Dan
Welcome to Sound Business Insights. I’m Dan Watkins. This episode is about healthcare compliance. This podcast is not intended to provide legal advice.
Neil
We’re opening a big topic here, but just in a nutshell, what is healthcare compliance?
Dan
Well, it’s a big, big topic.
Neil
Yes.
Dan
Broadly speaking, healthcare providers are supposed to provide efficient, honest, non fraudulent care for people’s health and all of the processes that go into making them able to do so. And bill for it. Bill, the federal government, bill private insurance is included. And there are several departments that oversee things like that. There’s your Department of Health and Human Services. There’s Department of Managed Healthcare that does private and public health, that has their guidelines and regulations. There’s compliance with HIPAA. There’s compliance with anti-kickback statutes.
Neil
Stark Law
Dan
Right. The Department of Health and Human Services lists five areas of fraud and regulations that they claim are and they know are very important to them, and they enforce them. And those five areas are false claims, making false claims for healthcare. I saw one that actually went into criminal prosecution where in Orange County there was a healthcare provider that was providing services and charging it to Medicare and for years, and this guy never saw the patients, and that wasn’t enough. He had nurses and non nurses who just wore white coats seeing the patients, and then that wasn’t enough. So he had those same people bill for seeing the patients when even they didn’t see the patients by the time they put him in jail and he had amassed over $60 million in fraudulent charges that he collected. He was living the life and they got them, put them away. All those patients got terrible healthcare. And now bigger budgets are out there to go enforce these against honest doctors to make sure they cross every T and dot every I.
Neil
So how is corporate governance and compliance different in a healthcare setting than it might be in a normal corporate environment?
Dan
Well, there’s not that much regulation. Well, I’m a lawyer. I do have regulation too, but most are not told where they can get their customers from. And doctors and lawyers are, and doctors and healthcare care providers are really told. They’re told on a state level, if you want to get these kind of clients, you better do it in certain ways. Otherwise you are going to be in trouble and you’ll be paying penalties and you’ll be subject to licensed hearings and fines and suspension of business and everything you can imagine. And then on the federal side, they have the stark laws, anti-kickback statutes there too. If you want to work for Medicare or any federal budget, you’ve got to comply with those as well, which say you cannot have any referral source unless it meets one of the exemptions under the statute. And when you form your company, you have to have that in mind, and you have your business model and your plan in healthcare, there’s a fourth coach, and there’s your lawyer banker, your accountant, and also a compliance coach or a manager or director that you can go to that is experienced in this as well. This is day-to-day.
Neil
Right. And so this is in most healthcare entities, that’s the person that’s responsible primarily for maintaining governance and compliance, right?
Dan
Well, your billing has got to be coded billing that’s got to comply. So you have to hire people who do billing and let’s use an outside source. And most providers split between that. They may have an M S O as we talked about, just to do their billing, but that has to meet all the requirements separating the anti-kickback statutes, and that has to be on a state and federal level. That’s one of the issues we do when we form and represent and merge and sell and acquire different healthcare entities. We have to keep that in mind for our clients.
Neil
Do most healthcare entities have a board of directors?
Dan
Not all. I mean, some are small when they’re larger, yes, they do have a board of directors. They all have different varying abilities and rights depending on the number of healthcare providers, the number of doctors, and they’re structured. We see all kinds of different types of structure.
Neil
If they do have a board, what’s the role of the board in compliance?
Dan
They have a compliance officer. Sometimes it’s just like any other board except for these issues have to come up and be addressed by the board and some of them don’t. Some the responsibility of the admin or the doctor in charge a responsible physician.
Neil
And what role does the Watkins Firm play when we’re in those conversations?
Dan
We’re the ones setting the outline with the doctors going through the program. Most of healthcare providers already have experience in this area. They’ve worked in a medical office before. They’ve had to deal with admin. They’d have to deal with managing partners. So they have experience in that area, and they come to us with questions and we’re ready with those answers.
Neil
Well, Dan, we’ve come out of the gate really firing. There’s just so much for them to keep track of. We kind of brushed across HIPAA. Let’s dive into it a little deeper. What’s involved with HIPAA compliance?
Dan
HIPAA has grown. HIPAA was just “keep my information confidential,” but now we have the computer age, and in addition to requirements that you have all of your patient’s information kept confidential, there’s also requirements that you make it available for anyone with a click of a mouse to look at it if they’re qualified. So we have HIPAA that says you’re supposed to keep all the things confidential. And then we have the High Tech Act, which is health information technology for economic and clinical health. And you have to comply with that. And you have Emergency Medical Treatment and Labor Act, tala, which says you have to have it ready and accessible for emergency treatment. So that access to their health record will not in any way get interfere with their health and their care in an emergency.
Dan
So complying with all those things, takes knowledge, takes a team of coaches, your lawyer, not your banker, your accountant, believe it or not, to budget for that. And whoever you hire as your technology officer or your management consultant or your team, they’re outside sources that we work with all the time to make sure you’re in compliance.
Neil
So you’re talking about ensuring that a patient’s records are kept private, but that they have to be accessible by the right staff for the right reasons. And then there are times where the wrong person’s looking at a record or something’s left or printed on a receipt and handed to a client. These are violations, HIPAA violations, and they have to be reported
Dan
Every step that they do. You have to make sure you are in compliance with those three acts. There’s another one as well that says you’re supposed to have complete computer compliance. And if you ever worked with some of these software companies out there, it’s hit or miss and the burden’s always on you. Yes. And so you want to make sure you’re dealing with professionals that advise you that are aware of this and understand where you’re going to run your company and what it takes.
Neil
And how does compliance tie into hiring doctors and employment practices?
Dan
Well, as healthcare lawyers, we understand your business model. Like we talked before, you got to know the business model. You got to understand what your clients are doing with respect to their services, and the services are provided by people. And you got to hire those people and you have to have office manuals, instructions that comply not just with the general law like your regular lawyer would give you, but also make sure that they’re going to comply with HIPAA. There’s individual responsibilities for everyone who deals with healthcare records. Yes. In addition to the big boss, you are going to be responsible if you get a job there. And that should be in your employee practices manual. So everybody knows where everybody stands.
Neil
How does independent contractor classification fall into a governance and compliance issue for healthcare entity?
Dan
Well, independent contractor issues are common medical providers, just like other licensees can be independent contractors. So they have a right, at least in California, every state’s different. So we get doctors who come in from out of state or going from our location out, and we get questions on that. The conflict of law, like difference between Ohio and California law when it comes to independent contractor or Florida, has different laws when it comes to independent contractor than we do. And luckily, we’re in a state that likes to change the definition of who can’t be independent contractors on almost every two, three years. So we all have to change our business models. But yeah, we help update employee policies. Again, we do so many of them that we don’t have a lawyer charging you $500 an hour to do your manual. We have paralegals that do them all the time, and they’re reviewed by counsel.
Dan
So we review independent contractor agreements, not just for the law, but also for what most of the other doctors we work with, or most of the other providers we work with wanted this and didn’t want that clause. Or we can literally say, for years of experience, if a doctor comes to us says, can you review our contract? Don’t bother arguing about this. They’ll say no. But yeah, there’s pushback on these issues. If you’re concerned about them, I think we should push back. Great. So you won’t blow the job and yet you’ll end up with a better contract.
Neil
You kind of brushed past the management service organization earlier, or M S o. Part of compliance is you got to keep a brick wall between the practice of medicine and the business side of the house.
Dan
M S O is the hot topic every year by the legislature. They would like to stop that relationship, even though it’s what runs a lot of healthcare organizations. Everyone has got a specialty. Consider it this way. You’ve got a specialty. You are great at billing. You are great at admin management. You are great at equipment leases. You are great at dealing with landlords. You’re great at a lot of things. And you can go to a healthcare organization and say, you’re not doing a good job at this stuff. I could do better. The profit I would make you just for my doing my job would pay for the fees. I’m going to charge you and more, and you wouldn’t have the headache and you can expand. Now, that would be a wonderful M S O partner. Yes. Right? Yeah.
Neil
You focus on the patients and taking care of the practice. I’ll focus on the business.
Dan
Correct. And there are all kinds of ways you can slice that because it’s not usually a situation where the managing partner is no good at these things. They’re actually very good at it. But another organization could come in and they could participate in certain ways and not participate in other ways and still be in compliance with M S O laws. That’s the best of both worlds. You are not kicking back, you’re not violating any laws. At the same time, you’re benefiting from your years of experience and your abilities in that field in addition to your healthcare skills.
Neil
And in a time when everyone is adding additional pressures to profitability in healthcare, you might actually be able to grow.
Dan
Yeah. You’re ready to grow. Yeah. You give yourself a little free time and you can expand.
Neil
Dan, you’ve been a part of buying and selling all kinds of healthcare related businesses over many years. I’ve heard this phrase in the healthcare business, I believe what is dead wood?
Dan
That is a derogatory term for an older doctor.
Neil
Why?
Dan
They own their practice. They have their equity stake. They’ve done the hard work. The younger doctors who are partners in the practice are working harder, and they look at these older doctors like, Hey, you shouldn’t be allowed to make what you make and you are stopping us from growing. Or you are this or you are that. Most people would just assume that there’s no workout. There’s no workout for that. But there is. We have faced that situation hundreds of times. There’s a way where the older doctor who’s earned his or her right to have that equity and that s egg going forward has to be compensated. And where it won’t cost the newer doctors anything really, if they structure things right. And they are given information about new ways to structure things and to move forward. So you can literally give both parties the best of both worlds.
Neil
And this is a common problem.
Dan
I don’t think it’s a problem. It is a common problem in the eyes of lots of people who’ve been working day to day, years to years, and they say, well, it’s not fair, but it’s not a problem for us. We solve that day to day. That’s why they call us. The way we get our business is like, well, they’ll run into somebody and say, you guys changed your business structure. Who did that? He goes, they’ll say the Watkins Firm. And that’s how we get a lot of our work.
Neil
So we’ve been working with the healthcare medical practices in the healthcare industry for decades. The regulatory compliance issues that they’re faced with, even compared with being in California just starting there. How important do you think the experience that the Watkins firm brings to the table is to a medical practice or a healthcare business?
Dan
They don’t teach this in law school. They don’t teach this in your M B A program. It had to be a specific program. It would teach it, but it only teach the business side. So you only learn this by experience. You only learn it by working at a firm that did this 35 years ago and carrying on the tradition. You have healthcare providers who work with ancillary services. Ancillary services, by definition is your M R I, your physical therapy, your services that work with the doctor to provide or the healthcare organization to provide services for the client. It’s evolving more and more telehealth and those have regulations. At the same time, you want to not just be a healthcare provider. You want to buy and sell your company. You want to expand, you want to grow. You have to have a law firm that can manage all those technicalities and keep you in compliance and allow you to do that. And that’s what we do. We have two kinds of lawyers here. We have our transaction lawyers who don’t see disputes. They see resolutions, they see solutions, they see, let’s make a deal. They close deals every month, and we have our litigators. They’d like to just chew on people. I’m a litigator, by the way,
Neil
From the healthcare point of view, The Watkins firm isn’t dead wood.
Dan
Well, I hope not.
(Both Laugh!)