Health Care Matters

A Complimentary Newsletter From:

Law Offices Of David S. Barmak, LLC

Managing Risk for Long Term Care and Health Care Providers

Volume 11, Issue 3                               ADVERTISEMENT                                      MARCH 2010

In This Issue
New Jersey Law Requires Managed Care Plans to Honor Patient Assignment of Benefits and Pay Out-Of-Network Healthcare Providers Directly
The Do's and Don'ts of Collecting Accounts Receivables
A Compliance Program: Beyond Calibration
Recent Supplemental Program Compliance Guidance for LTC Facilities Issued by OIG
Electronic Death Certificate Filing Mandatory Statewide for Hospitals as of April 15, 2010....Deadline for LTC Facilities to be Announced Soon
David S. Barmak, Esq. 
David Photo
Licensed to practice law in the States of New Jersey, New York, Connecticut and Pennsylvania 
New Jersey Law Requires Managed Care Plans to Honor Patient Assignment of Benefits and Pay Out-Of-Network Healthcare Providers Directly
If you or a member of your family have been treated or examined by a physician, you became a member of a tripartite group that is universal to healthcare.  The first party to this group is the "payor" which provides health benefits to members known as "subscribers", the second party who have paid a premium to be part of a group or an individual health insurance plan.  The final person in our group is the physician who is designated as the "provider".  In advance of your visit to the provider the payor has agreed with the provider to pay a certain amount of money to the provider for the services provided to the subscriber.  The amount to be paid is determined by a contract with the subscriber.  Certain providers have agreed to a fixed fee for the designated services.  These contractually bound providers are considered to be "participating" or more commonly known as "in-network" providers.  If a subscriber is examined or treated by a provider that is in network the subscriber will be relieved of a financial burden as the provider gets paid directly thus encouraging greater participation in the network on the part of both parties.  Nonparticipating or "out-of-network" providers get treated somewhat differently.  When services are performed by the nonparticipating or "out-of-network" provider, payment is made (in many cases) by the payor directly to the subscriber at a different rate of payment.  Some providers have required the subscribers to execute an assignment of benefits which presumes to require the payor to send the payment directly to the provider instead of the subscriber (the same manner of payment that would be available to the in-network provider).  Unfortunately, many of the contracts between the payor and subscriber have an anti-assignment provision which prohibits that arrangement. The payors have long argued that they needed to protect that provision as a method of enticing providers to become participating/in network providers with the assurance that they would receive payment directly and that "out-of-network" providers would not.  This author argued against that theory in New Jersey without success.  See Somerset Orthopedic Associates vs. Horizon Blue Cross of New Jersey, Inc. 345 N.J. Super. 410 (App. Div. 2001).
Unfortunately, the following example of how this system works is not unique, but one of hundreds, if not thousands, of similar situations:
A patient receives a continuous passive motion exerciser (CPM) from a durable medical equipment provider (DME), who then submits a claim for reimbursement to the payor.  By the time the bookkeeping department at the provider (DME) catches up with the fact that they had not been paid, the payor advises the provider that thousands of dollars of claims reimbursement has already been paid directly to the patient.  The bookkeeper complains because the patient had signed an assignment of benefits (AOB). That document, she argues, should have permitted the provider to stand in the shoes of the subscriber and receive those benefits directly.  The payor answers that the subscriber agreement with the patient has a provision which voids any such assignment provision without prior written, expressed consent from the payor.  Since no such permission was requested or obtained, the provider will have to chase the patient to get paid. This is a substantial burden to the provider who has not gotten paid for services and/or supplies provided. Of course the next logical step is to contact the patient and I'm sure that the reader can readily anticipate the results: when the patient is contacted she simply states that she does not have the money, she thought the money was hers and it is spent on more important things-like her child's college tuition. Now the ugly attempt to collect the debt begins (of course, no suit can be maintained against the payor, as they will defend on the grounds that there was no privity of contract between the provider and the payor).
Until recently the overwhelming majority of jurisdictions have upheld these anti-assignment clauses in group healthcare contracts.  The rationale accepted by the court has been the view that the ability to direct payment to or away from a healthcare provider has been a valuable tool in keeping the payor's costs down, thus limiting healthcare costs by supporting the motivation of providers to participate in the network.  Moreover, if the healthcare provider could direct payment to itself, while being out-of-network, there would be no advantage that could be offered by a payor to build a provider network. It now appears that New Jersey has begun to recognize the inequities involved in this theory.

On January 16, 2010 then acting New Jersey Governor Sweeney signed into law a requirement that managed-care plans pay nonparticipating providers directly if the patient has assigned his/her health insurance benefits to the provider (AOB). This law is scheduled to take effect on January 16, 2011 and is effective on all policies in which the payor retains the right to change the premium and which policies are in effect as of that date.  The Assignment Law applies to managed-care plans that offer both in network and out-of-network plans.  Those plans will be required to remit payment directly to the provider, or in the alternative, to the provider and the subscriber as joint payees.  The payments are to be made within 30 days pursuant to the New Jersey Prompt Payment Law. If payment is improperly made to the patient instead of the provider the claim will be considered unpaid, thus overdue and subject to interest. (P.L. 2009 c. 209)

Post script: This author's perspective, having been personally involved in the DME industry and having concentrated his practice representing many health care providers over the past 25 years, is that providers do not participate in Payor provider networks primarily in order to obtain payment directly from Payors. The primary reasons for participation in a Payor's provider network include the dollar amount of the pre-arranged fee and the hoped for ability to attract subscribers based upon the low out-of-pocket co-payment that the subscriber pays to the participating provider as opposed to the high co-insurance and deductible that the subscriber is expected to pay to the non-participating provider; however, the expectation of an out-of-pocket  payment differential by subscribers to participating and non-participating providers has now been called into question by the recent Appellate Division decision in
Garcia et al. v. HealthNet of New Jersey, Inc., Wayne Surgical Center, LW et al., Docket No. A-2430-07T3.  The Appellate Division's decision undermines the expectation of an out-of-pocket payment differential by the subscriber to participating and non-participating providers thereby eliminating, in this author's opinion, a primary reason for providers to participate in Payor networks.  Click here to read this author's New Jersey Law Journal article entitled Insurance Company Demands Full Payment From Health Care Providers dated December 21, 2009.  So how important is it to non-participating providers for Payors to pay them directly? Based upon this author's experience, most patients turn over to their non-participating providers all reimbursements received from the Payors. In the past, patients rarely kept reimbursement payments sent directly by the Payors and when this did happen, health care providers treated the situation as a pain in the neck; however, in today's very difficult economic and reimbursement environment, where cash flow is extremely critical and there is a slim differential between positive and negative cash flow, more and more patients are keeping reimbursement payments sent directly by the Payors and providers are finding themselves chasing patients for the reimbursement payments more frequently.  For the provider, the delay in receiving reimbursement for services and products provided to patients represents a cost and a delay that is harmful if not malicious. Providers have overhead that must be paid for at the time it is utilized including but not limited to the services rendered, product provided, and billing and collecting efforts made. The additional cost of chasing a patient for reimbursement payments is, in this author's opinion, unwarranted.  The rationale offered by Payors to support sending reimbursement payments directly to patients - that this constitutes a "carrot" to participate in the Payors' provider networks - is illusory and fruitless. In contrast, the potential harm to the patient (temptation to keep the reimbursement payment) and the real harm to the provider (extra cost and delayed receipt of reimbursement) are both serious issues that thankfully are now addressed by the State's legislature as of January 16, 2011.
The Do's and Don'ts of Collecting Accounts Receivables

Register for FREE One Hour Teleconference
Wednesday, May 26, 2010 at 10:00 am

Join David Barmak on a free teleconference to learn the do's and don'ts of collecting accounts receivables.  Learn how to minimize your exposure to loss of revenue and how to properly and legally collect past due accounts.  David will discuss the Federal Fair Debt Collection Act and its ramifications for you, your staff, your ownership and their business. Please call Saul A. Fern at (609) 688-0055 at the Law Offices Of David S. Barmak, LLC to register for this free one hour teleconference.
A Compliance Program: Beyond Calibration
Allison J. Whitehead, Esquire
Law Associate in the Law Offices Of  David S. Barmak, LLC.
Is there more to time clock compliance than calibration? A corporate compliance program, as outlined by the Office of the Inspector General, has traditionally been used to address fraud and abuse issues; however, day-to-day operational issues are often discovered and readily handled if one takes a broad view of the scope of a corporate compliance program; for example, extending the reach to include the infamous time clock.
Consider the following illustration: A nurse hurries to work, acutely aware that she is 15 minutes late for her shift. Once inside, she has a choice, either head over to the centrally located time clock and 'punch in' or bypass the time clock and go directly to her designated station. The nurse chooses the latter option, in an effort to save time. It was a rough morning; she convinces herself that she's not often late, and it won't hurt to pretend the time clock failed to register her proper 7 a.m. punch.
A certified nursing assistant (CNA) arrives at work, ready to start his 7 a.m. shift promptly at 6 a.m. Upon arrival, he first makes a beeline for the time clock to punch in, and then heads back outside to park his idling car. Eventually the CNA is back at work, cup of coffee in-hand, presumably ready to start his day.

The culmination of each pay period necessarily means the payroll department in a long-term care facility will be swamped with complaints and requests for paycheck adjustments. The nurse who failed to punch in to register the start of her morning shift conveniently failed to punch out after her 3 p.m. to 11 p.m. shift the day before. The 'missed punch' was not appropriately addressed or remedied, and the payroll department uses uninformed discretion to determine whether or not to pay the nurse for what may be an extra shift. Similarly, the payroll department will grapple with whether to pay the CNA a full extra hour of wages according to his early time clock punch. These two instances represent a mere percentage of the countless wage/hour timekeeping issues that continuously present problems for long-term care facilities. 

The administrator refuses to pay employees for what he presumes to be unauthorized time, and instructs the payroll department to err conservatively in favor of the nursing facility when speculating actual hours worked. As a result, the nurse is not paid for the 11 p.m. to 7 a.m. shift, and is further docked an hour or two of earned pay because of conjecture that her 'missed punch' was an effort to avoid being late. In addition, the payroll department relies on its 'rounding' policy to provide a window in which the employee can punch in timely. Although the facility knows that an hour is well beyond an acceptable punch window, it will not pay the CNA from 6 a.m., the time he clocked in, to 7 a.m., the scheduled start of his shift, assuming it was not authorized. 

Employees begin to complain that they are not being paid appropriately for hours worked. The administrator responds that he will not pay an employee an extra seven minutes of wages if the employee punches in seven minutes early, let alone pay for a full hour of unauthorized work.

The administrator did hear, however, that another nursing home in New Jersey was recently visited by the New Jersey Department of Labor and Workforce Development (NJDOL) and the investigation and audit that followed was invasive and costly. The administrator begins to wonder, how likely is it that the NJDOL will find issue with his long-term care facility. Numerous long-term care facilities implement rounding policies and fudge time records in an attempt to create a more 'accurate' (and cheaper) payroll, certainly the NJDOL will not single him out. The administrator decides to continue with his current payroll practice.
Unbeknownst to the administrator, the long-term care facility is a prime candidate for a collective action pursuant to the provisions of Section 16(b) of the Fair Labor Standards Act,¹ which might be brought by a group of current and former employees of the nursing facility seeking compensation for alleged unrecorded and uncompensated work in the form of certain pre- and post- shift activities performed by them. A more immediate harm might befall the nursing facility if a disgruntled employee decides to make a telephone call directly to the NJDOL. Regardless, the long-term care facility is in a precarious situation. 
Had the administrator contacted a healthcare attorney who specializes in creating and implementing corporate compliance programs for healthcare facilities, the administrator would probably not have to worry about being audited by the NJDOL. Had a corporate compliance program been in place, a few elements would have prevented, or at least limited, improper timekeeping and corresponding compensation problems.
These elements could include:
  • An auditing tool to review and analyze current payroll protocol, reporting and timekeeping systems. 
  • A timekeeping policy and procedure to educate staff and protect the nursing facility.
  • The availability of a corporate compliance officer aggrieved employees could approach with their concerns before the damage was too great to warrant blowing the whistle on their employer. 
However, in this illustration, there is no auditing tool, policy and procedure, or officer because there is no corporate compliance program in place. Previously, the board of directors erroneously assumed that the loose timekeeping and payroll practices would not jeopardize the facility because so many other long-term care facilities were conducted in the same manner. 
The NJDOL investigates, demands documents, scrutinizes payroll and conducts a hearing, which results in a huge penalty and headache for the long-term care facility.

The facility failed to pay its employees appropriately and failed to keep accurate time records. By law, nursing facilities are obligated to keep accurate records of the time worked by "non-exempt" employees. In the case of the nurse who missed punch, the facility's time records show the NJDOL that she was not paid for an entire shift. In the absence of a reporting system that would have advised payroll of the missed punch in a timely manner to ensure the appropriate documentation and payment to the employee, the time records reflect that the nurse should have been paid.
In the same vein, the facility's time records reveal that the CNA should have been paid for the additional hour prior to the start of his scheduled shift because the facility has no proof, other than the time record, that this was improper. The NJDOL will maintain that the CNA should be paid from the time he actually punched in, claiming this rounding practice is unacceptable.
Many facilities implement a grace period, whereby their employees' starting time and stopping time is rounded to the nearest fraction of an hour. In the past, the U.S. Department of Labor has maintained that rounding practices are acceptable "provided that it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked."² Under federal Fair Labor Standards Act regulations, rounding that "averages out" over time and does not always benefit the employer is acceptable. 
Previously, the Division of Wage and Hour Compliance accepted rounding practices that complied with the federal regulations. Recently, however, the NJDOL has implemented a new enforcement policy prohibiting employers from uniformly rounding non-exempt employees' time. The New Jersey Wage Payment Law³ requires that employers pay employees for all time actually worked. Therefore, it is the enforcement policy of the NJDOL that employers who round off time worked in any increment must round it off in favor of the employee.
In New Jersey, a "punch window" remains lawful provided the employee was not actually performing work that benefits the employer during the punch window. The NJDOL would demand that the facility pay the CNA, who punched in an hour early to his shift and left to park his car before returning to work, if the facility cannot document that the employee was not actually performing work that benefits the employer at that time. Similarly, in the absence of documented proof that the nurse did not actually work the extra shift, the NJDOL would demand that the facility pay her according to her time clock punches.
A well-intentioned long-term care facility may find itself the subject of a serious investigation by the NJDOL. A facility should arm itself with knowledge of what the law requires and implement an appropriate policy and procedure tailored to its facility. A corporate compliance program is a simple and effective way to ensure proper observanceof the law. 

1.         29 U.S.C. § 216(b).
2.         29 C.F.R. § 785.48(b). 
3.         N.J.S.A. 34:11-4.1, et seq.
Recent Settlements with Health Care Providers Announced by U.S. Department of Justice
On February 26, 2010, United States Attorney Carmen M. Ortiz and Tony West, Assistant Attorney General for the Justice Department's Civil Division announced today that the Government has reached a $14 million settlement with Mariner Health Care, Inc. ("Mariner"), and SavaSeniorCare Administrative Services, LLC ("Sava"), both nursing home chains operating out of Atlanta, Georgia, and with their principals, Leonard Grunstein, Murray Forman and Rubin Schron. The settlement resolves the United States' allegations that the defendants solicited and received kickback payments from Omnicare, Inc. ("Omnicare"), the nation's largest pharmacy that specializes in dispensing drugs to nursing home patients.
Electronic Death Certificate Filing Mandatory Statewide for Hospitals as of April 15, 2010 . . . Deadline for LTC Facilities to be Announced Soon
The New Jersey Department of Health and Senior Services (DHSS) has developed the New Jersey Electronic Death Registration System (EDRS) which will replace the previous paper-based method of registering deaths that occur in the State of New Jersey. The new electronic system offers a secure, streamlined method to file death certificates in the State.  The EDRS does not change the reporting process, it automates it.
Here is the procedure that a facility will follow under the new electronic system:
  1. The nursing home or long term care facility will appoint someone to act as the administrator of the Electronic Death Registration System (EDRS).  That person goes on line and registers.
  2. The administrator is issued a user name & password after faxing the DHSS the required information.
  3. The administrator is then responsible to obtain, track and provide the list of RN's with his/her e-mail addresses so that each nurse is issued their own individual password.
  4. When a patient dies the nurse goes online and using the facility user name and his/her individual password enters the required information.
Currently, a RN pronounces the death of a patient and then starts the death certificate by writing only: time of death, time pronounced, nurse name and license number.  When the funeral home picks up the expired patient the paper death certificate is given to the funeral home representative and it is the funeral home who then continues to process the death certificate.  The new electronic system will also be used by funeral directors and physicians.  The death certificate once registered at the DHSS will be issued via computer to the funeral home for the family and to the town for filing.
Law Offices Of David S. Barmak, LLC
David Barmak established his health care law firm in 1984 to deliver legal services, both in transactions and litigation, to organizations and professional practitioners in the health care field.  We call this approach "Enterprise-Wide Risk Management" because it includes three important facets:
  1. Counsel and advisement on all aspects of legal risk, from setting up the entity to corporate governance and compliance;
  2. Protection of your practice or business through litigation prosecution or defense in the Courts; as well as regulatory compliance and licensure issues before government agencies; and
  3. Operations improvement through the implementation of enterprise-wise onsite audits, programs and training seminars in the areas of, but not limited to, Fraud and Abuse, HIPAA Privacy and Data Security, Employment, A/R Management, Emergency Preparedness, and Workplace Violence.

David S. Barmak, Esq. received his JD from Cornell University and BA from Duke University.  He is licensed to practice and serves clients in the States of New Jersey, New York, Connecticut and Pennsylvania.  Also he now serves as Chair of the Health and Hospital Law Section of the New Jersey State Bar Association.  Before making your choice of attorney, you should give this matter careful thought.  The selection of an attorney is an important decision.  The recipient may, if the newsletter is inaccurate or misleading, report the same to the Committee on Attorney Advertising. 

For more information, please contact us:
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