Five Legal Issues for all Healthcare Entrepreneurs

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A few weeks ago, the Rochester startup community heard from Fredrikson & Byron healthcare attorneys Ryan Johnson and Marguerite Ahmann for “Health Law 101: Key Legal Issues for Health Care Companies.” This event was hosted by the Mayo Clinic Business Accelerator and Collider Coworking.  

Here are five key legal issues that Johnson and Ahmann believe all healthcare entrepreneurs should have on their radar.

1.     False Claims Act (FCA). The FCA is the primary mechanism used by the government to combat fraudulent claims to the federal government. The FCA was originally enacted in 1863 to protect against fraudulent suppliers to the Union Army during the Civil War. This statute holds any person liable who knowingly submits false claims to the government and can result in payment of treble damages- or triple the amount of the actual damages- plus a $5,000-10,000 penalty for each false claim. This statute applies to many areas of healthcare, especially billing and coding and off-label marketing of drugs. It does not hold persons or entities liable for mistakes, including coding errors.

2.     Qui Tam Provision. This is a provision included in the FCA, which allows people not affiliated with the government, called “relators,” to file false claim accusations on behalf of the government.

3.     Anti-Kickback Statute. This statute makes it illegal to offer, solicit, or receive any payments intended to induce a referral of a federal healthcare program business. Safe harbor regulations outline financial transactions that would not be regarded as offenses under the statute. These specific allowances involve transactions at fair market value.

4.     Stark Law. These are a set of federal laws originally intended to protect against unnecessary testing and services that could increase healthcare costs. These laws prohibit a physician from self-referring Medicaid/Medicare patients for a Designated Health Service (DHS) to an entity in which the physician or an immediate family member has a financial interest. This is a strict liability statute, meaning proof of intent to violate the law is not necessary. Violation of Stark Law is a civil, not criminal, penalty of up to $15,000 per claim.

5.     Health Insurance Portability and Accountability Act (HIPAA). Enacted in 1996, HIPAA is a federal statute that safeguards Protected Health Information (PHI). PHI broadly refers to any information about the state of health, healthcare treatment, or healthcare payment that can be linked to a specific individual. HIPAA applies to “covered entities” – healthcare providers and health systems- and “business associates” – third parties who are contracted to work with the covered entities and have access to PHI. HIPAA provides patients with certain rights over their PHI and who can access these data. Sometimes state laws are more strict than federal HIPAA regulations. In these cases, the more restrictive law must be followed. This is the case in Minnesota, where the Minnesota Health Records Act places additional obligations on healthcare providers not covered under HIPAA. 

For more information about healthcare law, please check out these web resources:

·      U.S. Department of Health & Human Services

·      Office of Inspector General

·      Minnesota Department of Health