Client Alert: Department of Labor Seeks to Broaden Definition of Fiduciary Under ERISA

On March 1 and 2,2011 the Department of Labor held public comment hearings on its new proposed regulations defining a fiduciary for purposes of employee benefit plans. It is likely the new regulations will cause many who provide financial services to employee benefit plans to be a fiduciary with respect to the plan. The new regulations will result in fiduciary status for those who do any of the following:

1. Provide advice, appraisals or fairness opinions as to the value of investments, make recommendations as to buying, selling or holding assets, or recommendations as to the management of securities or other property.

2. Acknowledge fiduciary status for purposes of providing advice regardless of whether the person meets other requirements of the regulation.

3. Is an investment advisor under Section 202(a)(11) of the Investment Advisors Act of 1940.

4. Provide advice or make recommendations pursuant to an agreement, arrangement or understanding, written or otherwise, with the plan, a plan fiduciary or a plan participant or beneficiary, where the advice may be considered in making investment or management decisions with respect to plan assets, and the advice will be individualized to the needs of the plan, a plan fiduciary or a participant or beneficiary.

The proposed regulations may be found at the Federal Register.

Each case a business or individual may face is unique and may require legal advice. If you would like additional information regarding the content of this article, please contact a member of our Labor and Employment Department.

Client Alert: ADAAA Regulations Released

The Equal Employment Opportunity Commission (EEOC) issued its final revised Americans with Disabilities Act (ADA) regulations and accompanying interpretive guidance in order to implement the ADA Amendments Act of 2008 (ADAAA), which prohibits employment discrimination on the basis of disability.

In keeping with the ADAAA, the new regulations are to be construed broadly, and will dramatically change an employer's focus from whether someone is disabled, to what accommodations should be made.

These new regulations will be effective May 24, 2011, and are available in the Federal Register. Employers with 15 or more employees are encouraged to revise policies and train supervisors to comply with these new rules. [For assistance with either of these, please contact Jennings, Strouss & Salmon]

Each case a business or individual may face is unique and may require legal advice. If you would like additional information regarding the content of this article, please contact a member of our Labor and Employment Department.

Hefty Fines Issued for HIPAA Violations

Bradley V. Martorana, Richard C. Smith
4.11.11

Within a couple of days apart, the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) issued civil money penalties (CMPs) to two covered entities for failure to comply with the Health Insurance Portability and Accountability Act's (HIPAA) privacy rule.

On February 22, 2011, OCR fined Cignet Health of George's County, Md. (Cignet) $4.3 million for failure to provide patients access to medical records within the allotted time frame required by HIPAA. This first-ever imposed penalty was a result of what the OCR claims was Cignet's "willful neglect" to provide 41 patients access to their medical records within 30 to 60 days of the submitted requests. These violations occurred between September 2008 and October 2009.

OCR Director Georgina Verdugo stated in a news release, "Covered entities and business associates must uphold their responsibility to provide patients with access to their medical records, and adhere closely to all of HIPAA's requirements." Verdugo also indicated that the HHS will continue to investigate and take action against organizations that knowingly disregard their obligations under the HIPAA privacy rules.

In addition to the direct violations of HIPAA privacy rules, the OCR claimed that Cignet failed to cooperate with its investigations into the violation claims and provide records in response to the OCR's subpoena. HIPAA covered entities are required to cooperate with HHS investigations; however, Cignet only produced the medical records after the OCR filed a petition to enforce its subpoena in U.S. District Court and obtained a default judgment.

Two days after the Cignet fines were issued, the OCR executed a $1 million resolution agreement with The General Hospital Corporation and Massachusetts General Physicians Organization Inc. (Mass General). After an investigation, the OCR determined that Mass General was liable for the privacy rule violation made by an employee who left documents containing protected health information (PHI) related to 192 patients on a subway train.

The HIPAA privacy rule requires that covered entities protect the privacy of patient information through administrative, physical and technical safeguards at all time. Director Verdugo indicated that the OCR investigation revealed that Mass General failed to establish reasonable and appropriate safeguards to protect the privacy of sensitive information when it was removed from the hospital's premises.

As part of the resolution agreement, Mass General entered into a Corrective Action Plan, which includes the development and implementation of a comprehensive set of policies and procedures that ensure patient information is protected when removed from the hospital; training of staff members on these policies and procedures; and designating the director of internal audit services of Partners Healthcare System Inc., the hospital's parent company, to serve as an internal monitor to assess the hospital's compliance with the corrective action plan and submit semi-annual reports to HHS for three years.

"To avoid enforcement penalties, covered entities must ensure they are always in compliance with the HIPAA Privacy and Security Rules," said Verdugo. "A robust compliance program includes employee training, vigilant implementation of policies and procedures, regular internal audits, and a prompt action plan to respond to incidents."

Each case a business or individual may face is unique and may require legal advice. If you would like additional information regarding the content of this article or the variety of services Jennings Strouss provides to our health care clients please contact Fred Cummings.

Richard C. Smith is a member of the Tax, Estate Planning & Probate Departments and represents clients in all aspects of tax, corporate and business planning. His practice has a particular emphasis in the employee benefits area including the design, implementation and other aspects of pension, profit sharing and other qualified plans. He also advises clients in estate planning matters, including estate plans, wills, trust and family partnership agreements. He represents many physicians' practices and handles health care matters for them. Contact Mr. Smith at rsmith@jsslaw.com or 602.262.5972.

Bradley V. Martorana is an Associate attorney focusing his practice on corporate, healthcare,tax and securities law. His practice includes counseling corporations, limited liability companies and partnerships as to the tax and non-tax consequences of formation, operation, compensation and other commercial transactions. He also advises buyers and sellers in mergers, acquisitions, reorganizations and other restructurings and represents issuers and investors in private placements of equity and debt securities. Mr. Martorana also advises on a variety of other business and real estate matters. Contact Mr. Martorana at bmartorana@jsslaw.com or 602-262-5958.

FASB May Expand Disclosure Requirements

The Financial Accounting Standards Board (FASB) is currently discussing an expanded disclosure requirement for those participating in a multiemployer pension or other post-retirement benefit plans. The proposed change, expected to be released later this year, will require employers to disclose any unfunded pension liability on its financial statements, and could dramatically affect a company's ability to obtain financing, particularly if the plan's funding status deteriorated during the financial crisis of 2008, when plan asset values dropped significantly. For more information, visit the FASB website.

Each case a business or individual may face is unique and may require legal advice. If you are an employer participating in a multiemployer pension or other post-retirement benefit plan and would like additional information regarding the content of this article, please contact a member of our Labor and Employment Department.

Accountable Care Organization Proposed Rules and Related Guidance

Healthcare Reform: Proposed Rules and Guidance Released for Accountable Care Organizations

On March 31, 2011, several Federal agencies released proposed rules and other guidance regarding participation in the Medicare shared savings program (MSSP) through Accountable Care Organizations (ACOs).

Background

Under the Patient Protection and Affordable Care Act (PPACA), as amended by the Health Care and Education Reconciliation Act of 2010, the Secretary of the Department of Health and Human Services (HHS) is required to establish a Medicare shared savings program that promotes accountability for care of Medicare beneficiaries, improves the coordination of Medicare fee-for-service items and services, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.

Groups of service providers and suppliers that may form an ACO include (i) physicians and other health care practitioners (ACO professionals) in a group practice, (ii) a network of individual practices, (iii) a partnership or joint venture arrangement between hospitals and ACO professionals, and (iv) a hospital employing ACO professionals. ACOs eligible to participate in the MSSP will manage and coordinate care for their assigned Medicare fee-for-service beneficiaries.

Healthcare service providers and suppliers participating in an ACO will continue to receive Medicare fee-for-service payments in the same manner as such payments would otherwise be made. In addition, an ACO that meets quality performance standards established by HHS and demonstrates that it has achieved savings against an appropriate benchmark of expected average per capita Medicare fee-for-service expenditures will be eligible to receive payments for Medicare shared savings (MSSP payments).

Following is a brief summary of the guidance and proposed rules that have been released by each of the Federal agencies.

The Centers for Medicare & Medicaid Services (CMS)

CMS has proposed the definitive rules relating to the operation of the MSSP and participation by ACOs. The notice of proposed rulemaking is available at: http://www.cms.gov/sharedsavingsprogram/

CMS and the Office of Inspector General of the U.S. Department of Health and Human Servces (OIG)

Participation in the MSSP through an ACO will create financial relationships among suppliers and providers which might not otherwise exist, and which might, absent exception, violate Federal fraud and abuse laws. CMS and the OIG jointly issued proposed guidance for the waiver of the application of the Federal Physician Self-Referral (Stark) Law and the Federal anti-kickback statute to certain relationships occurring by reason of participation in the MSSP through an ACO. The guidance is available at: http://www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1

The Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ)

The FTC and DOJ jointly issued a "Proposed Statement of Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program." The Proposed Statement is intended to address concerns that providers’ and suppliers’ participation in ACOs may contravene Federal antitrust laws. The Proposed Statement is available at http://www.ftc.gov/opp/aco/.

The Internal Revenue Service (IRS)

Recognizing that tax-exempt organizations (including many hospitals) will be participating in ACOs alongside for-profit providers and suppliers, the IRS is considering whether additional guidance is necessary regarding the participation by tax-exempt organizations in the MSSP through ACOs. Treasury Notice 2011-20 is available at: http://www.irs.gov/newsroom/article/0,,id=222814,00.html.