13 Legal Issues for Hospitals and Health Systems

Here are 13 legal issues affecting hospitals and health systems in 2011.

1) Lawsuits against the mandate to buy health insurance.

Since Congress is unlikely to repeal healthcare reform in the face of President Obama's veto, any repeal in the next two years would have to come through the courts, and that prospect is becoming more likely. A federal judge in Florida became the first to reject the whole law, rather than just its highly unpopular mandate to buy insurance. He concluded the law is not "severable," meaning if one part is removed, the rest would have to go, too. That's a legal concept, but it is also an apt description of the interlocking nature of the law's provisions. Keeping the popular protection for people with preexisting conditions, for example, requires that everyone have insurance. Without such a mandate, people would have no reason to buy coverage until they got sick.

The core case against the mandate rests on Constitutional law, which President Obama used to teach, but Constitutional law has some slippery concepts. The Commerce Clause grants Congress the authority to regulate "activities that substantially affect interstate commerce," which courts have interpreted to mean Congress cannot regulate "inactivity." Obama administration lawyers argue not buying insurance is an active decision, because if people without insurance get sick, they still need care and will crowd into EDs to get it for free. But the lawsuits — and there are about 20 of them, including the Florida case, which includes 26 states — insist that no matter what the administration says, not buying insurance is still "inactivity." As of Jan. 17, 2011, lower courts that have heard these cases have come down on different sides regarding the mandate's constitutionality, according to an article published in the Feb. 2011 edition of AHLA Connections. Those finding the new law constitutional include a Michigan District Court (Thomas More Law Center v. Obama) and a Virginia District Court (Liberty University v. Geithner). On the other side, a Virginia District Judge (Commonwealth of Virginia v. Sebelius) found that the individual mandate violates the Commerce Clause. As expected, Secretary Sebelius and the Obama administration disagree that the mandate is in violation of the Clause, arguing instead that Congress has the "constitutional authority to enact laws that are necessary and proper to achieve the goal of providing health services at a reasonable cost to those who cannot obtain or afford it under the current system," according to the AHLA report.

Aside from potential issues with the Commerce Clause, the Obama Administration also argues it has the authority to tax individuals who decide not to purchase qualifying coverage. District Judge Henry Hudson, the Virginia District Judge who found the individual mandate in violation of the Clause, also rejected this argument. He found the "tax" imposed on individuals who chose not to purchase coverage is in fact a penalty, based on the use of the word "penalty" in the minimum essential coverage section of the statute. He argued that the distinction between a tax (intended to raise funds) and a penalty (intended to regulate behavior) is constitutionally meaningful, according to the AHLA report.

Everyone expects the Supreme Court to ultimately decide the issue, which could take as long as two years. The high court's five-member conservative majority may well hold together. Rulings on these cases have been stubbornly partisan so far, with two Democrat-appointed judges in favor of the law and two Republican-appointed judges against it. Also, the Constitutional issue involves an expansion of federal authority, an issue that can get a conservative jurist's blood boiling. Never before has Congress required purchase of a private good or service, wrote a Virginia judge ruling against the mandate. The Supreme Court could strike down the individual mandate or it could go all the way and repeal the whole law. The high court generally shies away from this, not wanting to be seen as usurping the powers of Congress. But the healthcare reform law could be an exception.

2) HIPAA and data breaches.

Breaches of electronic data have become a major problem, as more providers switch to electronic systems. In addition, interoperability of systems is expected to create yet more breaches, as information is traded between networks. Laptop theft is the most common type of data breach, accounting for 24 percent of reported breaches, according to HHS. Desktop computers were involved in 16 percent of breaches and portable devices such as smart phones were involved in 14 percent.

Almost all the states have developed their own data-breach laws. California enacted the first such law in 2003, and 46 states quickly followed. However, the laws vary on what counts as personal information, how notice of the breach has to be made and the amount of fines for noncompliance. In Nov. 2010, California levied a total of $792,000 in fines against six hospitals and a nursing home for failing to prevent unauthorized access to confidential patient information.

In Sept. 2009, HHS implemented notification requirements for breaches of unsecured protected health information. Affected patients must be notified in writing within 60 days of discovering the breach, and if more than 500 people are impacted, local media outlets must be alerted, and the breach must be posted on the HHS website. If a breach affects fewer than 500 individuals, the provider can notify HHS on an annual basis. And if the data is encrypted in accordance with HHS guidances, an organization is exempt from notification because the information is unusable by unauthorized individuals.

On Feb. 23, 2011, HHS issued its first monetary fine for a privacy violation: $4.3 million to Maryland-based Cignet Health. The notice followed a finding by HHS' Office of Civil Rights that the health system failed to provide 41 patients with copies of their medical records. Cignet also allegedly failed to respond to requests from the Office for Information on the complaints. The second monetary fine followed the next day, as The General Hospital Corporation and Massachusetts General Physicians Organization, representing Massachusetts General Hospital in Boston, agreed to pay the U.S. government $1 million to settle allegations that the hospital violated the HIPAA privacy rule. The allegations involved the loss of documents — a patient schedule containing names and medical record numbers for 192 patients, as well as billing encounter forms containing the name, date of birth, medical record number, health insurer and policy number, diagnosis and name of providers for 66 of those patients.

Cignet Health's settlement underscores the necessity of cooperating with OCR investigations. In Cignet's case, failure to cooperate with the agency's investigation spurred a $3 million fine — almost 70 percent of the total penalty.

3) Antitrust issues and ACOs.

Federal antitrust laws will likely have to be reinterpreted to make way for accountable care organizations. ACOs present a new legal problem because competing hospital systems would be able to come together and share pricing information, which could be viewed as "per se" illegal under Section One of the Sherman Act. The possibility that ACOs could be a means for hospitals to raise prices runs counter to the basic concept of ACOs, which is to bring hospitals together to lower prices, but it could happen.

CMS, which is currently drafting proposed regulations for ACOs, doesn't have a direct concern with antitrust. Raising prices due to market dominance is not an issue for Medicare, because it set prices unilaterally. However, private payors, who are beginning to create their own ACO-like relationships with hospitals and physicians, are exposed to market forces and have a strong interest in ensuring strong antitrust regulations for providers — even as insurers themselves enjoy wide exemptions from antitrust laws under the McCarran-Ferguson Act. The two federal antitrust agencies, the Federal Trade Commission and the Department of Justice's Antitrust Division, also want to keep antitrust enforcement strong. These agencies, in separate branches of government from CMS, do not have a direct interest in making sure ACOs work. And yet the FTC and DOJ joined CMS last October in co-hosting a listening session to get feedback from stakeholders on how ACOs should be regulated.

As a basis for allowing ACOs to operate, antitrust lawyers cite a 1996 joint FTC-DOJ guidance on clinical integration. But it is not a perfect fit and antitrust agencies are expected to provide more guidance. In a recent joint workshop held by the Federal Trade Commission, the Department of Health and Human Services Office of Inspector General and CMS, stakeholders raised concerns about existing antitrust laws, according to the AHLA Connections report. Some stakeholders suggested that without advice and support from antitrust agencies, ACOs — as well as other integration strategies — might pose an insurmountable risk for providers. The agencies have the option of setting up new "market power" safe harbor for ACOs, but more likely, they might provide recognition of allowable ACO activities. For example, the agencies might decide CMS' designation of Medicare ACO status to competing providers is evidence they are committed to clinical integration and reducing costs, rather than creating an unlawful combination to raise prices.

4) False claims and whistleblower suits.

The False Claims Act is a federal law that covers fraud involving any federally funded contract or program, including Medicare or Medicaid, allowing healthcare providers to be prosecuted for various actions leading to the submission of a fraudulent claim. The primary activities that may constitute violations under the False Claims Act include:

• Knowingly presenting to the federal government a false or fraudulent claim for payment.
• Knowingly using a false record or statement to get a claim paid by the federal government.
• Conspiring with others to get a false or fraudulent claim paid by the federal government.
• Knowingly using a false record or statement to conceal, avoid or decrease an obligation to pay money or transmit property to the federal government.

The Patient Protection and Affordable Care Act will expand the government's reach under the FCA with requirements aimed at enhancing fraud-fighting and increasing penalties for submitting false claims. Starting in 2012, physicians must return known overpayments to the government within 60 days of discovering an error.

Another issue affecting false claims is the empowerment of whistleblowers under reform. Under PPACA, whistleblowers may initiate false claims actions based on information publicly disclosed through federal criminal, civil and administrative proceedings in which the government or its agent is a party, as well as federal reports, hearings, audits or investigations. While state proceedings no longer qualify, following Congress' revision of the statute to apply to only federal sources, news media reports are still considered public disclosure. In other words, a whistleblower no longer has to be the actual source of the information. Both critics and proponents say this measure will make it easier for whistleblowers to bring cases against healthcare organizations, though opinions differ on whether the increase in cases will help or hurt the industry. False Claims Act investigations of hospitals have come under fire recently from the American Hospital Association. In a letter to the Committee on Oversight and Government Reform, the AHA said, "The Department of Justice and certain Assistant United States Attorneys are abusing their authority by initiating False Claims Act investigations of hospitals upon the discovery of a mistake or overutilization." The AHA said FCA cases pose a great risk to hospitals in terms of monetary and administrative sanctions, and the threat of FCA liability "leads hospitals to incur massive expenses in retaining specialized council and outside forensic accountants."

Over the course of 2010, many hospitals, health systems and pharmaceutical companies were targeted by the federal government for their roles in submitting false claims. More than 700 False Claims Act issues were alleged by the federal government in 2010, and from 2009-2010, the government recovered nearly $7 billion under the False Claims Act. Of that recovery, healthcare providers and pharmaceutical companies represented over 75 percent of the total payment. In May 2010, the Health Alliance of Greater Cincinnati and The Christ Hospital in Mount Auburn, Ohio, agreed to pay $108 million to settle claims they violated the Anti-Kickback Statute and False Claims Act. In November, St. Joseph Medical Center in Towson, Md., agreed to pay the United States $22 million to settle allegations under the FCA that it paid kickbacks and violated Stark Law when it entered into a professional services contract with MidAtlantic Cardiovascular Associates.

5) Anti-Kickback and physician-hospital issues.

The Anti-Kickback Statute governs a hospital's financial relationships with physicians. To avoid being stung by the law, a hospital first has to make sure its physician relationships are not just a way to pay physicians for referrals. The statute prohibits knowingly offering or receiving payment to induce referrals of items or services. The law is similar to the Stark self-referral law and, indeed, one transaction can violate both laws at once. An Anti-Kickback violation is also expensive. It is a felony offense carrying criminal fines of up to $25,000 per violation, imprisonment for up to five years and exclusion from government healthcare programs.

Healthcare organizations can run afoul of the Anti-Kickback Law by providing free services or staff to a practice, paying for unneeded services, providing discounts to practices and paying physicians different amounts than what had been contracted. Recruitment arrangements could also violate the statute. To comply, payments to physicians have to be at fair market value and be commercially reasonable.

The health reform law makes it clear that starting in 2012, Anti-Kickback Statute violations can spur false claims liability. In addition, the government no longer has to prove an individual had "actual knowledge" of the Anti-Kickback Statute in order to violate it; instead, a conviction requires proof that the defendant knew his or her conduct was illegal, according to the AHLA Connections report. Previously, the Ninth Circuit's holding in Hanlester Network v. Shalala, 51 F.3d 1390 (9th Cir. 1995) interpreted the Statute's "knowingly and willingly" standard to mean that the government must provide evidence a defendant knew of the Statute and aimed to disobey it. Under the current law, a violation of the AKS is enough to pursue conviction.

The year 2010 presented its fair share of major anti-kickback cases. In January, the former owners of Los Angeles-based Angels Medical Center paid $10 million for paying illegal kickbacks to patient recruiters for the recruitment of homeless patients. In November, Towson, Md.-based St. Joseph Medical Center paid $22 million to resolve a lawsuit that alleged the hospital paid kickbacks to MidAtlantic Cardiovascular Associates, under the guise of professional services agreements in return for the group’s referrals to the medical center. Christiana Care Health System in Wilmington, Del., agreed to pay $3.3 million to settle a whistleblower kickback lawsuit in March; according to the charges, the system overpaid physicians for in-hospital readings of EEGs allegedly as a “reward” for referring patients to the hospital.

6) Impact of Stark Law on physician-hospital relationships.

The Stark Law was enacted to prevent referral sources — namely physicians and physician extenders — from inappropriately profiting from referrals. Under Stark, a physician may not refer a patient for certain services to be reimbursed by federal healthcare programs to an entity with which the physician has an ownership interest or compensation arrangement. There are some exceptions to the law: Stark regulations allow nonmonetary compensation (not more than $300 per year) to physicians from a referred-to entity; preventive services are exempted as long as they meet CMS' relevant frequency limits and are reimbursed based on a Medicare fee schedule; and hospital incidental benefits are permitted if they meet a variety of requirements (described in greater detail in a report by the American Academy of Family Physicians here.)

The broadest exception to Stark Law probably exists in the concept of "fair market value." According to the AAFP report, compensation is permitted as long as it meets the following criteria:

• Compensation be written down and must cover only specific identifiable items or services.
• The time frame — which can be less than a year as long as the compensation remains the same for each period within a year — must be specified.
• When compensation is fixed for at least a year, it must be stated specifically in advance, must be consistent with fair market value and must not take into account volume or value of referrals.
• The transaction must be commercially reasonable and further legitimate business purposes of the parties.
• It must meet a safe-harbor regulation under the Anti-Kickback Statute, be explicitly approved by the Office of the Inspector General under a favorable advisory opinion or must not violate the Anti-Kickback Statute.
• The services must not involve the counseling or promotion of a business arrangement or other activity that violates state or federal law.

The various exceptions available under the Stark Law also include rental of office space, rental of equipment, physician recruitment, charitable donations from physicians, retention payments in underserved areas, isolated transactions (e.g., one-time sale of property), personal service agreements, risk-sharing arrangements and various other situations.

The complicated nature of Stark means hospitals must be very careful about compensation arrangements with physicians. Intent is not required to violate the statute, so violations occur frequently. While violation of Stark — unlike violation of the Anti-Kickback Statute — is not a criminal offense, violations may result in penalties such as denial of payment for services, repayment of reimbursed services and monetary penalties up to $15,000 per violation and $100,000 per arrangement or scheme. A knowing Stark violation can result in exclusion from federal healthcare program participation. The PPACA mandates that the Department of Health and Human Services establish a voluntary self-referral disclosure protocol to allow providers to report alleged violations of the Stark law. This mandate reverses a decision by the Office of the Inspector General in March 2009, when disclosures involving Stark-only violations were prohibited.

Examples of Stark Law penalties are all over the healthcare industry. In July 2010, a federal judge signed an order stating Tuomey Hospital in Sumter, S.C., must pay the U.S. government more than $49.4 million for violating the Stark Act. Federal prosecutors alleged that beginning in 2004 the hospital violated federal healthcare law by offering part-time and other employment contracts for its Outpatient Surgery Center to physicians.

7) Recovery audit contractors

Recovery audit contractors, private companies that audit providers for overpayments and get a share of what they find, are just beginning to establish themselves for Medicare payments and will soon spread to Medicaid and Medicare Advantage payments. Hospitals and practices can appeal RAC determinations, but they must choose their fights wisely because appeals are expensive and time-consuming. That said, providers have good changes of winning an appeal against a Medicare RAC if they can show their claim filings met CMS payment criteria, RAC advisors say. Several federal court decisions have held that CMS payment criteria must be used when evaluating claims for Medicare payment.

The AHA estimates it costs a hospital an average of $2,000-$7,000 to file an RAC appeal. And if the appeal is lost, the hospital must also pay interest of 12 percent a year on the sum owed. In the RAC Demonstration, providers appealed more than 22 percent of adverse determinations and won about one-third of those appeals. But hospitals that appeal must be patient. They don't usually win the first two levels of appeal: a "redetermination" filed with the Medicare administrative contractor and a "reconsideration" filed with the qualified independent contractor.

Appeals start to be overturned at the third level, overseen by an administrative law judge, who is an attorney working for HHS. And if that fails, providers can go to the Medicare Appeals Council, which may either modify or reverse an administrative law judge's ruling or return the case to the ALJ for a second hearing. Even at this stage, RAC experts say providers should refrain from using legal or procedural arguments and focus on adherence to CMS payment criteria. If all else fails, providers then have the option of going to federal district court.

8) Compliance requirements for tax-exempt hospitals.

The Patient Protection and Affordable Care Act contains specific requirements for hospitals that wish to receive or maintain tax-exempt status under section 501(c)(3) of the Internal Revenue Code, changing the "community benefit standard" upon which tax-exempt hospitals have been judged for 40 years.

On March 18, 2010, the Illinois Supreme Court decided to uphold the Illinois Department of Revenue's determination that Provena Hospitals, an Illinois non-profit corporation that owns and operates Provena Covenant Medical Center, was not entitled to a charitable or religious exemption from real property taxes. The director of the Illinois Department of Revenue denied the exemption saying that Provena did not demonstrate eligibility as an institution of public charity that owned property used in an exclusively charitable manner. The director determined Provena could also not claim eligibility by using the property exclusively for religious purposes. The decision came on the eve of the enactment of healthcare reform legislation, signaling an era of change for requirements of non-profit hospitals.

The new requirements for tax-exempt hospitals include:

Community health needs assessments. In order to maintain status as a tax-exempt hospital, each facility must conduct a "community health needs assessment" at least once every three years, as well as adopt a strategy to meet the community's identified needs. Hospitals that fail to conduct the assessment and report the strategy on Form 990 will be subject to an excise tax totaling $50,000.

Written financial assistance and emergency care policies. Healthcare reform also requires tax-exempt hospitals to establish a financial assistance policy and an emergency care policy. The financial assistance policy must detail the eligibility criteria for financial assistance at the hospital, including whether that assistance includes free or discounted care. The policy must also show the basis for calculating amounts charged for patients, the application process for financial assistance, measures to publicize the financial assistance policy in the community and steps the hospital may take to address non-paying patients. The emergency care policy — designed to prevent discrimination against patients ineligible for financial or government assistance — must require the hospital to provide care for emergency medical conditions without discrimination.  

Limitation on charges. Under healthcare reform, the amount a tax-exempt hospital charges for emergency or other medically necessary care for patients eligible for financial assistance may not exceed the amounts usually billed to insured patients. According to a Joint Committee on Taxation report, "the amounts billed to those who qualify for financial assistance may be based on either the best, or an average of the three best, negotiated commercial rates, or Medicare rate."

Limitations on collections policies. Collection actions may not be undertaken until the hospital has made reasonable efforts to determine whether the patient is eligible for financial assistance.

In addition to these four new requirements, tax-exempt organizations must include several new items in their Form 990 reports to the IRS, such as an explanation of the results of the needs assessment and audited financial statements that will be open to public disclosure. In Feb. 2011, the IRS delayed the filing season for non-profit hospitals, giving facilities three months of extra time to file their 2010 Form 990. The changes were granted to complete implementation of changes to IRS forms and systems required to reflect the additional requirements for non-profit hospitals under healthcare reform. The IRS has asked that hospitals wait until July 1, 2011, to file the form.

9) Co-management arrangements.

Co-management arrangements, under which a hospital pays physicians to fulfill defined duties and meet perfomance objectives, are a way for hospitals to create alignment with physicians and could a stop on the road to bundling and accountable care arrangements with physicians. Co-management arrangements can be utilized at the general hospital, physician-owned hospital and surgery center level and generally involve a fixed fee and an incentive to meet pre-determined objectives. But co-management can also create legal issues under antitrust, Anti-Kickback, civil monetary penalties, physician self-referral prohibitions, tax exempt organization requirements and Medicare laws and regulations. For example, the Anti-Kickback Law prohibits accepting cash or any item of value for referrals of health services.

These arrangements can be structured to meet many objectives, such as lowering hospital costs, achieving operational efficiencies, improving quality and outcomes, adherence to evidence-based medicine and increasing profitability, patient satisfaction, physician recruitment and even emergency call coverage.

However, each component of the fee must be based on fair market value and this needs to be documented. Compensation cannot be related to the value or volume of referral needs. Duties cannot overlap with what others are doing, and the hospital should review its compensation arrangements to make sure this is not happening. Responsibilities have to be clearly defined and determined in advance. They should not include easily attainable goals, such as showing up on time.

10) Changes in reimbursement.

Reimbursement rates have shifted under PPACA, significantly lowering reimbursements for some providers while increasing rates for others. As far as increases, Medicare will grant primary care practitioners a 10 percent bonus effective in 2011, and general surgeons practicing in health professional shortage areas will receive a 10 percent bonus on top of the existing HPSA bonus, according to the AHLA Connections report. Hospitals in the bottom quartile for risk-adjusted Medicare spending per beneficiary will also receive rewards.

As far as decreases, hospital reimbursement rates for inpatient services will decrease in fiscal year 2011 by approximately $440 million. Another 3 percent cut will take its toll on providers and hospitals as CMS attempts to recoup payments made in previous years that arose from certain documentation and coding changes. Starting in 2015, physicians who fail to demonstrate cost-effective and high quality performance will be penalized through a value-based payment modifier; similar payment penalties begin in 2015 for hospitals with high rates of hospital-acquired conditions and high readmission rates for specified conditions.

At the end of 2010, Congress and President Obama blocked a 25 percent reduction in physician reimbursement rates that had been scheduled for Jan. 1, 2011. Current funding levels will persist through Dec. 31, 2011, at an estimated cost of $14.9 billion, according to the AHLA Connections report. Similar blocks to the sustainable growth rate cuts were enacted in 2010 and the years prior, meaning future reductions are steadily growing as Congress delays the cuts.

Out-of-network profits continue to decrease for hospitals across the country, a shift from the historical advantage of using out-of-network to increase profits or improve negotiating position.

11) Labor and employment issues.

In the coming years, hospitals may see more age discrimination claims related to termination, as well as more requests for accommodations from employees with disabilities. In April 2010, a physician sued Thomas Memorial Hospital, claiming he was replaced by "younger, less experienced surgeons" and that the facility discharged him because of his age; in March, a former Lee Memorial Health System employee, age 67, filed an age discrimination suit against the hospital system, alleging she was rejected for more than 14 positions for which she was qualified. In September, a 63-year-old man filed suit against West Houston Medical Center, saying his diagnosis of diverticulitis and hypertension, as well as his age, led to his abrupt replacement by a 30-year-old colleague.

Hospitals wishing to avoid successful legal action from disgruntled employees should implement formal, written policies on employee dismissal. Job descriptions should also be kept accurate and up-to-date to prevent discrimination claims.

Hospitals may also see an increase in unionization efforts, even in states where hospitals have traditionally remained union-free. While unionization works for many facilities and provides a sense of security to employees, it can also present difficulties for hospital administration. For example, in a unionized environment, if an employee has a concern, he or she must go through a union representative and consult the union contract rather than speaking directly to a supervisor. Several hospitals and health systems have been stymied by employee strikes in recent months: the service workers union at Pocono Medical Center in Pennsylvania approved a one-day strike in February over unfair labor practices, while union nurses at Eastern Maine Medical Center in Bangor held a one-day strike in November, citing poor patient-to-nurse ratios. Strikes — especially those affecting a significant portion of hospital employees — can paralyze hospital operations or force facilities to use more-expensive agency help to fill vacated positions. 

On the other side of the unionization dispute, some organizations are taking measures to allow employees to unionize without objection. Hospital chain HCA signed a neutrality agreement with the Service Employees International Union and California Nurses Association last April allowing the unions to organize workers at 20 HCA hospitals. The year-long agreement allows union workers to organize workers at the specified hospitals in Florida, Texas, Missouri and Nevada without objection from the operator. HCA has agreed to provide the unions lists of employees and allow them on hospital property. Labor experts say such agreements may come to fruition as unions look to grow membership and hospital operators look to provide stability.

12) Mergers and antitrust law.

Hospital mergers are heating up and so are concerns that some of them violate antitrust law. Merger and acquisition volume for the third quarter of 2010 was 20 percent higher than for the third quarter of 2009. Enforcement agencies have been leery of hospital mergers, suspecting that market power, rather than increased efficiency, is the real motivation behind them.

In addition to the Sherman Act, the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice enforce the Clayton Act, which forbids mergers that harm competition. But enforcement actions by these agencies have had frequently been overruled by the courts in recent years. Hospitals have won lawsuits against enforcement actions by pointing to a larger market area than the government alleged, showing evidence of improved efficiencies from the merger, and, in some cases, showing that the merged entity can better serve the community.

One of the most recent merger cases is the FTC's antitrust challenge against Toledo-based ProMedica Health System for its acquisition of 198-bed St. Luke’s Hospital. The FTC claimed the acquisition reduced competition and would contribute to higher prices. But as part of its argument, ProMedica said the FTC should go easy on enforcement because hospitals are trying to integrate to prepare for accountable care organizations and other payment arrangements. The lawsuit is "inconsistent with the integration and coordination that healthcare reform both encourages and requires," ProMedica said in a statement. The FTC, however, claimed it had "business documents" showing that "a principal motivation for the acquisition was for St. Luke's to gain enhanced bargaining leverage with health plans, and the ability to raise prices for services."

13) Medical malpractice and tort reform.

In January's State of the Union address, President Obama said he was willing to consider proposals designed to eliminate "frivolous" medical malpractice lawsuits, a move that some say could significantly impact hospitals. Currently, nearly all states require that physicians have liability insurance, and even in states that don't, physicians usually have to have insurance coverage in order to gain hospital privileges. Hospitals and other healthcare facilities purchase their own insurance separate from physicians and physician practices, and hospitals that directly employ physicians generally buy policies that cover both the hospital and its medical staff.

Physician malpractice premiums are priced differently from hospital malpractice premiums. While physician premiums are priced according to specialty and geographic location, hospital premiums are priced according to location, clinical services offered and the hospital's claims experience.

President Obama's statement followed the introduction of a tort reform bill by Reps. Phil Gingrey, MD (R-Ga.), David Scott (D-Ga.) and Lamar Smith (R-Texas) on Jan. 24 that would cap noneconomic — or "pain and suffering" — damages in malpractice cases at $250,000, similar versions of which have been introduced on a regular basis by House Republicans since 2002 and have repeatedly failed to pass in the Senate. Proponents of tort reform say medical malpractice costs are an unnecessary expenditure for an already-struggling healthcare industry. According to an AMA report, medical liability premiums in the United States grew by nearly 950 percent between 1976 and 2009, though specific figures on premiums were not provided.

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