Transition Guide The Law of Healthcare Administration, Seventh Edition Stuart Showalter, JD
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1 Transition Guide The Law of Healthcare Administration, Seventh Edition Stuart Showalter, JD The Law of Healthcare Administration, Seventh Edition, examines healthcare law from the management perspective. The book offers a thorough treatment of healthcare law in the United States, written in plain language for ease of use. The author addresses the significant changes the 2010 Affordable Care Act (ACA) makes to the healthcare industry, including provisions relating to taxation and compliance, the development of accountable care organizations, and new privacy rules under HIPAA. This updated edition includes the following new material: An extensive discussion of the major changes occasioned by the ACA The antitrust decision Federal Trade Commission v. Phoebe Putney Health System Quality issues related to accountable care organizations and The Joint Commission s accreditation standards The ACA s Shared Savings Program and its effect on further hospital physician alignment and physician employment The Foreign Corrupt Practices Act Chapter Breakdown Chapter 1: The Anglo American Legal System This chapter discusses the history of law, its sources, the relationships among the three branches of government, the basic structure of the federal and state court systems, and some basics of legal procedure in civil cases. Chapter 2: A Brief History of Medicine Because a page of history is worth a volume of logic, chapters 1 and 2 provide a foundation for the concepts explored in the remaining 13 chapters. Chapter 3: Health Reform, Access to Care, and Admission and Discharge
2 This chapter has been extensively revised to review the major changes wrought by the ACA. It discusses the anticipated timeline for those changes, the various constitutional challenges to the ACA, the issues those lawsuits raised, and the ultimate decision of the US Supreme Court. The text then addresses the traditional rules about hospital admission and discharge the black letter rule that there is no common law right to be admitted to a hospital and a number of exceptions to that principle. The chapter discussion of the law related to emergency services foreshadows the more thorough treatment of the topic in Chapter 10. In addition, the special circumstances attending the admission and discharge of psychiatric patients and the uncompensated care and community service obligations of many not for profit organizations are presented in the chapter. The chapter serves as a preface for the discussion in Chapter 7 of the conflict between managed care organizations desire to limit healthcare expenditures and providers moral and legal duties to provide quality patient care. New to Chapter 3 is a significant discussion of NFIB v. Sibelius the US Supreme Court decision that upholds the constitutionality of most of the ACA. The chapter s The Court Decides section features a large portion of the Supreme Court s landmark opinion on this case. Also included in this chapter are general observations about what has occurred in the health reform arena and what we might expect in the near future. I encourage readers to reach their own conclusions about subsequent developments, and I give some suggestions on what readers may look for as they follow the events. Chapter 4: Contracts and Intentional Torts This chapter addresses the essential elements of a valid contract (competent parties, meeting of the minds, consideration, and legality of purpose) and the importance of contract law in the relationships between patients and their physicians and between patients and hospitals. The chapter also briefly discusses issues related to workers compensation and intentional tort, pointing out that both can affect physician patient and hospital patient relationships. Chapter 5: Negligence This chapter outlines the four basic elements of proof in a tort case duty, breach, injury, and causation. The duty (the standard of care) can be proven in various ways, and the plaintiff s injuries must have been caused by the defendant s (or defendant s agent s) breach of that duty. In the case of an agency relationship, the concept of respondeat superior (vicarious liability) applies. In the case of a physician s negligence (medical malpractice), the standards of different schools of practice (traditional medicine versus osteopathy, for example) might determine the standard of care. When proof of specific negligence is difficult to demonstrate, res ipsa loquitur might be applied. Also explored in this chapter are so called never events inexcusable mistakes that ought never to happen and efforts by various organizations to prevent their occurrence. The discussion of never events has been updated in this edition to reflect the fact that the original estimate of 98,000 preventable deaths per year was a serious understatement; the latest estimate is more than four times
3 as large. Finally, a number of defenses to malpractice suits and reform of/alternatives to the tort system are discussed. Chapter 6: The Organization and Management of a Corporate Healthcare Institution This chapter reviews some basic concepts of corporation law, including a corporation s personhood, its ability to shield owners from personal liability, the foundations of corporate power, and the duties of a corporation s governing board. The concept of piercing the corporate veil and the various reasons for and methods of restructuring a healthcare corporation are also explored. The powers of a corporation are limited by state corporation law and the company s organizing documents (the corporate charter). Healthcare executives must be aware of those powers and help the governing board accomplish corporate objectives within their limits. Particular attention is given to the phenomenon of hospital physician joint ventures and its potential for renewal in the coming decade due to the effects of the ACA, accountable care organizations, the Balanced budget Act of 1997 s sustainable growth rate method of cost control, and other factors in the healthcare environment. Chapter 7: Liability of the Healthcare Institution For more than half of the twentieth century, most charitable organizations were immune from tort liability. And after charitable immunity was abolished, the concepts of apparent agency and agency by estoppel expanded to the point that the independent contractor defense is no longer viable or desirable as a matter of substantive tort law in the field of hospital liability. More significant, the expanded doctrine of corporate negligence the nondelegable duty of reviewing and evaluating clinical practices has essentially obliterated the distinction between vicarious liability and direct liability, as illustrated in the cases discussed in this chapter. The rise of managed care in the 1980s and 1990s has prompted questions about whether efforts to control costs compromise the quality of care. Because the Employee Retirement Income Security Act preempts any state law relating to employee benefit plans (including employer based health plans), in many cases managed care organizations are immune from liability for coverage decisions that lead to adverse patient outcomes. Conflicts between patients welfare and the goal of conserving medical resources (reducing costs) sometimes arise and may require congressional action to resolve. Chapter 8: Medical Staff Privileges and Peer Review This chapter focuses on decisions about medical staff privileges. In this seventh edition, the chapter notes that some fundamental changes will result from the ACA s Shared Savings Program, under which groups of providers organized as an accountable care organization (ACO) will join to provide, manage, and coordinate services for Medicare beneficiaries. In this way, ACOs continue the practice of hospital physician alignment that began with physician hospital organizations in the 1990s; employment by a hospital or integrated delivery system will be an increasingly attractive option for many physicians. Thus, under the ACA, hospitals have new reasons to forge or improve their bond with their medical staffs.
4 The chapter points out that management and the medical staff continue to be responsible for the credentialing process but that the ultimate responsibility for appointing a competent medical staff lies with the hospital governing board. Decisions on medical staff membership must be based on the individual s qualifications rather than on a bias against a particular school of practice. The chapter also addresses issues related to the peer review and quality assurance functions, both of which are efforts to monitor the quality of care. It concludes with some thoughts about alternative medicine providers. Chapter 9: Health Information Management This chapter reviews the various ways in which health information is properly used such as for documenting treatment, for accurate billing, and for providing evidence in legal forums. It also discusses the Health Insurance Portability and Accountability Act (HIPAA) as well as other state and federal laws that govern the protection of health information. It outlines circumstances in which third parties may legitimately access individuals health information with and without patient consent, and it points out the pitfalls that one can encounter when that information is improperly disclosed. Added in this edition are a new case involving HIPAA preemption (presented in The Court Decides), a discussion of medical identity theft and hacking by cyber thieves, and a reference to the meaningful use standards and the HIPAA Omnibus Rule. Chapter 10: Emergency Care This chapter reviews the common law rule that individuals have no duty to provide emergency care and its numerous exceptions, both judicial and statutory. It provides considerable detail on the Emergency Medical Treatment and Active Labor Act (EMTALA), which currently sets the standard for emergency department personnel s review of patients conditions, and presents examples of liability for failure to meet those standards. The chapter contains a discussion of Good Samaritan statutes, which are probably unnecessary but have afforded some medical personnel a measure of emotional comfort. A new EMTALA related case concerning hospital owned ambulances has been added to The Court Decides section. Chapter 11: Consent for Treatment and Withholding Consent This chapter explores the difference between consent and informed consent and outlines the minimum requirements for the latter. It also considers consent issues in emergency situations and such thorny issues as the right to die (i.e., refusal to consent to life sustaining treatment) and consent for patients who are not competent to make choices for themselves (including infants and young children). It ends with discussion of various methods of documenting and enforcing patients end of life preferences, including living wills and durable power of attorneys. Two appendixes present examples of an advance directive form and a physician order for life sustaining treatment form. Chapter 12: Taxation of Healthcare Institutions This chapter addresses the taxation of healthcare organizations, primarily not for profit corporations. All tax exempt organizations are not for profit, but not all not for profits are tax exempt. The standards for
5 income and property tax exemption are also discussed, as are the occasions in which some income of a tax exempt organization may be taxable. ACA requirements are discussed including the need for a community health needs assessment, written nondiscrimination policies, and prohibitions on extraordinary collection actions. The ACA s review and reporting requirements and its new audit standards are reviewed as well. The chapter raises the question of what it means to be a charity and what implications that designation may have under federal and state laws. It closes with a review of a 2010 decision that, if followed by other states, augurs rough sailing ahead for nonprofit hospitals property tax exemptions, especially if the ACA significantly decreases the number of uninsured people in the United States. Chapter 13: Competition and Antitrust Law The chapter reviews the basic concepts of competition (antitrust) law, including laws against restraints of trade, monopolization, and price discrimination. It distinguishes among per se violations division of markets, price fixing, group boycotts, and tying arrangements and shows how cases that do not fit one of those categories are decided on the basis of a rule of reason analysis specific to the anticompetitive effects of each set of facts. The chapter presents a new exhibit that summarizes various exemptions from the antitrust laws (e.g., implied repeal, state action, Noerr Pennington doctrine), and a 2013 pay for delay case is reviewed. A significant US Supreme Court decision (Federal Trade Comm n v. Phoebe Putney Health System) has been added to The Court Decides. The chapter explores the factors used in defining the appropriate market for individual cases and concludes with a discussion of what to expect in the coming years, especially now that implementation of the ACA has begun. Chapter 14: Issues of Reproduction and Birth This chapter reviews many of the legal questions regarding abortion, sterilization, wrongful life, wrongful birth, surrogate parenting, in vitro fertilization, and stem cell research. It discusses hospitals role in reproduction issues whether they can be required to provide such services and when they can expect government programs to pay for the procedures if they do provide them. It also points out that abortion will continue to be a topic for debate at the state level and that the number of cases considering stem cell research will increase. Chapter 15: Fraud Laws and Corporate Compliance This chapter concludes the book with some of the most salient issues in healthcare today: the prevention of fraud and abuse in governmental payment programs. The major fraud laws False Claims Act, antikickback statute, and the Stark self referral laws are reviewed. A new section that discusses the Foreign Corrupt Practices Act has been added in this edition, along with a new trend of applying the Stark law to Medicaid. The chapter emphasizes the aggressive enforcement activities of federal and state regulators and the severe monetary and criminal penalties that can be imposed for violations. It includes some of the changes to the fraud laws occasioned by the passage of the ACA, and it reviews the basics of a corporate
6 compliance program one of the most effective efforts a healthcare organization can undertake to prevent fraud, promote integrity, and improve billing accuracy. A corporate compliance program serves as both an important preventive measure and a valuable resource for a wide range of legal and ethical issues.
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