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Business Entity Formation: Choosing the Right Business Structure for Your Needs

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By Mathew Levy, Esq. & Mauro Viskovic, Esq.
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Are you looking to start a business and getting ready to decide on the business entity? Choosing your business’s legal structure is one of the most critical steps you must take in forming your business.  Often professionals spend too little time considering what business structure would maximize their profit and minimize their exposure to liability.  Sole proprietorships, partnerships, limited liability companies, and corporations are among the most common types of business entities and each poses different advantages and disadvantages. 

Anyone contemplating a new venture would be well advised to assess the needs of the venture and choose the structure that best suits its likely needs.  In doing so, consider how many investors will have an ownership interest in the business and the extent of their respective ownership, control, and liability.  Also, consider the time and cost associated with setting up a business entity, tax consequences, the transferability of ownership and management interest, and the intended lifespan of the entity.

Here’s a quick look at the most common types of business structures you can select from and their characteristics.  

The Sole Proprietorship

A sole proprietorship is the simplest type of business entity and requires minimal paperwork.  It is an unincorporated business that’s owned by the individual running it. A sole proprietorship is the default choice for anyone who runs a business but hasn’t set up another formal business structure like an LLC. As a sole proprietor, there’s no liability separation between your personal and business assets and expenses. You are personally responsible for all your business’s debts and obligations.

Individuals that do a lot of contractual work, such as freelancers, consultants and personal trainers often choose to file their taxes as sole proprietors. This is the easiest way to go if you’re just starting out or you’re not yet making enough profit to justify the costs of an LLC or corporation. However, even if you’ve been in business for decades, a sole proprietorship may still be the best option, depending on the type of business you run. It’s all going to depend on your income, business type, and your personal management preferences.

A sole proprietorship can only have one owner. If you take on a business partner, your unincorporated business will become a general partnership.

The Partnership

A partnership is an organization composed of two or more persons or entities that join forces for the purpose of running a business for profit.  Its owners or “partners” share the ownership and management interest of the partnership.  While a partner can freely assign her profits (ownership interest) to another, she may not assign her control (management interest) without the consent of all of the partners, unless agreed upon in writing.  Partnerships enjoy limited life and dissolve upon the death, bankruptcy, or withdrawal of any partner.  

While a partnership may be formed without a written agreement, the failure to do so is a recipe for disaster.  Written partnership agreements should spell out the financial and managerial responsibilities of each partner, including the requisite capital contributions of each and how profits and losses will be apportioned.  The partnership agreement may also provide guidelines for the transfer of ownership interest and the dissolution of the business.  Despite any such agreement, New York law holds each partner liable for acts performed on behalf of the partnership by any partner or employee.  Partnership liability is unlimited and can place personal assets at risk. 

Significantly, partnership income is not subject to taxation.  Rather, each partner is taxed individually for his own income.  However, by filing certain forms, a partnership can elect to be taxed like a corporation if this arrangement will create tax savings.  

The Corporation

A corporation is a legal entity owned by one or more persons (or other business entities).  Owners are issued stock (i.e. shares of corporate ownership).  Shareholders elect directors who set corporate policy and appoint officers responsible for the actual operation of the business.  Through its officers or directors, a corporation may enter into contracts, own property, sue or be sued, pay taxes and conduct business.  Shareholders enjoy limited liability and a shareholder’s risk is generally limited to the value of his or her stock.  

Corporations have many rules associated with formation and maintenance.  A corporation must file a certificate of incorporation setting forth its name and corporate purpose.  In order to assure limited shareholder liability, corporations are required to obey a strict set of rules and maintain particular business records.  The filing of a certificate of incorporation in this state designates the secretary of state as the corporation’s agent for the receipt of legal processes, such as a summons or a subpoena.  

Unlike partnerships, corporations are separate and distinct legal entities from their shareholders.  Consequentially, corporations can enjoy perpetual life and their stock may be freely transferred.  Also, corporate income is taxed twice.  A corporation is taxed on its income and its shareholders are taxed on the dividends they receive.  However, shareholders that also work for the corporation may enjoy tax-free fringe benefits such as health and life insurance.  Entities known as “S” corporations are taxed like partnerships but enjoy the limited liability and other advantages of incorporation.  With some exceptions, “S” corporations cannot have more than 100 shareholders, all of which must be U.S. residents, qualifying trusts, or certain tax-exempt individuals.   

The LLC

A limited liability company or LLC is an entity owned by one or more natural persons or entities, known as “members” or “managers.”  It is formed by filing an article of organization with the state in conformance with the requirements of New York’s Limited Liability Company Law.  Significantly, members are not personally liable for the business debts of the company, unless specified by the articles of incorporation.  The entity may elect whether it will be treated like a corporation or a partnership for tax purposes, without being subject to the liability of a partnership or the restrictions imposed on an “S” corporation.  An LLC must adopt a written operation agreement setting forth how and by whom the company is to be managed, how ownership interests may be transferred, the obligations of the members with respect to each other, and the circumstances under which it may be dissolved.  

Formation of an LLC may be expensive and technical.  New York law provides minimum requirements for a business to receive limited liability company treatment.  Like a partnership, an LLC has limited life.  The operating agreement must specify an outside date for the dissolution of the company.  Absent a contrary provision in the operating agreement, an LLC will dissolve upon the death, withdrawal, or bankruptcy of a member.  Like a partnership, unless otherwise provided in the operating agreement, a member’s financial interest in the LLC is freely transferable, but her management interest is not, absent the consent of the other members.

Should you have any questions regarding the implications of choosing your business entity type, please contact Mathew Levy, Esq at 516-926-3320 or email mlevy@weisszarett.com or Mauro Viskovic, Esq at 516-751-6537 or mviskovic@weisszarett.com. 

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy, and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

How to Prepare for OPMC Investigations: A Legal Perspective

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In the state of New York, there is an office within the Department of Health that serves to investigate claims of medical misconduct, known as the Office of Professional Medical Conduct or “OPMC.”

While the scope of OPMC’s jurisdiction is not unlimited, they play a heavy hand and are the primary governmental enforcement agency responsible for monitoring physician conduct, addressing complaints against doctors and adjudicating remedial and disciplinary actions that can leave a lasting stain on a physician’s career.

Luckily, there are key steps you can take to ensure legal protection, should you find yourself in the midst of an OPMC investigation. With the help of the right team of healthcare attorneys, you can protect yourself, your practice and your professional reputation.

For this reason, it is imperative that you know how to properly respond in the event an OPMC investigation does occur. For more information on the legal perspective of these events, keep reading below.

What Is an OPMC Investigation?

“OPMC” is the Office of Professional Medical Conduct. This office sits within the New York State Department of Health.

The main purpose of this office is to investigate complaints lodged against medical practitioners who are governed by the Orders of the State Board for Professional Medical Conduct. This includes:

  • Physicians
  • Physician assistants

The board itself is mostly comprised of physicians, with the remaining one-third of personnel made up of physician assistants and laypersons.

What Happens When an OPMC Complaint Is Filed?

An OPMC complaint may be filed by a patient, or from a patient’s family or friends. These issues can also be lodged by hospitals and government sources. Additionally, healthcare facilities must also report internal disciplinary action for misconduct matters.

Examples of qualifying misconduct include:

  • Negligence
  • Incompetence
  • Impairment from alcohol or drugs
  • Refusing to provide care based on race, color, national origin, etc.
  • Ordering excessive tests or treatments
  • Billing fraud
  • Moral Unfitness

These are just a handful of the potential violations that OPMC would investigate. Others might include: failing to maintain or transfer medical records, privacy violations, or sexual harassment or abusive conduct towards a patient. 

Once an investigation is launched, physicians are expected to fully cooperate. This includes providing any requested documentation, such as medical records and billing materials. Physicians are also given the right to participate in an informal interview with OPMC representatives, but are not obligated to do so. 

From there, the board will make a determination to either dismiss the investigation, or proceed to phase 2 of the process that involves formal charges of misconduct and a multi-step administrative hearing and appeal process. If found guilty, OPMC can impose a variety of disciplinary or remedial actions including: 

  • Revocation of medical license
  • Suspension or limitation of medical license
  • Probation
  • Monitoring
  • Censure
  • Reprimand
  • Fines
  • Community service

With such potentially serious consequences on the line, it is imperative every medical professional who may be subject to these rules take these matters seriously, and do what s/he can to minimize risk and outcome. Since the vast bulk of investigations are closed before proceeding to the phase 2 charges, it is strongly recommended that all efforts be taken to “nip the matter in the bud” and try to get the complaint dismissed as soon as possible. 

It is extremely important to reiterate that during these interviews—and any other stage of the investigation—physicians are authorized to bring in legal counsel.

What Are OPD Investigations?

Similar to OPMC, OPD is another New York State office that handles these types of investigations. OPD stands for the Office of Professional Discipline and sits within the New York State Department of Education

The Department of Education oversees the licensing process for other (non-medical) professionals practicing in New York. This covers a wide span of professionals, including:

  • Dentists
  • Mental health professionals besides psychiatrists
  • Nurses
  • Pharmacists
  • Veterinarians
  • Athletic trainers
  • Chiropractors

These are just a handful of categories that the New York OPD oversees. As with OPMC cases, OPD inquiries typically begin with a claim that is then investigated.

Like OPMC, an OPD investigation can result in drastic remedial or disciplinary action. 

How Can I Prepare for an OPMC or OPD Investigation?

In the event you do find yourself under an OPMC or OPD investigation, one of the most important steps you can take is to secure legal representation. With the help of a trusted team of healthcare lawyers, you can ensure you properly understand all rules and regulations and how they apply to you. Experienced counsel have been down the OPMC/OPD road many times before, and have acquired practical experience in dealing with this very important matter in a professional’s career.

More often than not, physicians fare better during OPMC investigations when they are honest and forthcoming with information. But with that said, it is important to understand your rights under the law throughout the process.

This is where trusted attorneys  in this area of law can help keep compliant with these procedures while avoiding unnecessary instances of self-incrimination.

Turn to the Lawyers at Weiss Zarett Brofman Sonnenklar & Levy, P.C.

With this information, you can gain a greater understanding of OPMC and its investigations. It is imperative that all medical professionals understand this information and the potentially serious consequences on the line.

Should you find yourself on the wrong side of an OPMC investigation, the best thing you can do for yourself and your professional reputation is to immediately seek proper counsel.

With the help of a qualified team of healthcare attorneys that are well-versed in this area of law, you can rest assured that your rights remain protected throughout.

In New York, there is a qualified team of dedicated lawyers standing by to help. Contact an attorney today to learn more, and to ensure you are putting your best foot forward heading into an OPMC investigation.

Mathew J. Levy
David A. Zarett
A young man using his laptop to video chat with his doctor through telehealth

Telehealth Law & COVID-19: Changes To Look Out for in 2021

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Telehealth and telemedicine have been on the rise over the past decade for those in the healthcare industry. As technology improves, more patients opt for remote medical care to alleviate the costs and inconveniences associated with in-person care. 

Recently, this area of medical services has received a metaphorical shot in the arm because of the global coronavirus pandemic, leading to increased patient volume and legal complexity in this budding area of medicine. 

This influx of change affects not only the care side of telehealth but also the legal rules and regulations that guide the trajectory of telemedicine as a whole. Our firm—which has built a niche in healthcare law—is closely monitoring how the pandemic has acted as a catalyst for change in this area of medical care. 

In this blog, we will address some of the more recent changes on the legal side of telehealth on a state and federal level and speculate on future changes. 

A Snapshot of Telemedicine in the U.S. 

Over the past five years, the number of telehealth services has increased by almost 10% per year. Records show that between 2010-2017, there was a nearly 50% boost in hospitals that utilize telehealth services and communication. 

As of now, over 75% of U.S. hospitals are using telehealth services to connect with patients and practitioners. Medicaid programs now have some form of coverage for these services. However, it has lagged behind other payers due to the limits on coverage and payment for telehealth services. These limitations have slowed how efficient telehealth technology has evolved. This, along with the challenge of many practitioners needing cross-state licenses, continues to be an overall disruption in progress. This has led to a significant push for the government to open up more and increase the use of telehealth. 

Telemedicine in the Age of COVID 

Since COVID hit, there has been a dramatic spike in telehealth usage. It’s proven that practitioners can diagnose and help patients while conserving medical supplies and reduce the strain on office and facility capacity. 

As our current global pandemic continues, practitioners have pushed to maintain the expansion of telehealth services. Practitioners who have expected telehealth to decrease have cited that coverage concerns and patients wanting in-person visits now that a vaccine is being administered are the primary causes. 

The Impact Of The Pandemic On Telehealth Regulations in 2020

At the beginning of the global pandemic, we saw a flurry of telehealth and telemedicine laws being passed to provide immediate relief for both patients and medical providers. One such bill, named the Telehealth Modernization Act, aimed to do the following: 

  • Remove geographic and originating site restrictions from Medicare coverage of telehealth services;
  • Ensure that Medicare covers telehealth services at federally qualified health centers (FQHCs) and rural health clinics (RHCs);
  • Give the Health and Human Services Secretary the authority to permanently expand the types of telehealth services covered by Medicare (the list now stands at 135) and the types of care providers who able to deliver those services; and
  • Enable Medicare to cover more telehealth services used for hospice and home dialysis care.

The bill was supposed to be a three-pronged approach to improve the healthcare landscape. This bill joined a flurry of other bills in 2020 that all aimed to make telehealth services more affordable and accessible to millions who may need them. 

Predictions For The Future Of Telehealth Legislation

As the healthcare landscape continues to shift around the pandemic and improving technology, we can expect to see more legislation addressing telemedicine and telehealth. 

Given how there was a significant expansion of Medicare and Medicaid coverage in the realm of telemedicine and telehealth, it may be helpful to try to chart the trajectory of the field for 2021 and beyond. 

Judging by legislation proposed in 2020 and earlier this year, we can make a few educated predictions about how this area of medicine will continue to evolve. 

Reducing Barriers To Care

At the onset of the coronavirus pandemic, legislators looked to reduce the barriers to care for practitioners and patients. States offered temporary waivers to suspend medical licensing requirements, which allowed practitioners to deliver services across state lines. We could see some states attempt to make these permanent to keep the barriers to care low. 

In 2020, we already saw bills advance like the Telehealth Expansion Act of 2020, the Advancing Telehealth Beyond COVID-19 Act, and the Protecting Access to Post-COVID-19 Telehealth Act that attempt to make key changes permanent. 

As with most things, reducing barriers has led to some pushback from traditional practitioners who may be invested in conventional licensing requirements. Legislators in many states are currently weighing the pros and cons of loosening the barriers, with many leaning towards loosening them in the face of a drastically-altered healthcare landscape. We can expect to see an increase in lobbying efforts from both sides of this issue in the coming years. 

A Focus On Privacy 

The issue of privacy is one that Congress has been grappling with since the technology boom of the 90s. The world of telehealth is no exception to this, with some companies coming under fire over the years for mishandling patient information. We could expect to see substantial changes to HIPAA laws and state consumer privacy laws to reflect the changing healthcare climate. On both the state and federal levels, we can expect the introduction of robust privacy laws and enhanced enforcement by the FCC. 

Technology-Neutral State Laws

At the onset of the coronavirus pandemic, many prior laws surrounding allowable modalities, practice standards, and other aspects of telehealth were relaxed to aid patients and medical professionals. One consequence of these temporary changes was that telehealth was allowed to focus more on quality of care than modalities of care delivery. Given the generally positive reaction to these changes, we may see legislation that continues towards technology-neutral telehealth laws. 

Stay Up-To-Date With Weiss Zarett!

As a firm with decades of experience in healthcare law, we make it a point to keep up with the rapid pace of changes in telehealth and telemedicine. Our attorneys keep a close eye on developments on a state and federal level so we can best guide our clients. 

To learn more about our services or how your practice may be affected by this changing landscape, contact us today to speak with an attorney! 

Compliance Concerns Rise as Information Blocking Rules Become Fully Mandatory

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By Mathew J. Levy, Esq.
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Health care providers constantly strive to do what is best for the patient. However, sometimes a practice’s policies and procedures may unintentionally fall short of this goal. For example, when a patient experiences challenges accessing his/her laboratory results and must wait until her physician has had a chance to review, this delaying of access could be considered preventing patient access to their own electronic health information (EHI). As a result, the provider may fall out of compliance with a new fully enforced rule on “Information Blocking.” 

Information Blocking is the interference with access, exchange, or use of EHI which can occur, for example, by a delayed lab result to a patient as illustrated above or charging excessive fees for patients to obtain their own records. The purpose of the regulation by the Office of the National Coordinator for Health Information Technology (ONC), is to promote patient control over their own health information by improving the facilitation of electronic access, exchange, and use of health information.

While the ONC information blocking regulations have been in full effect since April 5, 2021, many physicians, healthcare IT developers, and health information networks, are reportedly unprepared. In fact, a recent survey by Life Image, a health care interoperability company, discovered that most clinical, technology, and administrative healthcare leaders are unprepared to comply with the rule’s prohibition on information blocking. While 70% of participants reported to awareness of the rule, 50% of participants are reportedly unaware of the practices that constitute information blocking with reports of engaging in noncompliant practices such as sharing paper records or sharing records on CDs. Almost half of the participants responded that they either had not made any changes or did not know how to meet the requirements.  

Most concerning is that of those surveyed, 39% were unaware that noncompliance with information blocking practices could result in civil monetary penalties. OIG recently proposed that noncompliance with the rule could face penalties of up to $1 million. These penalties are significant, and it is imperative for providers to focus their attention on (1) understanding the requirements and exceptions (2) having a compliance program in place that integrates the rules into your practice and (3) maintaining your compliance program. New York no longer permits a per page copying charge when producing electronic records per patient request– providers can only charge for the time it takes to retrieve the record from its server which is usually de minimus. A reference for you to review related to this topic is “21st Century Cures Act Has Taken Effect” and “Understanding Compliance.”

About the Author: 

Mathew J. Levy is a Partner of the firm and co-chairs the Firm’s corporate transaction and healthcare regulatory practice. Mr. Levy has extensive experience in, defending healthcare professionals in actions brought by State licensing authorities and the Federal agencies (OIG, Medicare, OMIG, Medicaid, DEA, OSHA, OCR OSHA, Hospital Review Boards, Office of Professional Medical Conduct and Office of Professional Discipline.) Mr. Levy has successfully defended numerous healthcare providers in actions involving the US Attorney’s Office investigations, Medicare Fraud Waste and Abuse investigations, Medicaid Fraud Control Unit investigations, OPMC, OPD, Medicare, Medicaid as well as commercial insurance audits including Prepayment Review, Post Payment Review, Medicare Hearings and Hospital Discipline Investigations.

Mr. Levy has successfully structured and negotiated joint venture agreements, private equity transactions, venture capital transactions, stock purchase agreements, asset sale agreements, shareholders agreements, partnership agreements, employment contracts, managed care agreements and commercial leases. Among the areas in which he focuses are coordinating mergers and acquisitions, compliance programs, ambulatory surgery centers, the establishment of diagnostic and treatment centers, HIPAA privacy regulations, fee-splitting issues, Stark law issues, fraud and abuse rules and regulations and Medicare/ Medicaid, Oxford, Americhoice, Fidelis, Healthfirst and other third-party payor settlements.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES. 

Asserting The Fifth Amendment Privilege In Civil Proceedings Can Be Tricky

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By Michael J. Spithogiannis, Esq. and Floyd G. Grossman, Esq.

Among the inalienable rights scrupulously protected is the privilege against self-incrimination.  The Fifth Amendment of the United States Constitution states that “[n]o person . . . shall be compelled in any criminal case to be a witness against himself. . . .”¹  The United States Supreme Court has ruled that the Fifth Amendment privilege is not only applicable to criminal proceedings, but “can be asserted in any proceeding, civil or criminal, . . . and it protects against any disclosures the witness reasonably believes could be used in a criminal prosecution or could lead to other evidence that might be so used.”² 

Whether to remain silent in connection with a criminal case seems clear-cut.  But whether to do so in a civil case requires a thorough understanding of its implications.  In a civil suit, the privilege against self-incrimination is often at odds with the obligation to disclose information to the other side.  

Fifth Amendment issues can arise in connection with pre-trial discovery and post-judgment collection proceedings, when it is not so clear that the privilege could or should be asserted.  

Pre-trial discovery.

The right to compel a party in a civil case to appear for a deposition under oath or produce documents is, with few exceptions, well-established.  Article 31 of New York’s Civil Practice Law and Rules (“CPLR”), the statute governing procedure in civil cases, compels “full disclosure of all matter material and necessary in the prosecution or defense of an action. . . .”³  To facilitate this mandate, courts are empowered to supervise discovery proceedings.  Invariably, civil courts not only make rulings compelling depositions or production of documents, but also rule on instances where a party seeks to avoid disclosure on Fifth Amendment grounds.⁴

CPLR §4501 provides that witnesses in a civil action are not required to answer questions that will tend to incriminate them. That said, refusing to provide discovery in a civil case on Fifth Amendment grounds has consequences.

If a defendant remains silent in a criminal case, no negative inference may be drawn from the refusal to testify.  It is always up to the prosecution to prove guilt beyond a reasonable doubt.  In a civil case, on the other hand, an adverse inference may be drawn against a party who refuses to testify on Fifth Amendment grounds.⁵  This means that a judge or jury may consider the refusal to testify in assessing the strength of the evidence offered by the opposing party.⁶  Moreover, unlike a criminal case, blanket refusals to answer questions in a civil action will not be permitted absent unique circumstances, and may only be asserted where there is reasonable cause to fear self-incrimination from a direct answer.⁷  The witness who asserts the privilege is required to justify his or her silence.⁸ To effectively invoke Fifth Amendment protections in a civil case, the witness has the burden to make particularized objections to each discovery request, and demonstrate that the evidence sought will either prove a crime or provide the source from which evidence of its commission might be found.⁹

Therefore, merely invoking the privilege is generally insufficient to preclude all discovery in a civil case.¹⁰ For example, even though a party in a civil case has the right to assert the privilege in the context of a deposition, it may only be asserted on a question-by-question basis; the testimony cannot be prevented altogether.¹¹  Even if criminal prosecution is pending, a witness is not entitled to stay the civil action until the criminal case is decided.¹²  In addition, asserting the privilege in a civil case does not relieve that party of his or her own evidentiary burden, or afford any protection against a failure to submit evidence.  The plaintiff is left to choose between, on the one hand, remaining silent and risk jeopardizing the case;¹³ and, on the other, presenting evidence that may constitute a waiver of the privilege, and opening the door to incriminating evidence.¹⁴    

Enforcement proceedings.

New York’s policy is to put no obstacle in the path of one seeking enforcement of a valid judgment.¹⁵  Enforcement proceedings, also referred to as supplementary proceedings, are civil proceedings to which a judgment debtor may be subjected.  Under New York law, supplementary proceedings aid in identifying and locating assets to satisfy a judgment and offer creditors tools for this purpose.¹⁶  

If the judgment creditor has some knowledge of who may have possession of property subject to collection, the CPLR permits service of restraining notices to prevent dissipation of the assets until they can be turned over in whole or partial satisfaction of the judgment.  As is often the case, however, a judgment creditor has little or no idea where money or other assets are hidden.  To address this problem, a judgment creditor can compel disclosure of all information relevant and material to the location of hidden assets.  A judgment creditor has the power to issue subpoenas compelling the judgment debtor to appear for a deposition, produce documents for examination, or disclose information in writing and under oath.  

Endemic to enforcement proceedings, however, is a judgment-debtor’s resistance to paying the judgment and may involve unlawful or even criminal disposition of assets to avoid execution.  Consequently, during enforcement proceedings, it may become apparent that disclosure of information by a judgment debtor could be incriminating.

The CPLR attempts to strike a balance between protection against self-incrimination and disclosure of information regarding a debtor’s assets. If the danger of prosecution is eliminated, the witness may be compelled to give testimony and produce evidence that might otherwise be incriminating.  To facilitate collection of money judgments, civil courts are authorized to grant immunity from criminal prosecution to any witness for giving testimony or evidence in an enforcement proceeding relating to disposition of property in which the judgment debtor has an interest, provided any interested district attorney is given 24-hours’ notice.¹⁷  Once immunity is granted, the Fifth Amendment is not a basis for withholding evidence.

Conclusion.

The Fifth Amendment privilege against self-incrimination is fundamental, and usually arises in the context of criminal investigations.  There are instances, less obvious, where an individual must consider whether testimony or production of evidence may open the door to criminal prosecution.  

A clear understanding of the nature and scope of the underlying legal proceeding and the consequences of providing testimony or producing evidence is essential. A thorough and candid discussion with counsel about these issues is crucial to protecting one’s inalienable privilege against self-incrimination.

Michael J. Spithogiannis, Esq. and Floyd G. Grossman, Esq. each have over 35 years’ experience litigating commercial and real-property disputes in state and federal courts throughout New York.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

¹U.S. Const. amend. V.
²Kastigar v. United States, 406 U.S. 441, 444-45 (1972) (emphasis added). See Lefkowitz v. Turley, 414 U.S. 70, 77 (1973).
³CPLR §3101(a).
⁴See Bank of Crete v. Koskotas, 1989 WL 46587 (S.D.N.Y. 1989).
⁵Marine Midland Bank v. John E. Russo Produce Co., 50 N.Y.2d 31 (1980).  
⁶El-Dehdan v. El-Dehdan, 114 A.D.3d 4 (2d Dep’t 2013), aff’d, 26 N.Y.3d 19.
⁷Marine Midland Bank v. John E. Russo Produce Co., supra; Matter of Astor, 62 A.D.3d 867, 869 (2d Dep’t 2009); Wenham Realty Corp. v. Janoff, 1994 WL 16856431 (Sup.Ct. N.Y.Co. 1994).
⁸Matter of Astor, 62 A.D.3d 867, 869-70 (2d Dep’t 2009).
⁹State v. Carey Resources, Inc., 97 A.D.2d 508 (2d Dep’t 1983).
¹⁰Spencer v. City of Buffalo, 172 A.D.3d 1916 (4th Dep’t 2019).
¹¹Matter of Schwab, 233 A.D.2d 732 (3d Dep’t 1996); Wenham Realty Corp. v. Janoff, 1994 WL 16856431 (Sup.Ct. N.Y.Co. 1994).
¹²Spencer v. City of Buffalo, supra; Stuart v. Tomasino, 148 A.D.2d 370, 373 (1st Dep’t 1989).
¹³Federal Chandros, Inc. v. Silverite Construction Co.,  Inc., 167 A.D.2d 315 (1st Dep’t 1990), app. dis., 77 N.Y.2d 893; Laverne v. Incorporated Village of Laurel Hollow, 18 N.Y.2d 635 (2d Dep’t 1966); Levine v. Bornstein, 13 Misc.2d 161 (Sup.Ct. Kings Co. 1958), aff’d, 7 A.D.2d 995 (2d Dep’t), aff’d, 6 N.Y.2d 892.
¹⁴Access Capital, Inc. v. DeCicco, 302 A.D.2d 48 (1st Dep’t 2002).
¹⁵U.S. Bank National Association v. APP International Finance Co., B.V., 100 A.D.3d 179, 183 (1st Dep’t 2012).
¹⁶Id.
¹⁷CPLR §5211.

Ambulatory Surgery Centers As Investments

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By Mathew J. Levy, Esq. and Mauro Viskovic, Esq. 

Investments in ambulatory surgery centers (“ASC”) appear to be on the rise. On April 29, 2021, the Office of Inspector General (“OIG”) posted an important advisory opinion¹ in which it concluded that a specific investment in an ASC by certain medical providers would not result in sanctions under the Anti-Kickback Statute (“AKS”)².

The transaction at issue involved a health system, individual surgeons and a medical management company that wished to invest in an ASC. As a general matter, AKS prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid, and from entering into certain kinds of financial relationships.  As such, AKS would be a potential impediment to the contemplated investment because the offer or payment of investment returns from an ASC to an investor constitutes remuneration under AKS.      

In concluding that the transaction would not result in sanctions under AKS, the OIG cited numerous factors mitigating the risk that the investment returns to the medical providers would be problematic under AKS, including the following factors:

  • All ASC investors would invest directly in the ASC.  That is, no investor would hold any ownership through a pass-through entity, which could be used to redirect revenues to reward referrals or otherwise erode the safeguards provided by direct investment.
  • The management company certified that it would not make or influence referrals, directly or indirectly, to the surgeon investors or to the new ASC; and (ii) no surgeon investor has or would have ownership in the management company.
  • The health system certified that the surgeon investors would use the new ambulatory surgery center on a “regular basis” as part of their medical practices. In referring to this aspect, it is interesting to note that OIG concluded the surgeon investors would fail to meet the hospital-physician ASC safe harbor provision requirement that a physician investor derive at least one-third of his or her medical practice income for the previous fiscal year or previous 12-month period from the performance of ASC-qualified procedures.
  • The contemplated arrangement would contain certain safeguards to reduce the risk that the health system would make or influence referrals to the ASC or the surgeon investors. For example, the health system certified that any compensation paid by the health system to its affiliated physicians for services furnished would be consistent with fair market value and would not be related, directly or indirectly, to the volume or value of referrals such affiliated physicians may make to the ASC or its surgeon investors. In addition, the health system certified that it would refrain from any action to require or encourage its affiliated physicians to refer patients to the ASC or to its surgeon investors and would not track referrals made to the ASC by its affiliated physicians.
  • Neither the ASC, nor any investor, would loan funds to or guarantee a loan for any investor to obtain ownership in the ASC. The ASC would not offer ownership to any party based on the previous or expected volume or value of referrals made. In addition, capital contributions and profit distributions would be made in proportion to an investor’s ownership in the ASC. 
  • Certain safeguards would be implemented to reduce the risk that the ASC’s investors would receive profit distributions for referrals of patients to the ASC. The health system certified that any space or equipment leased by the ASC from the health system or an affiliated real estate company would comply with AKS safe harbors for space rental and equipment rental, as applicable, and any services performed by the health system or the real estate company for the ASC would comply with the safe harbor for personal services and management contracts and outcomes-based payments. 
  • Additional safeguards would be adopted that are designed to reduce fraud and abuse risks (e.g., improper billing). The ASC, the health system, the surgeon investors, and the management company would treat patients receiving medical benefits or assistance under any Federal health care program in a nondiscriminatory manner. Further, the health system certified that all ancillary services provided to Federal health care program beneficiaries performed at the ASC would be related directly and integrally to primary procedures performed at the ASC and would not be billed separately to Medicare or any Federal health care program. The health system also certified that it would not include on any cost report or any claim for payment from a Federal health care program any costs associated with the ASC, unless such costs are required to be included by a Federal health care program.
  • The ASC and its investors would provide written notice to patients referred by ASC investors to the ASC of the referral source’s investment interest in the ASC.

This OIG Advisory Opinion provides helpful guidance for analyzing the AKS implications of a contemplated ASC investment by a medical provider.  It is critical to note, however, that the advisory opinion is limited in scope to the specific arrangement described therein, has no applicability to any other arrangements, and cannot be relied on by other parties.

Should you have any questions regarding the structuring of investments in ambulatory surgery centers, please contact Mathew Levy at 516-926-3320 or MLevy@weisszarett.com.

About the Authors: 

Mathew J. Levy is a Partner of the firm and co-chairs the Firm’s corporate transaction and healthcare regulatory practice. Mr. Levy has extensive experience in, defending healthcare professionals in actions brought by State licensing authorities and the Federal agencies (OIG, Medicare, OMIG, Medicaid, DEA, OSHA, OCR OSHA, Hospital Review Boards, Office of Professional Medical Conduct and Office of Professional Discipline.) Mr. Levy has successfully defended numerous healthcare providers in actions involving the US Attorney’s Office investigations, Medicare Fraud Waste and Abuse investigations, Medicaid Fraud Control Unit investigations, OPMC, OPD, Medicare, Medicaid as well as commercial insurance audits including Prepayment Review, Post Payment Review, Medicare Hearings and Hospital Discipline Investigations.

Mr. Levy has successfully structured and negotiated joint venture agreements, private equity transactions, venture capital transactions, stock purchase agreements, asset sale agreements, shareholders agreements, partnership agreements, employment contracts, managed care agreements and commercial leases. Among the areas in which he focuses are coordinating mergers and acquisitions, compliance programs, ambulatory surgery centers, the establishment of diagnostic and treatment centers, HIPAA privacy regulations, fee-splitting issues, Stark law issues, fraud and abuse rules and regulations and Medicare/ Medicaid, Oxford, Americhoice, Fidelis, Healthfirst and other third-party payor settlements.

Mauro Viskovic is a Partner in the Firm’s corporate and transactions practice group, where he focuses on providing high quality and cost-effective solutions to clients’ legal matters.  He represents entrepreneurs through all stages of their ventures’ development, including advice on structure, initial company formation and organization, private financings, commercial transactions, mergers and acquisitions and liquidity events.  In addition, Mauro represents investors in all aspects of corporate finance transactions and also focuses his practice on the representation of private investment fund advisers and portfolio managers

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

¹OIG Advisory Opinion 21-02.
²42 USC § 1320a-7b(b).

Adult-Use Cannabis Now Legal in New York

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By Stacey Lipitz Marder, Esq.


A summary of the key provisions of the new law is set forth below.

Office of Cannabis Management:

The new law establishes the Office of Cannabis Management (OCM), which will be part of the New York State Liquor Authority. The OCM will be responsible in crafting and overseeing the corresponding regulations covering medical, adult-use, and cannabinoid hemp. 

On March 31, 2021, the highly anticipated Marihuana Regulation and Taxation Act (S.854-A/A.1248-A) was signed into law by Governor Andrew Cuomo, adding New York to the list of states where adult use of cannabis is legal. It is unclear when dispensaries will open and sales will begin, although there has been speculation that this will not occur until at least 2022. The cannabis market is expected to be incredibly lucrative and provide lots of new opportunities. 

Licenses:

As per the law, licenses will be issued for growers, distributors, and retailers. Microbusinesses will be allowed to be vertically integrated, although the criteria for a microbusiness has not yet been established. The law also sets a goal whereby 50% of licenses will be issued to social equity applicants, including those individuals disproportionately impacted by cannabis enforcement, minority and women-owned businesses, financially distressed farmers, and service-disabled veterans. Cities, towns, and villages may opt-out of allowing dispensaries and will have until the end of the year (December 31, 2021) to do so. 

Existing Medical Marijuana Business:

The new law will also expand New York’s existing medical marijuana program in order to make it less restrictive. For instance, additional medical conditions will be covered, patients will not be restricted from smoking medical marijuana, the current supply cap will be increased, and home cultivation for medical cannabis patients will be permitted. Furthermore, medical marijuana companies will be able to add additional sites where they can operate (provided certain conditions are met), as well as apply for recreational licenses.  

Taxes:

Due to the significant economic opportunities associated with the new legalization, it is anticipated that tax collections from the adult-use cannabis program will reach $350 million annually. The legislation establishes a 13% sales tax; 9% of which is allocated to the state, and 4% to localities. In addition, distributors would collect an excise tax based on THC content. The taxes already imposed on marijuana sold for medical purposes will remain unchanged.

Traffic Safety:

The legislation also includes additional funding for drug recognition experts and law enforcement to ensure safe roadways. The Department of Health has been tasked with studying devices that determine if a person is impaired from marijuana. The use of cannabis by drivers will remain prohibited and will be subject to the penalties currently in effect. 

Personal Possession and Home Cultivation:

Although legal, the new law sets limits with respect to the amount of cannabis that can be grown at home and personal possession of cannabis outside the home. Six plants may be cultivated for personal use, provided only three are mature at a time. Adults are now permitted to possess up to three ounces of cannabis for recreational use or twenty-four grams of concentrated cannabis.

Criminal Justice and Record Expungement:

Under the new law, the records of people previously convicted of crimes relating to cannabis that would now be legal will be expunged. Reduced penalties will also be implemented for possession and sale.

Public Health:

As per the new legislation, OCM will be responsible for establishing a public health and education campaign in order to ensure the health and safety surrounding those affected by the new law. 

While the legalization of adult cannabis can provide new, lucrative opportunities for individuals and businesses, a thorough due diligence review should be completed before entering into the cannabis space. Furthermore, it is imperative that all potential business arrangements be reviewed not only from a compliance standpoint but also from a business standpoint in order to maximize benefit and minimize risk. 

Should you have any questions regarding the new cannabis laws or potentially entering into the cannabis space, please contact Stacey Marder at 516-926-3319 or SMarder@weisszarett.com. 

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.

Medicare Payments on Hold Pending Congressional Sequester Fix

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By Mathew J. Levy, Esq.
Email Mathew

Participating Medicare providers already experiencing financial hardship due to the pandemic would be further hit by a 2% payment cut until Congress takes action next month with the passage of a sequester fix. To address this issue, the Centers for Medicare & Medicaid Services (“CMS”) is temporarily pausing Medicare payments to providers.

CMS recently announced “Temporary Claims Hold Pending Congressional Action to Extend 2% Sequester Reduction Suspension” in a special news edition of its MLN Connects newsletter, available here. CMS’ notification instructs Medicare Administrative Contractors (“MACs”) to temporarily pause all claims with dates of service on or after April 1, 2021, for a short period, without affecting providers’ cash flow.

Additionally, the change is intended to minimize the number of claims that MACs must reprocess if Congress were to extend the suspension. Further, CMS assures that if necessary, the MACs will automatically adjust. Additionally, the MACs will reprocess any claims that were paid with the reduction applied.  

If you are a participating Medicare provider, you can find your MAC Provider Contact Center at this website. 

Importantly, if you are a provider seeking clarification on how these changes may affect you, you can contact Mathew J. Levy at 516-926-3320 or mlevy@weisszarett.com.

Mathew J. Levy is a Shareholder/Director of Weiss Zarett and co-chairs the Firm’s corporate transaction and healthcare regulatory practice. Mr. Levy has extensive experience in defending healthcare professionals in actions brought by state licensing authorities and federal agencies. Mr. Levy has successfully defended numerous healthcare providers in actions involving the US Attorney’s Office investigations, Medicare Fraud Waste and Abuse investigations, Medicaid Fraud Control Unit investigations, OPMC, OPD, Medicare, Medicaid as well as commercial insurance audits. Mr. Levy has successfully structured and negotiated joint-venture agreements, private equity transactions, venture capital transactions, stock purchase agreements, asset sale agreements, shareholders agreements, partnership agreements, employment contracts, managed care agreements, and commercial leases.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.