Government Has an AHA Moment – MD Specialists May Be Left Out in the Cold.


As infantile as this may sound, our government has finally realized that if you pay more, it actually costs more. That is, in essence, the realization that lies at the center of our government’s AHA moment.

To best understand the issue, the AHA moment and the future consequences, the historical background is important.

As a general rule, Medicare sets various rates of compensation for doctors and hospitals. In many or even most instances, private insurance companies’ contracts with medical providers and their reimbursement is based on a multiple of Medicare reimbursement.

Therefore, Medicare reimbursement, to a large extent, drives a significant portion of global (not private pay) reimbursement for physician, clinical, home and hospital-based medical care.

Furthermore, it is patently obvious that with regard to surgery, hospitals have a higher cost structure than surgical centers, and emergency rooms have a higher cost structure than urgent care centers or independent medical practices. While the degree, the cause of the differences or the attendant reasons may be subject to debate, it is clear that the cost of the operational overhead varies dramatically. Accordingly, Medicare and private insurers pay hospitals more for surgery than they pay surgery centers. Similarly, Medicare pays hospitals more for various treatments than it pays independent practices.

What amazes me is that there was apparently no real recognition that if you pay hospitals more money for the same service, the aggregate cost of healthcare increases as well.

The following chart gives a few examples of the differing reimbursements rates for doctor offices vs. off campus hospital owned practices.

GENERAL SURGERY 49560 Repair initial incisional or ventral hernia; reducible $742.00 $2,429.00
CARDIO-VASCULAR 36560 Insertion of tunneled centrally inserted central venous access device, with subcutaneous port; younger than 5 years of age $1,344.83 $2,123.47
36571 Insertion of peripherally inserted central venous access device, with subcutaneous port; age 5 years or older $1,319.64 $1,768.17
36593 Declotting by thrombolytic agent of implanted vascular access device or catheter $29.95 $161.31
19380 Revision of reconstructed breast $797.06 $3,586.79
19366 Breast reconstruction with other technique $1,449.03 $2,655.57

In addition, particularly with specialists, when a patient goes to an independent medical practice and has certain tests performed, those treatment codes incorporate the fact that the treatment occurred in the doctor’s office, so that the doctor receives one payment for treating the patient and administering the test or performing the procedure.

Hospitals, however, have traditionally been entitled to what is referred to as a “double-dip” because the doctor is allowed to bill for the procedure and the hospital is able to bill for the use of the facility. As such, the total reimbursement dramatically increases. It is not uncommon for the difference to be 100% or more. Once again, it is amazing that in this day and age in which the rising cost of healthcare seems to be in the forefront of the news, it apparently took a very long time to realize that if you pay more for the same medical treatment/procedure, the aggregate cost actually goes up.

As a result of this disparity, many hospitals embarked on purchasing and/or absorbing numerous specialty medical practices.

A recent survey by The American College of Cardiology found that between 2007 and 2012, the number of cardiologists working for hospitals more than tripled while the percentage working in private practice fell from 59% to 36%.

I recently had a discussion with a partner in a suburban cardiology group comprised of nine cardiologists who told me that his practice was bought by a hospital and that the doctors are now paid directly by that hospital. The hospital they work for is based in a large city approximately 30 miles away. It was obvious that the value to the hospital was the fact that the cardiology practice directed many procedures to the hospital, but the reality is that the aggregate revenue/cost of the treatments performed at the satellite location increased as well.

In another case, a client recounted that her child was treated by a pediatric cardiologist who joined up with the hospital. Looking at her EOB (explanation of benefits setting forth how much her insurance paid), going to the same doctor, at the same office, for the same procedure yielded reimbursement that was significantly more than double of what the doctor had been previously reimbursed.

This seemingly simple idea that when you pay more your costs increase has apparently finally hit home as evidenced in the Federal government’s proposed 2016 budget.

The new budget seeks to “encourage efficient care by improving incentives to provide care in the most appropriate ambulatory setting: the budget proposes to improve incentives to provide ambulatory care in the most appropriate clinical setting. Evidence suggests that in recent years, billing of many ambulatory services has been shifting from physicians’ offices to the usually higher paid hospital outpatient department setting, increasing Medicare spending and beneficiary cost-sharing.”

At this juncture the Federal government only seeks to equalize reimbursement for off-campus hospital/medical practices with independent physician practices.

What is driving this move is both the government’s cost as well as trying to address the ever rising co-pay contributions by the patients.

The White House has apparently calculated that this move will yield a larger economic benefit to the government than raising Medicare eligibility from 65 to 67. This calculation underscores the degree of enhanced reimbursement paid to off-campus hospital medical practices

It is not certain whether the hospitals will be able to justify the disparity in payment and thereby fend off this proposal, or that the votes of the many people suffering from increased co-pays as well as the general need to address the cost of healthcare will allow it to pass in the budget. Your guess is as good as mine.

A number of questions come to mind:

1. Even if this adjustment does not occur in the 2016 budget, how long will it take until this concept/need gains traction, and in fact occurs?

2. If off-campus medical practices are not afforded enhanced reimbursement, will the hospitals seek to move those practices on campus, or will they be rendered unable to renew the contracts they have with these practices?

3. If at some point in the future hospitals are no longer able to renew the contracts because they are not receiving the reimbursement that was the basis of the initial acquisition of the medical practices, what will happen to the doctors? Specifically, are these medical practices that have become accustomed to working in a more “corporate” environment and were able to step away from the ministerial/operational/entrepreneurial aspects of their practices, be forced to go back to square one, and considering the regulatory overlay that has occurred in the last few years, will they be able to make the transition?

4. At some point, will the government incentivize urgent care and surgical centers by raising their reimbursement and incentivizing them to the extent that this lower overhead model draws down the number of hospital admissions and thereby, the aggregate cost of healthcare?

5. If number 4 (above) occurs, how will hospitals deal with the lower revenue obtained because patients and revenue were diverted to urgent care and surgical care centers? Ultimately, we need hospitals, and in order for them to operate, they must be able to cover their costs. We cannot afford to lose our hospitals, and therefore, will the cost/reimbursement of the remaining treatments/procedures that do occur at the remaining hospitals be increased to offset the lost revenue? If that is the case, how much money will we ultimately save?

I believe that the future is uncertain, but it is reasonably certain that individual moves do not happen in a vacuum. Effectively, every action has a reaction and both the future of healthcare and the consequences of the various initiatives seem far from certain or even predictable.

What do you think?

The Economic (Non)Sense of Medicine as a Career

There is an almost universal recognition that America cannot afford its health care system. While on the one hand the government seeks to expand the number of people covered by insurance and increase the minimum levels of coverage, it simultaneously seeks to rein in the aggregate cost. Obviously, there must be some “give” somewhere.

Reimbursement for medical treatment (including both the reimbursement obtained by doctors as well as the reimbursement obtained by medical facilities such as clinics, surgical centers and hospitals) seems to be the number one target for cost-containment, with big Pharma a close second (although big Pharma is beyond the scope of this post.)

Curtailing, limiting or otherwise decreasing doctor/treatment reimbursement directly effects the revenue medical practices obtain, and therefore the amount that doctors earn.

I believe that there is an apparent lack of recognition that doctors make a very substantial and significant investment in pursuing a medical career. Ultimately, the sacrifices made by doctors must yield financial reward commensurate with their sacrifices, and in line with the commitment/benefit ratio of other pursuits,  or the medical profession may be abandoned, at least in part.

 A doctor typically spends 10 years + of higher education in pursuit of his or her medical training, many hundreds of thousands of dollars in tuition, significant sums in associated expenses, and the opportunity costs of money not earned during that decade (or longer.) It seems readily evident that people who are intelligent, hard-working, studious, and are ready to forgo instant gratification for a longer-term payoff, have other career choices where the sacrifice/benefit ratio augurs in favor of the alternative choices. At the end of the day, if we want doctors, there must be a value proposition in relation to the other available alternatives. I am concerned that recent changes are upsetting the career choice equilibrium.

In a recent study sponsored by CareCloud in partnership with Quantia MD with responses from over 5000 physicians certain key findings were set forth.

 1. US physicians are now more than twice as likely to foresee eroding, not increasing, profits in 2014.

2. The issues weighing on finances are led by declining reimbursements (60%), rising costs (50%) requirements of the ACA (49%) and the transition to ICD 10 (43%)

3. Successful patient engagement requires that physicians have adequate time and space to focus on care. But the percentage of doctors spending more than one day a week on paperwork rose sharply between 2013 and 2014 from 58% to 70%. Nearly 1/4 (23%) spend more than 40% oftheir time on administration, up from 15% in 2013.

4. Interest in selling their practices is rising

5.   Almost 1/3 of physicians aim to rip and replace at least one element of the core technology platforms in the next year, citing cost (36%) usability (31%) noncompliance with ICD 10/MU (31%) and a lack of vendor innovation (17%).

It does not take a rocket scientist to figure out that as the reward and satisfaction of a particular career declines, the people seeking to embark on that path will similarly decline.

By analogy, there was a recent article in the New York Law Journal regarding the legal profession and the decline in prospective lawyers. The article reported that fewer people are choosing to enter the legal profession. Law school enrollment for first-year students has declined 30% in the past four years and is at its lowest level since 1973. Enrollment at New York Law School’s has fallen approximately 23% since 2010. People are shying away from the legal profession-despite the desperate need for affordable and accessible legal services by the poor and people of limited means-because they sense it is no longer a reliable source of employment in today’s economy sufficient to justify the significant cost of legal education.

Are we being penny wise and pound foolish with respect to the reimbursement and resultant earnings of doctors. Are we driving future doctors away from medicine, and if so, who will ultimately pay the price. 

What do you think

Will the government send medical practitioners back to the Stone Age or to Bankruptcy Court?

There are currently two competing forces with respect to the administration of healthcare. On the one hand, the government seeks widespread use of EMRs and electronic dissemination of medical records. On the other hand, OIG, various Attorneys General and the courts present potentially crippling financial liability for the almost inevitable data breaches caused by hackers.

The recent data breaches of Target and Sony, among others, amply demonstrate that financial data (which often includes medical data) presents a rich target for hackers. The value of Medicare information is often much more valuable, on a per person basis, than a person’s credit history. More specifically, dishonest DME companies and/or sham medical facilities are able to use improperly obtained Medicare information thus enabling them to be reimbursed well in advance of the government becoming aware of, investigating and finally stopping the improper billing and resulting payments. Considering the value of these “rich targets,” it seems almost inevitable that data hacking is a growth (albeit illegal) industry.

Conversely, the government is currently cutting Medicare reimbursement from more than 257,000 U.S. doctors by 1% for failure to meet federal goals in the use of electronic medical records. In addition, 28,000 providers will be fined an additional 1% of Medicare pay for failure to prescribe medications electronically.

While there are approximately 400,000 providers that have received bonus Medicare payments for meeting electronic use goals, these bonuses will ultimately be replaced by fines for failure to adopt electronic records and/or communications.

For those that have adopted EMR and electronic communication systems, the courts are generally allowing private rights of action for the breaches, and this is in addition to the governmental fines and associated costs for HIPAA and HITECH breaches.

In a case brought in Minnesota, U.S. District Judge Paul Magnuson recently ruled that consumers were allowed to sue Target Corporation over the retailer’s late 2013 data breach that they claim compromised their personal financial information. Target has said that at least 40 million credit cards were compromised in the breach which may have resulted in the theft of the personal information (such as e-mail addresses and phone numbers) of as many as 110 million people. This ruling followed a similar decision by Judge Magnuson in which he allowed banks to move forward with their lawsuits against Target for the money they spent reimbursing fraudulent charges and for the issuance of new credit and debit cards related to the breach.

With respect to the Sony breach, at least four lawsuits have been filed accusing Sony of not doing enough to protect individuals’ private data, including personal medical information. According to the class action lawsuit filed in U.S. District Court in California, “for decades, [Sony] failed, and continues to fail, to take the reasonably necessary actions to provide a sufficient level of IT security to reasonably secure its employees’ [personal information].”

Frankly, the same allegation could be asserted against any organization that is the victim of a data hack. The essential argument would be that by sheer virtue of the fact that data was hacked, the company, or in this case the medical provider, did not provide sufficient security.

Effectively, medical providers are forced to either embrace electronic medical records and electronic dissemination of medical information or face lower revenues and/or fines. On the other hand, if they do embrace the use of EMRs and electronic transmission of PHI, they risk the consequences of an almost inevitable chance of their data being hacked, which could (at least theoretically) render them insolvent or even bankrupt.

Alternatively, medical providers could follow the Kremlin’s logic and recognize that entering information into a computer renders it susceptible to hacking or improper dissemination. Specifically, in July of 2013, a source in Russia’s Federal Guard Service (FSG), which is in charge of safeguarding Kremlin communications, disclosed that FSG was looking to spend approximately $15,000 to purchase ELECTRIC typewriters in light of the publication of secret Wiki leaks documents. Apparently, they believe that computers cannotbe trusted. Interestingly, it appears that the Kremlin actually forgot that computers are not the only technology vulnerable to attack. Even ELECTRIC typewriters are not safe.

There were reports that German politicians were also considering a return to manual typewriters for sensitive documents. The Germans were not even considering electric typewriters, but were going back to the REALLY old-fashioned MANUAL typewriters. If you are starting to believe that the Germans are paranoid, the Associated Press (in the 1980s) reported that the Soviets bugged the typewriters in the U.S. Embassy. “In the second such lapse since 1978, U.S. officials allowed Soviet agents to get hold of typewriters being shipped to the U.S. Embassy in Moscow and to bug them electronically ‘for years,’” the Senate intelligence committee said Tuesday. As a result, the panel said “for years, the Soviets were reading some of our most sensitive diplomatic correspondence, economic and political analyses, and other communications.”

With the advent of microchips, one could argue that even pens could transmit information.

It would be very sad if the medical profession were held to a standard that large corporations and even governments cannot maintain. Is using quill pens the only bulletproof solution to preclude liability, or should we have reasonable and attainable standards beyond which doctors, clinics and hospitals would not be held accountable for data hacks?

What do you think?

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Intellectual (Dis)Honesty – Boko Haram

Why is the Western world apparently ignoring the mass murder being perpetrated by Boko Haram – is there any justification? I sincerely invite your comments as I find this question particularly puzzling.

In terms of background, the United States Institute of Peace has reported that the local Boko Haram is an Islamic sect that believes politics in northern Nigeria has been seized by a group of corrupt, fake Muslims. It wants to wage a war against them and the Federal Republic of Nigeria, to create a “pure” Islamic state ruled by sharia law.

Furthermore, since August 2011, Boko Haram has planted bombs almost weekly in public places or in churches in Nigeria’s northeast. The group has also broadened its targets to include setting fire to schools. In March 2012, some 12 public schools in Maiduguri were burned down during the night, and as many as 10,000 pupils were denied ability to obtain an education.

The list of atrocities goes on, and for a fleeting moment, the plight of hundreds of schoolchildren that were kidnapped achieved prominence with the western media arena. The almost constant kidnapping of women and children, however, seems to go almost unnoticed.

By contrast, the January 7, 2015 attack and murder of twelve people in Paris at the offices of Charlie Hebdo and thereafter the murder of five innocents relating to the attack at a kosher food establishment (which may very well have been related) resulted in a march of over one million people with participants from forty countries.

Incidentally, on January 3, 2015, Boko Haram destroyed two Nigerian towns, Baga and Doron Baga. In Doron Baga alone, more than 3,100 buildings were damaged or destroyed. In Baga, at least 620 buildings were shattered.

While the number of casualties has yet to be established, the United Nations Refugee Agency confirmed that over 7,000 Nigerian refugees arrived in western Chad on January 9, 2015.

The big question is why?

Why is there such a great disparity between the media reports of the massive carnage and devastation occurring in Nigeria at the hands of Boko Haram, and the almost unprecedented level of media coverage regarding Paris?

Why is there such a great disparity between the public outcry for the plight of many thousands of people who were brutally murdered, maimed and displaced in Nigeria (almost nil) and the million plus participant public outcry for less than 20 innocent victims who were brutally murdered in France?

I have spoken to a number of colleagues, and while we are all puzzled, the range of answers within the universe of possibility seems even more troubling.

1. The Western world is much more sensitive to terrorism and/or loss of life in its own backyard.

2. The Western world can easily say that we will not stand up for events occurring in a foreign nation until its own citizenry stands up for itself. I believe that this position represents the view of the uninformed, because the citizens in Nigeria under attack are hardly able to stage protests, and the military seems to be trying to fend off Boko Haram without any meaningful international support.

3. The Boko Haram issue is viewed as an internecine fight between different factions of a religion/ideology and therefore, it is either inappropriate to intervene, or alternatively, exceedingly easy to turn a blind eye. In light of the fact that Boko Haram roughly means “Western education is forbidden” it seems difficult to take the position that this is “their” problem.

In the final analysis, I think the question we are forced to ask, particularly as Americans is if in the year 2015, we truly believe that “all men are created equal.”

While I generally write about healthcare, its attendant law, the United States government’s attempts to provide healthcare for all, I think it only fair to include a post of this sort as part of our collective and collaborative view on “healthcare.”

I would be particularly thankful, and would probably sleep a lot better, if the readers of this post were able to shed some light and help to reconcile how or why this disparity can be justified. Frankly, I fail to understand it.

What do you think?

Intellectual (Dis)Honesty Part II

What are the parameters of a term that has recently been bandied about, namely, “addressing income inequality?”

As with many other areas, life is simple at the extremes. An uber-wealthy man walks down the street and sees fellow citizens starving; any sense of humanity dictates that he should give the starving people some food.

Obviously, when the government gets involved, we call it tax.

At the other extreme, if a person was required to divest himself/herself of wealth by sheer virtue of the fact that someone else had less, we would call it socialism.

It is the middle ground that might cause someone to scratch their head. To what degree do we want to address income inequality?

If the solution is giving the people earning less the ability to earn more, one would expect, and rightfully even demand, a comprehensive plan. That plan, however, would have to factor in personal issues like motivation, financial or time investment, delayed gratification, etc. not to mention intervening forces like globalization and offshore labor, as well as technology taking a bite out of unskilled labor employment.

I believe that any statement regarding addressing income inequality must be comprehensive, achievable and realistic if it is to be meaningful. Examples of a scattered approach to dealing with income inequality are the ACA, junior college for all, and seeking to raise taxation on capital gains. The issue is complex, and therefore, the solution deserves at least as much attention as the underlying issue.

On the other hand, if we are simply talking about taking from the rich and giving to the poor, which would essentially amount to 21st-century governmental Robin-Hoodism, I would at least expect to hear the degree to which this redistribution of wealth was appropriate in the aggregate, rather than hearing a sprinkling of willy-nilly ideas. Obviously, this approach would also need some type of economic plan, substantiating that the level of redistribution did not create a disincentive for people to make the investment and take the risks that generally precede their accumulation of wealth.

In either case, it would really be refreshing to take a lesson from GPS, where the first question asked when embarking on a journey is — what is your destination?

What do you think?

Intellectual (Dis)Honesty, The Affordable Care Act (ACA), and the Redistribution of Wealth

A reasonable analysis of the ACA illustrates that one of the major issues is that it entails is a functional redistribution of wealth, except that in this case, it does not exclusively seek contributions from the wealthy. 

In order to best understand my point, I ask the reader to think in terms of homeowner’s or other property and casualty insurance.

One of the fundamental principles of insurance is that it redistributes risk, which from the point of view of the insurer, necessitates getting a large enough pool comprised primarily of low risk participants, so that the premiums it receives will be enough to pay for the risk it undertakes and its operational expenses, while allowing for a profit. 

From the insured’s point of view, they recognize that there is a certain level of risk — fire, storm, theft etc., for which they are not willing or able to undertake the risk of loss, and accordingly are willing to pay a certain amount of money (“wealth”) to buy peace of mind and security. What they are really doing though, is redistributing their wealth. If they ever have a large claim, they will receive money (“wealth”) that was contributed by other people, whereas, if they never have a claim they will contribute their wealth to other people who are victims of fire, theft etc. In the final analysis, they are either a net payer or a net receiver. 

Insurers are very careful to make sure that the pool of insureds, are not subject to “adverse selection,” which means that a disproportionate number of people who are especially risky, or know they will have claims, seek insurance. For example, if there is a forecast for a hurricane in a particular region, one typically cannot buy homeowner’s insurance. The insurance company does not want the responsibility of payment for those people who seek insurance when the risks are especially high.

For whatever reason, individuals are not troubled or not cognizant of the fact that when they purchase homeowner’s insurance, they are engaged in redistribution of wealth. In fact, the term “redistribution of wealth” is rarely used with respect to homeowner’s insurance. If you think about it I think you will agree that when insurers pool risk, they are to some extent, redistributing wealth.

Now let’s look at healthcare insurance. Essentially, it follows the same principles, and from the point of view of the insurer, one would want a large enough pool of healthy people so that the premiums would pay for the sick and infirm, operational expenses and yield a profit. The distribution of risk and receipt of premiums and payments to the insured is, functionally, redistribution of wealth.

As a general rule, albeit with some exceptions, those who receive a net benefit are most likely to favor the redistribution, and those who are net payers, are more likely to oppose it. 

Now let’s look at the ACA.

To the extent that some of the fundamental underpinnings of the ACA are to require coverage for pre-existing conditions, and take away caps on coverage (both of which increase the potential risk to the insurer), it is an absolute necessity to broaden the rolls of the insured to a pool of less risky participants, e.g. the young and healthy. Essentially, allowing for pre-existing conditions and taking away caps necessitates that the healthier segment of our society join the ranks of the insured. In fact, it necessitates a mandate for insurance either at the individual level or at the employer level. Without a mandate (obligation), an individual could wait until he/she were faced with a catastrophic illness and then sign up for insurance. It would be the absolute most extreme case of adverse selection – a situation insurers could not withstand. 

As such, the ACA mandated employer-sponsored insurance, individual insurance and/or fines for failure to obtain coverage. To the extent that we want to cover pre-existing conditions, raise caps on coverage, and broaden coverage, the mandate is necessary. Let’s not forget that insurance is all about redistribution of risk, and redistributing premiums (“wealth”). 

The problem is that the insurance mandate affects young and healthy people that do not recognize the need for insurance (especially at today’s premium prices) and bristle at the thought of paying premiums (that they often cannot afford) for the benefit of others. Clearly, they are not ready for a redistribution of wealth before they have achieved any level of wealth.

For better or worse, however, that is what the ACA mandates.

Of course, a significant portion of the ACA relates to expanding eligibility for Medicaid, which means that our government is now subject to (at least to some degree) the same issues set forth above. The difference, though, is that the government has tools that are not available to the private insurers – namely, taxation.

It is no surprise that the Supreme Court allowed our government to surcharge people/companies who did not buy insurance under its ability to tax. One could strongly argue that any tax that goes towards entitlements is a redistribution of wealth, or that it is self-evident that tax (at least in part) is a redistribution of wealth.

It is also not surprising that President Obama will seek to increase capital gains taxes with a carve out for couples earning less than $500,000 to pay for certain initiatives to boost the effective income of individuals in the lowest earning brackets, and to ensure that it is only the more affluent that participate in this new redistribution of wealth.

My point is that whether you are pro or con, let’s at least call it what it is. The ACA must incorporate a redistribution of wealth by obtaining net contributions from young, healthy and probably not wealthy people, as well as net contributions from more wealthy in the form of increased taxes.

What do you think?


Would You Sue your Doctor for Medical Malpractice?

I was recently reminded of an incident that occurred to a fellow (who we will call Mr. X) approximately 20 years ago. I pose the question of whether you would have sued for medical malpractice.

At that time, I was involved in a real estate deal and met with a rather affluent aristocratic fellow, Mr. X, who sought to buy an industrial property. My involvement in this matter had nothing to do with healthcare, but he asked that our meeting take place at his home. When we met, he explained that he was a post-cardiac surgery patient and that an unfortunate incident had occurred of which he was only vaguely aware of in real time as he was significantly addled with various drugs. His wife later clarified his foggy recollection.

Apparently, during his first cardiac surgery, his heart was moved and successfully replaced. Protocol required that before he was closed up, an x-ray be taken to ensure that none of the various surgical devices were left in his body. Despite the counting and the x-ray, unfortunately, a sponge was left inside of him. As a result, he required another round of surgery and his heart had to be moved and replaced once again. Mr. X happily reported that he survived both surgeries. Clearly, he was not billed for the second surgery.

When I met him, he had already gone back to his cardiologist and explained the whole story to him. Mr. X  believed that the second surgery posed a real danger to his health,  that his recovery and incapacity were increased, and that he had additional pain and suffering because of this incident.  His cardiologist told him that he could sue, but that he should recognize that a well-qualified surgeon (who was probably not at all at fault for what happened) as well as others would be distracted from their important work of saving lives. The question he posed was did Mr. X really want to inflict the rigors of litigation on a doctor, medical team and hospital, people who essentially had dedicated their lives to helping others. Mr. X decided not to pursue any potential claims.

Due to my involvement in the healthcare arena (although my firm does not handle medical malpractice), and because we represent healthcare providers in other areas, I am often asked for my opinion. My particular opinions are not relevant to the question, but I can say that most people believe that if they do not achieve the result they expected, there must be someone on the other side who is subject to being sued.

When I began to think about patients being stakeholders in our healthcare system I was reminded that when it comes to one’s personal health, it is “life at all cost.” With the cost of universal healthcare, if that ever happens, we may not be able to embrace that philosophy.

My question to the reader is “What would you have done, and why?” Even if Mr. X did not accurately present the situation or that with the passage of time I may have forgotten some of the finer points, the question still remains.

The Ying and Yang of the Affordable Care Act (ACA) Part II

In the previous segment, I touched upon both the high cost and the various competing interests relating to lowering the cost of the provision of healthcare.

The number of people eligible for health coverage has increased, and to that extent, the ACA gets a check in the plus column.

If, however, the newly covered people use emergency rooms in situations for which there are significantly less expensive avenues of treatment available, e.g. urgent care centers or primary care physicians, the already staggering cost of healthcare will increase.

Frankly, there are conflicting reports as to how this will play out, and the truth is that it is very hard for anyone to predict the future.

That said, I am reminded of a letter I wrote to the Washington Times in 2008 [ – Scroll to the bottom of the page – letter with the heading Health Crisis] when healthcare costs were 16% of the GDP, as opposed to the current 17.4%. I think some of the issues raised then are still unanswered, as we must have a multidimensional approach in which a plan answers how coverage will be implemented,where the money is coming from, and how to effectively reduce the real aggregate cost of healthcare. I believe that we have not yet achieved the balance necessary, or the 360 degree view that healthcare reform demands.

It is readily apparent that there are various stakeholders (often with competing or divergent interests) involved in healthcare. These include:

1.  The government (which includes those charged with fiscal stability as well as those charged with a social/ethical mandate allowing for medical coverage.)
2.  Insurers.
3.  Healthcare providers (including hospitals, surgical centers, urgent care centers,primary care doctors, support staff and specialists).
4.  Medical equipment suppliers.
5.  Pharmaceutical companies.

In addition, we also have to deal with the voters, plus the apparent fundamental disagreements between the executive branch and Congress (along with their own internal disagreements).

It is no wonder that there is no simple answer or silver bullet.

As a predicate matter, and in an effort to remain both accurate and intellectually honest, the emergency room visits that need attention are those that could be dealt with in a less costly setting. The best barometer (giving it rough justice) would be to measure the emergency room visits for which a hospital admission was not necessary.

The big question is where will newly insured individuals seek treatment? I believe the most scientific study (albeit limited to Oregon, and possibly, Portland) was a Harvard study done over a number of years in which 25,000 Medicaid patients went to the emergency department at the Portland area hospitals, on average 1.43 times over 18 months, while those who were not insured only made an average of 1.02 trips to the emergency room in the same time frame. This leads to the conclusion that those on Medicaid avail themselves of the emergency room 40% more than the uninsured. While this may be an oversimplification of a very detailed study, from the media’s perspective, that was the takeaway.

Obviously, if the study is indicative of forward-going and national trends, President Obama’s belief that increased coverage of the populace would drive people away from emergency rooms (more expensive) to doctors (less expensive) should be revisited.

On the other hand,it will take time for people to realize that not only is it cheaper, but it is probably more convenient and advantageous to take minor medical issues to a doctor’s office or urgent care center rather than an emergency room.

In fact, recent reports from Los Angele’s for the first few months of the new healthcare system’s operation seem to indicate that the Oregon study may not be an accurate predictor. There are reports that emergency rooms visits that did not require hospital admissions grew by 3.9% in Los Angeles County for the first half of 2014, which was well within the average 3 to 5% increase for the prior three years.

An interesting fact is that while the county’s three large public hospitals that historically cared for uninsured patients saw a 9% drop, several private hospitals reported double-digit increases in outpatient visits. This would indicate that even if there was no net increase in emergency room visits attributable to the ACA, there may be a significant shift from public to private hospitals.

This possible shift raises another issue which arguably will put significant strain on the not-for-profit hospitals. The ACA initially placed certain requirements on the not-for-profit hospital sector, which comprise approximately half of the hospitals in the United States. Failure to finalize and implement these various measures means risking their not-for-profit status or making them subject to excise taxes. This can only increase their cost of operation.

While one might argue that the measures are fair, that does not mean that they do not come without financial cost.

The requirements of charitable hospitals include limiting charges to patients eligible for financial assistance to those that are generally billed to patients with insurance, affirmatively establishing and posting financial assistance policies,significant limitations on billing and collection, including an inability to garnish wages until reasonable efforts are made to determine if the individual is eligible for assistance, and performing community health needs assessments.I am not certain if this is limited to the not-for-profit’s community, but if it is, my question is why? In any case,my focus is not on the propriety of these measures, but merely to point out that they invariably will increase the cost of operation.The tax on medical devices is a total enigma to me. Other than raising revenue, how is this in anyway supposed to help affordable healthcare?

All of this discussion, however, maybe for naught if the Supreme Court decides that the ACA does not cover the approximately 5 million people who signed up on the Federal Healthcare portal with the expectation that they would get tax credits. Under normal circumstances, if the Supreme Court were to disallow the tax credits, the legislation would go back to Congress and it would be rewritten. As we all know, however, the Congress that the ACA will return to, is not the same Congress that passed the legislation in the first place, which means that there is a distinct possibility that the ACA may be dealt a significant blow from which it may not recover, which will send us back to the drawing board.

It is clear to me that there are many divergent interests, and it will take significant open communication and dialogue as well as a singular and uniform interest in affording at least a certain level of healthcare to everyone to achieve what the ACA set out to do.

The Ying and Yang of the Affordable Care Act (ACA) Part I

The ACA has changed the landscape of healthcare in the United States. The change, however, is ongoing, has many competing interests, and what the long-term future holds is really guesswork. The consequences will have a huge effect, not only on the provision of healthcare but, I believe, on the U.S. economy.

The cost of healthcare in the United States, which was $2.9 trillion dollars in 2013, remained the same 17.4% of the GDP that it has been since 2009.

Some actuaries predict that National Healthcare spending will increase and that by 2023 it will rise to 19.3% of the GDP.

While experts may have varying definitions of the GDP, I believe it means that we are headed toward a course where almost one-fifth of everything produced in this country will go to pay for healthcare. Even at today’s 17.4% rate, it is truly alarming when we realize that we don’t have a plan where everyone is insured, and we have not yet determined what “insured” really means (which is a discussion for another day).

There is no doubt that the ACA has increased the number of individuals who either have or are eligible for healthcare coverage.

Larry Levitt of the Kaiser Family Foundation has stated that “The fundamental impetus for the law was to the lower the number of uninsured, and it has clearly done that … but simply getting people insured doesn’t mean healthcare is affordable.”

The affordability issue is best underscored by an analysis conducted by McKinsey and Co. that, on a nationwide basis, the median deductible for individuals was $4,100 for bronze plans, and $2,500 for silver plans.

If one follows the reasonable assumption that the purchasers of bronze plans are people who either cannot afford a more expensive plan, or in some cases, choose to seek the cheapest plan, a $5,000 out-of-pocket expense could drive them away from seeking medical care.

A recent poll has indicated that as of November 2014, 46% viewed the law unfavorably and 37% were in favor, which is an increase in the “disfavor” column of Americans’ opinion from just four years ago.

For better or worse, it is likely that more people will be driven to seek health insurance coverage as 2015 is the first year in which tax returns require people to report if they had health insurance for the previous year. If you don’t qualify for one of the approximately 30 exemptions (once again, our government deserves an advanced degree in complexity), you face fines of either 1% of your household income above the threshold for filing taxes or $95, whichever is greater. The following year it will at least double, and by 2016 the average fine, (or as the Supreme Court recently classified, the average tax) will be approximately $1,100 based on current estimates.

As more people become eligible for Medicaid and more people are driven to obtain insurance, the looming question becomes, will doctors accept the increased or even the current level of Medicaid patients?

The reason why this question arises, is primarily because there were enhanced Medicaid reimbursements allowed in 2013 and 2014, which will (as it currently stands) not be available in 2015.

Primary care physicians, the people that I believe are at the epicenter of healthcare, will probably be the most affected by these cuts, or more accurately, the end of enhanced reimbursement. Call it what you want; as it currently stands, doctors will earn less on Medicaid patients in 2015 than they earned in 2014.

A significant study conducted by the nonpartisan Urban Institute indicates that Medicaid payments for primary care services could drop by 50% or more in California, Florida, New York, Pennsylvania, and many other states.

It is well within the realm of possibility that many doctors will not accept new Medicaid patients, possibly stop treating Medicaid patients, or in some cases, simply retire.

If that is not enough, on March 4, 2015, the United States Supreme Court is scheduled to hear King v. Burwell, which questions if the Obama administration is improperly providing tax credits to the almost 5,000,000 people who purchased health insurance through the Federal Exchange. Obviously, these tax credits were a major inducement to the enrollees, and a major consideration for the purchase of insurance through the Federal Exchange which currently serves 37 states.

I hope to continue with some additional factors playing into the mix in the next segment, and respectfully request my readers to post their comments as there are so many stakeholders who have intelligent and meaningful perspectives.

It will be interesting to see how the ACA plays out in 2015, particularly with the shift in Congress and the various competing interests facing off.


There are a number of events that recently occurred which, taken together, should make any individual or any company that is subject to an “associate agreement” or any “covered entity” possessing PHI, (as well as their respective attorneys) take pause.

1. Anchorage Community Mental Health Services (ACMHS) notified OCR regarding the breach of unsecured PHI relating to malware that compromised the security of its IT systems. The breach affected 2,743 individuals. Apparently, there was a finding that ACMHS had adopted security rules, policies and procedures in 2005, but based on its Resolution Agreement with the government, it was found that ACMHS failed to conduct an accurate and thorough assessment of the potential risks and vulnerabilities as to the confidentiality, integrity and availability of its E-PHI. Aside from the various undertakings in the Resolution Agreement, ACMHS is subject to a $150K fine.

2. Sony Pictures Entertainment (SPE), the victim of a cyber-attack, has realized that based on the more than 200 GB of data that has already been released by the hackers, there have been more than 30,000 HR records compromised. Accordingly, Sony has released a notification letter that is extremely broad. The following language was included: “Although [SPE] is in the process of investigating the scope of the cyber-attack, SPE believes that the following types of personal identifiable information that you provided to SPE may have been obtained by unauthorized individuals: (i) name, (ii) address, (iii) Social Security number, driver’s license number, passport number and/or other government identifier, (iv) bank account information, (v) credit card information for corporate travel and expense, (vi) username and passwords, (vii) compensation and (viii) other employment related information. In addition, unauthorized individuals may have obtained (ix) HIPAA protected health information, such as name, Social Security number, claims, appeals information you submitted to SPE (including diagnosis and disability code), date of birth, home address, and member ID number to the extent that you and/or your dependents participated in SPE health plans, and (x) health/medical information that you provided to us outside of SPE health plans.”

HIPAA- HITECH breaches have now moved from allowing employees to improperly access and disseminate PHI, or the loss or theft of a laptop left in a car, to the vulnerabilities that “rich targets” for hackers such as major corporations present. I think it is fair to assume that the hackers’ primary target was not health records.

3. To further supplement the problem, on November 11, 2013, the Connecticut Supreme Court ruled in Byrne v. Avery Center for Obstetrics and Gynecology, P.C. that HIPAA does not necessarily preclude a private action (brought by the victim or victims) for negligence on the part of the covered entity, and that the HIPAA regulations may (at least theoretically) be used in determining the applicable standard of care. Simply stated, the idea of a class action for a single violation of HIPPA, e.g. the loss or theft of a hard drive or thumb drive, or the mass dissemination of one person’s personal information over the internet after that person’s PHI was the subject of a single breach of HIPAA could subject the health provider or their associates to damages that are well beyond anything ever contemplated by HIPAA. In the case of the former, a class action by many thousands of individuals is a real possibility. In the latter case, imagine if the medical records of a single high profile person, e.g. famous executive or actor/actress, was obtained in violation of HIPAA, and then was disseminated on the internet. In either case, the legal fees and damages (as well as the settlement value) could be staggering.

What these three seemingly unassociated issues seem to point towards is that taken together, covered entities and their associates may become responsible for failure to adequately protect their PHI in the event that malware enters their system, or their systems are hacked, at a time when even major corporations that have and use significant resources to protect their data, can be hacked. In addition, the release of HR data which could easily implicate HIPAA could render these entities not only prime targets for hackers, but major marks for class-action or high value negligence lawsuits.

It seems clear to me that the level of vulnerability, responsibility and accountability has recently risen to a higher degree of significance.