Three Recent Legal Developments That Affect Physicians

Make sure you are aware of these legal changes: medical malpractice cap limits; third-party billing practices; and enforcement of Notice of Privacy Practices.

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Three items have surfaced that physicians need to keep a pulse on and include: (1) medical malpractice cap limits; (2) third-party billing practices; and (3) the Department of Health and Human Services' (HHS) enforcement of Notice of Privacy Practices for clinical laboratories. All of these items have a significant impact on back office operations, as well as revenue cycle management. Hence, it is better to be proactive and plan.

Medical malpractice limits

These vary from state-to-state and should always be on the forefront in a physician's back-office operations. These impact expenses on two fronts: (1) the cost of insurance; and (2) the residual amount a physician may have to pay out-of-pocket in the event of an adverse ruling against him. California Proposition 46, which will be voted on Nov. 4, seeks to raise the cap in malpractice lawsuit claims, along with other items. Specifically, the initiative will:

• Increase the state's cap on non-economic damages that can be assessed in medical negligence lawsuits to over $1 million from the current cap of $250,000.

• Require drug and alcohol testing of doctors and reporting of positive tests to the California Medical Board.

• Require the California Medical Board to suspend doctors pending investigation of positive tests and take disciplinary action if the doctor was found impaired while on duty.

• Require healthcare practitioners to report any doctor suspected of drug or alcohol impairment or medical negligence.

• Require healthcare practitioners to consult the state prescription drug history database before prescribing certain controlled substances.

Physicians need to be proactive and speak with their insurance carriers now about potential rate increases and deductibles.

Third-party billing practices

While state laws may not expressly address third-party billing practices, the federal law does. Providers should closely read 42 CFR 447.10(c) and (f), as well as the terms of the contract's compensation provision before signing up with a third-party business agent. 42 CFR 447.10(f) relates to business agents and expressly states:

"Payment may be made to a business agent, such as a billing service or an accounting firm, that furnishes statements and receives payments in the name of the provider, if the agent's compensation for this service is - (1) Related to the cost of processing the billing; (2) Not related on a percentage or other basis to the amount that is billed or collected; and (3) Not dependent upon the collection of the payment."

Therefore, it is important to make sure that the contract and billing practices are in compliance with federal law. Otherwise, significant fines could be assessed.


A final item to keep on the radar screen is HIPAA. On October 3, 2014, HHS announced that pursuant to the Federal Register (79 Fed. Reg. 7290 (Feb. 6, 2014)), all clinical laboratories need to have their Notice of Privacy Practices revised by Oct. 6. This is a good reminder for physician offices to check their own Notice of Privacy Practices, as well as those of their laboratories.

Keeping abreast of state laws related to malpractice claims and insurance premiums is critical for mitigating risk. By making sure third-party billing entities are compliant, as well as HIPAA privacy practices, significant fines may be avoided. In sum, ignoring these three items could have significant economic consequences for physicians.