By Lisa English Hinkle
While the COVID-19 virus surges and possibly re-surges in states all around us, Kentucky’s cautious management of this crisis has created opportunities for healthcare providers to ease back into business and shift into recovery. Whether Kentucky can continue to contain the virus is uncertain, but as healthcare providers retool and spend the federal dollars infused by the CARES ACT, here are the areas to watch:
During this pandemic and infusion of federal funds, at least three federal agencies are already geared up to protect people, funds and infrastructure from fraud, abuse and scams that harm patients, divert COVID-19 funds from intended purposes and otherwise misuse government funds.
Healthcare providers should plan now for increased audits, investigations and enforcement activities and account for use of federal money deposited into accounts without provider request pursuant to the CARES Act. With ambiguous directions for the use of federal dollars, healthcare provides should take steps, now more than ever, to assure that the funds are properly spent and accounted for and reports are filed when due.
As lawmakers rushed to respond to the COVID-19 crisis, they both increased payouts to and reduced oversight and regulation over healthcare providers. Now that the initial rush is over, federal agencies have already started investigation and enforcement activities and even some prosecutions. Healthcare providers should work to ensure that all funds are accounted for and any overpayments are returned in a timely fashion. Compliance with all regulations, even those that are relaxed during the pandemic, will also take center stage as business returns to normal.
Review Your Contracts
The pandemic continues to challenge healthcare providers as resources are diverted from traditional uses and dedicated for COVID-19 purposes. With higher margin operations and elective procedures stopped, hospitals are stressed as resources are and have been committed to COVID-19 purposes, resulting in deteriorating margins, shortages of equipment and supplies and an exhausted and stressed workforce.
Traditional healthcare providers slowed, if not ceased, many other services for a significant period. The healthcare industry is stressed in every setting, even though the stressors may vary from provider to provider and specialty to specialty. From hospitals to home health, all providers have experienced new problems and challenges, which affect healthcare transactions, relationships and contracts.
Once a cut-and-cloned standard term in healthcare contracts, the “Force Majeure” contractual term has taken on new meaning and importance in healthcare transactions and contracting. The Force Majeure provision can excuse performance of a contract in the event of extreme circumstances. This provision typically requires the occurrence of an unforeseen event like a natural disaster, terrorism or war, and the event itself should be a direct cause of the party’s inability to perform the contract.
Some Force Majeure provisions explicitly list pandemics as a qualifying event for non-performance, while others have more general descriptions that could include the COVID-19 outbreak. When a Force Majeure event occurs, the parties usually shoulder an actual or implied duty to mitigate its effect or seek alternate means of performance.
Another defense to enforcement of a contract is the frustration of purpose or impossibility of performance doctrines which essentially mean that the essential and/or material terms of a contract cannot be performed under the circumstances. These doctrines may have significance when reviewing compensation methodologies for physician employment contracts when based upon Relative Value Units.
Material Adverse Effect
Another term that is often standard and can trigger the termination of a contract in a healthcare transaction is the material adverse effect or material adverse change clause. These clauses often create opportunities to allow a buyer to walk away from obligations under a purchase agreement or other definitive agreement with little or no compensation owed to the seller. Depending on the circumstances, these clauses can be helpful or hurtful, but in any event should be reviewed. Every contract going forward should consider these provisions.
Careful and thoughtful consideration of medical pandemics should be addressed in all healthcare transactions and contracts going forward.
Telemedicine and telehealth have taken huge leaps forward during the pandemic. As the world embraces working from home, so too, have regulators realized that both telemedicine and telehealth are efficient and effective means to provide access to healthcare during a crisis that requires limiting in-person contact.
“Telemedicine” means the provision of clinical services and “telehealth” embodies the tools necessary for electronic exchange of information, and many restrictions on both have been temporarily lifted.
With relaxation of location requirements for Medicare patients, approval to use more visual and audio devices, ability to see not just established but new patients, and new payment for services, telemedicine via telehealth has been a boon for healthcare providers.
However, the relaxation of these requirements and waivers are only effective until the public health emergency is declared over. Most anticipate that the relaxation of these requirements will continue at least in part, but with new restrictions and regulations.
Providers using telemedicine and submitting claims must be sure that appropriate coding and documentation support the telemedicine services and note that the services were provided using telehealth in the patient record. Going forward, compliance efforts to ensure appropriate policies and procedures, like decision trees for determining appropriateness of virtual visits versus in person visits, must be developed and in place. Providers and employees must be trained to correctly manage and document telemedicine visits, including obtaining the appropriate patient consents under Kentucky law and verification of patient identity.
While HIPAA enforcement activities have been relaxed to allow physicians and patients to use smart devices, HIPAA and HI-TECH are still in effect and patient privacy is still protected. In fact, regulators and healthcare providers are seeing increasing complaints of patient privacy violations around COVID-19. Despite complications, providers have grappled with telemedicine and devised innovative ways to use technology to increase patient access to care during this pandemic, integrating the use of telemedicine and telehealth into the everyday provision of healthcare. It is improbable that in-person face to face visits will ever revert to pre-pandemic levels of 90 percent of all patient visits.
Physicians, Nurse Practitioners and Physician Assistants (who now have prescribing authority if qualifications are met) must all be aware that recent relaxation of the prescribing requirements for controlled substances by the Kentucky Board of Medical Licensure and the Kentucky Board of Nursing is only temporary.
As a result of the statutory mandates for prescribing controlled substances, either new regulations or even statutory modifications will be required to allow physicians and nurse practitioners to continue to prescribe controlled substances without in-patient visits to manage patients with chronic pain and other conditions like substance use disorders.
Under OSHA’s recordkeeping requirements, COVID-19 is a recordable illness that employers must record when there is evidence that the illness was contracted at work.
If, after a reasonable and good faith inquiry, the employer cannot determine if it is more likely than not that exposure in the workplace did not cause the illness, then the employer is responsible for recording cases of COVID-19 if: (1) the case is a confirmed case of COVID-19 under CDC guidelines; (2) the case is work-related as defined by 29 CFR Section 1904.5; and (3) the case involves one or more of the general recording criteria set forth in 29 CFR Section 1904.7. While this is only one of many OSHA requirements, it is one that is important and likely to support litigation.
As boards have addressed the pandemic and implemented emergency actions, corporate governance has encountered new dilemmas and problems with a critical need for important and effective decision making accomplished in a timely manner. The COVID-19 crisis has required timely decision making without the luxury of referring issues to committees for research, review and recommendation.
Distinctions between the roles of governance and management are critical and must be well understood to accomplish effective action and response. The differences between the respective duties and lines of authority and the need for emergency action in a crisis can be ambiguous and the source of friction and confusion.
For the foreseeable future, boards are likely to have a greater level of governance responsibility and must have procedures that provide effective communication and sharing of information between the board and management. Without this, emergency action is likely to be problematic, not fully vetted, not fully supported, or not perceived as a cohesive response. Without the support and buy-in of both the board and management, actions are less likely to be effective and met with employee, stakeholder or public support.
This pandemic has presented fundamental challenges to corporate stability which require a cohesive and well-designed corporate response; this should not be delegated to management or the executive committee, instead requiring effective board engagement. Effective board engagement does not require involvement in day to day decisions, but it does require communication of important facts that enable responsible review and decision-making.
Development of an effective board engagement tool for decision making is crucial. A critical impact of the pandemic is that the law, corporate stakeholders, and public policy will likely expect healthcare boards to be responsive to how circumstances have changed by taking action grounded in good faith and reasonable business judgment, and this can only be achieved with an effective board engagement and efficient decision-making process.
Healthcare boards, however, must not only manage the business risks created by the crisis, but also manage and make serious life and death decisions about patient safety and quality of care. As the pandemic has taught, the board must ensure that emergency preparedness, response plans and resources are in place to support patients and staff. Complex issues like rationing of care and resources, as well as vetting and adopting standards of care in crisis, call for effective board engagement and efficient decision-making.
-Lisa English Hinkle is with McBrayer in Lexington, Ky.
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