New York State Adopts Extensive Rule Changes Affecting Investment Community

By Mauro Viskovic, Esq.
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New York State Attorney General Letitia James recently announced major changes to rules affecting a broad range of investment professionals and the investment industry in general.  The new rules will change the regulatory process for offering investment securities to New York residents and will implement registration requirements for business brokers or “finders” who are in the business of connecting prospective investors to companies seeking investment capital.  In addition, investment adviser representatives (including representatives of private equity fund managers and hedge fund managers) will be subject to state registration and examination requirements. 

Notice of Investment Offerings:

One of the key changes will harmonize the New York and the federal notice filing requirements for private investment offerings that are exempt from registration under federal law.  The state notice requirements for such offerings will now be complied with by filing the federal Form D through the electronic filing depository system of the North American Securities Administrators Association. This amendment will aim to streamline the securities offering filing process in New York, which had still been using an antiquated paper filing system.

Finder Registration:

Conversely, the state imposed additional regulatory burdens that will affect finders who connect businesses to sources of investment capital in exchange for compensation.  Such finders will be subject to all of the registration requirements that New York demands of brokers, broker-dealers, and salespersons.  The new requirements include the following: (i) finders not associated with a registered broker-dealer must file Form M-1; (ii) finders associated with a non-Financial Industry Regulatory Authority, Inc. (“FINRA”) member broker-dealer must file Form M-2; and (iii) finders associated with a FINRA member broker-dealer must file Form U4.  Finder registration periods for non-FINRA members are four years, while FINRA members must follow applicable FINRA registration rules.

This adds another layer of regulation for those not registered as well as expense because these newly registered finders will have to pay fees to the State of New York as part of the registration process. Further, these new regulations are in stark contrast to the recent proposed federal registration exemption applicable to finders.  See SEC Proposes Eliminating a Significant Burden on Raising Capital in Private Markets.

Investment Adviser Registration and Examination:

New York will require “investment adviser representatives” – a very broad statutory term that includes individual professionals managing hedge funds and private equity funds – to register with the state and meet certain examination requirements.  Such individuals must register by filing Form U-4 with the web-based Investment Advisor Registration Depository (IARD) or Central Registration Depository (CRD) operated by FINRA.  Within two years prior to the registration date, registrants must take and pass either (1) the Series 65, Uniform Investment Adviser Law Examination or (2) the Securities Industry Essentials Examination, combined with the Series 7, General Securities Representative Examination, and the Series 66, Uniform Combined State Law Examination.  Individuals who have been serving as investment adviser representatives for at least two years will be eligible to apply for a waiver of the examination requirement. 

Other Changes:

The new rules will add a new bookkeeping requirement for investment advisers.  The revision requires that New York State registered investment advisers take reasonable steps to verify the “accredited investor” and “qualified client” status of any client so designated, including making and maintaining documents used in the course of such verification.  The terms “accredited investor” and “qualified client” are defined under applicable SEC regulations and generally refer to high net-worth investors who are financially sophisticated and have a reduced need for the protection provided by heightened disclosure requirements.

Weiss Zarett represents a broad range of professionals in the New York investment community. If you have any questions regarding these new regulations, please email Mauro Viskovic, Esq. at mviskovic@weisszarett.com or call us at (516) 627-7000.

About the Author: 

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 and financial services industries, including corporate and transactional matters, employment, civil and administrative litigation, regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

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CLIENT ALERT: CMS and OIG Move to Expand Exceptions and Safe Harbors to Stark Law and Anti-Kickback Statute

By Mathew J. Levy, Esq. & Mauro Viskovic, Esq. 
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On November 20, 2020, the Centers for Medicare and Medicaid Services (“CMS”) and the Office of Inspector General (“OIG”) adopted significant changes to regulations regarding the Anti-Kickback Statute (“AKS”) and the Physician Self-Referral Law (“Stark Law”).  Among the changes are those that expand, and create new, AKS safe harbors and Stark Law exceptions.

Background:

As a general matter, AKS and the Stark Law and AKS prohibit 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.  There are various exceptions to the Stark Law, together with certain safe harbors to AKS, that permit certain referrals under limited circumstances.  The recent changes adopted by CMS and OIG aim to expand those exceptions and safe harbors in order to modernize and clarify regulations that were enacted back in 1989.  Summarized below is a general overview of the key AKS and Stark Law changes.  

AKS Changes:  

The main AKS revisions are as follows:

  • Value-Base Arrangements:  Three new AKS safe harbors will be added to protect certain arrangements entered into with, or by, a value-based enterprise (VBE) and its eligible participants for a number of value-based network arrangements, as follows:
  • Care coordination arrangements to improve quality, health outcomes, and efficiency, involving “no risk”, where in-kind renumeration such as technology or services are exchanged between VBE participants used to engage in value-based activities directly connected to care coordination for the target patient population.
  • Value-based arrangements involving both monetary and in-kind renumeration between a VBE and VBE participants where the VBE assumes “substantial downside financial risk” for providing or arranging for the provision of items and services for the target patient population, and the VBE participants assume a “meaningful share” of that risk.
  • Value-based arrangements involving both monetary and in-kind renumeration between a VBE and VBE participants where the VBE assumes “full financial risk” for all items and services covered by a payor for each patient in the target population for a term of at least one year.

These “value-based” safe harbors vary by the type of remuneration protected, the type of entities eligible to rely on the safe harbors, and the types of safeguards included as safe harbor conditions. The value-based safe harbors exclude pharmaceutical manufacturers, distributors, and wholesalers; PBMs; pharmacies that primarily compound or dispense compounded drugs; laboratories; medical device and supply manufacturers; medical device distributors and wholesalers; DMEPOS suppliers; and physician-owned medical device companies. The care coordination safe harbor can be accessed by medical device and DMEPOS manufacturers to protect digital technology arrangements under certain conditions.

  • Patient Engagement:  A new safe harbor will be added for patient engagement tools and supports to improve care quality, outcomes and efficiency, furnished by a VBE participant or “eligible agent” to a patient in a “target patient population,” subject to a $500 annual cap, with an inflation adjuster. This safe harbor includes the same general exclusions as outlined above but allows medical device and supply manufacturers to provide some digital health technology.
  • CMS-Sponsored Models:  A new safe harbor will be added for CMS-sponsored model arrangements and CMS-sponsored model patient incentives that is expected to reduce the need for separate fraud and abuse waivers for new CMS-sponsored models.
  • Cybersecurity:  A new safe harbor will be added to protect non-monetary donations of certain cybersecurity technology, including both software and hardware, and related services. This safe harbor permits the donation of cybersecurity technology to physician groups or other providers so long as the technology is “necessary and used predominantly to implement, maintain, or reestablish cybersecurity.” The safe harbor limits donors from making donation decisions considering volume or value of referrals or other business generated between the parties.
  • Electronic Health Records:  The existing electronic health records (EHR) safe harbor will be modified to update provisions regarding interoperability, remove the prohibition on donation of equivalent technology, and provide clarification to protections for cybersecurity technology and services included in an electronic health records arrangement.
  • Personal Services and Management Contracts:  The existing personal services and management contracts safe harbor will be modified to increase flexibility for part-time or unpredictable compensation arrangements, and to provide new protection for outcome-based payment arrangements, with the same entity-exclusions that are applied to the new value-based safe harbors.
  • Warranties:  The existing safe harbor for warranties will be modified to revise to definition of “warranty” and provide protection for warranties for one or more items and related services.
  • Local Transportation:  The existing safe harbor for local transportation will be modified to increase mileage limits from 50 to 75 miles for rural areas, and to eliminate distance limitations for transporting patients discharged home from an inpatient or observation setting.

The AKS changes will become effective January 19, 2021.

Stark Law Changes:

Many of the Stark Law changes track similar revisions made to AKS, with some distinctions.  The main revisions are as follows: 

  • Exceptions for Value-based Arrangements. As with the AKS changes, new, permanent exceptions for value-based arrangements were adopted to permit value-based arrangements that satisfy certain requirements based on the level of financial risk undertaken (full financial risk, meaningful downside financial risk, or no risk).  These exceptions will allow health care providers to design and enter into more flexible value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate Stark Law.
  • New Guidance and Clarifications. SMS provided additional guidance on key requirements of the exceptions to the Stark Law to make it easier for health care providers to comply with the law. For instance, compensation provided to a physician by another health care provider must generally be at “fair market value.” The new rules clarify how to determine whether compensation meets this requirement.  An additional clarification was effected by adding new definition of “commercially reasonable”, which requires that an arrangement “furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty” and clarifies that an arrangement may be commercially reasonable even if it does not result in a profit for one or more of the parties.
  • Other New Exceptions. The final rule establishes new exceptions to protect non-abusive, beneficial arrangements between physicians and other health care providers that apply regardless of whether the parties operate in a fee-for-service or value-based payment system—such as donations of cybersecurity technology that safeguard the integrity of the health care system. In addition, CMS finalized a new exception to protect compensation not exceeding an aggregate of $5,000 per calendar year, adjusted for inflation, to a physician for the provision of items and services without the need for a signed writing and compensation that is set in advance if certain conditions are met, including that the compensation does not exceed fair market value and is not determined in any manner that takes into account the volume or value of referrals or other business generated.

The new Stark Law regulations will become effective January 19, 2021. Certain provisions relating to value-based care arrangements will not be effective until January 1, 2022.

Should you have any questions regarding the foregoing rule changes, 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.

New OPMC Signage Requirements: Updates to New York Public Health Law Mandate that Medical Practices Post Visible Sign Directing Patients to OPMC Website

By Seth A. Nadel, Esq.
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Effective October 7, 2020, updates to New York’s Public Health Law have imposed a new requirement on physician practices to post conspicuous signage directing patients to the website of the Office of Professional Medical Conduct (OPMC) and advising them that they may visit the OPMC website to report suspected instances of professional misconduct. Specifically, the new Public Health Law § 230(11)(h) provides as follows:

The office of professional medical conduct shall post on its website information on patients’ rights and reporting options under this subdivision regarding professional misconduct, which shall specifically include information on reporting instances of misconduct involving sexual harassment and assault. All physicians’ practice settings shall conspicuously post signage, visible to their patients, directing such patients to the office of professional medical conduct’s website for information about their rights and how to report professional misconduct.

Notably, the new provision does not specify the exact contents of the required signage other than to state that it should “direct” the patients to OPMC’s website “for information about their rights and how to report professional misconduct.” At a minimum then, the sign should contain a link to OPMC’s website (located at https://www.health.ny.gov/professionals/doctors/conduct/) and contain a short statement that patients may learn more about their rights or report suspected physician misconduct using the information at that link.

Likewise, the law does not specify precisely where in a medical office the sign should be posted, beyond saying that it should be posted “conspicuously” and be “visible to their patients.” Presumably, placing the sign where it can be plainly viewed in a practice’s waiting room or near a reception desk would likely be considered satisfactory for these purposes. 

Although practitioners and practice associations, including the Medical Society of the State of New York (MSSNY), have taken umbrage at this new rule, it remains effective as of this writing. This being so, physicians should take immediate steps to comply with the signage requirement in their respective practices to the extent they have not already done so.

Weiss Zarett represents numerous physicians in connection with regulatory and compliance issues, as well as proceedings before OPMC. If you have any questions about the new signage requirements or about the OPMC process, please reach out to Seth A. Nadel, Esq. at snadel@weisszarett.com or 516-627-7000.

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.

NYS OMIG STREAMLINES COMPLIANCE CERTIFICATION REQUIREMENTS

By Mathew J. Levy, Esq. & Zoila Sanchez, J.D., M.P.H.
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Effective immediately, the New York State Office of the Medicaid Inspector General (OMIG) implemented changes to the annual Compliance Certification Requirement (NYS Social Services Law (SSL) §363-d) which we discussed in a prior Blast

This change impacts ALL NYS PROVIDERS AND BILLING COMPANIES that have received or billed at least $500,000 in Medicaid payments directly or indirectly (through managed care companies or insurers) in any consecutive 12-month period, as well as prior certification obligations under the Deficit Reduction Act (DRA).

The annual certification requirements have been simplified in the following ways: 

NYS providers are no longer required to complete the annual December certification also known as the SSL Certification, which was previously completed using a form available on the OMIG website. 

Instead, providers and billing companies must now submit an annual Certification Statement to eMedNY. That filing now satisfies and hence eliminates the DRA Certification required for providers billing or receiving over $5 million dollars annually. 

Deadline: The Certification Statement is due on the anniversary of the provider’s Medicaid enrollment. Providers can locate this date in their initial Medicaid enrollment welcome letter. Additionally, providers can expect to receive a NYSDOH reminder by mail approximately 45-60 days before their enrollment anniversary.

Impact: In response to a request for clarification, the OMIG has told us that there will be additional changes in the upcoming months to the financial threshold for Medicaid certification. Those changes will be noticed in Medicaid Updates. We will also provide updates in future Blasts.

Keep in mind that providers who have withdrawn from Medicaid due to sale or closure but are  still collecting Medicaid monies for services rendered prior to withdrawal from the program, will still be required to file if they hit the $500,000 threshold during the relevant time period.

Remember—the recent changes do not alter other requirements which are continuously evaluated by OMIG’s Bureau of Compliance to reduce fraud, waste, and abuse. Providers can take steps to ensure compliance by reviewing “Understanding Compliance.”

Should you have any questions regarding mandatory compliance program requirements 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.

Zoila Sanchez, J.D., M.P.H. joined the Firm full-time upon graduating with her Juris Doctor degree from the Maurice A. Deane School of Law at Hofstra University. During law school, Ms. Sanchez served as a Legal Clerk with the U.S. Department of Health and Human Services Office of Counsel to the Inspector General in Washington, DC, where her work focused on health care fraud and abuse. Ms. Sanchez has experience in supporting the Firm’s business and health care law, and litigation practice areas. 

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.

SEC Proposes Eliminating a Significant Burden on Raising Capital in Private Markets

By Mauro Viskovic, Esq
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Startup, developmental and emerging growth businesses nationwide welcomed a recent proposal from the Securities and Exchange Commission that, if adopted, would make it considerably less difficult for them to raise capital.  

For many businesses seeking to raise start-up or working capital, banks are simply not an option due to the stringent credit requirements, asset encumbrances and overall rigidity that are associated with bank loans.  Accordingly, an alternative capital source for them are individual “angel” investors and, in some cases, venture capital and private equity funds.  

“Finders” are individuals who can connect businesses to these sources of investment capital in exchange for commission-based compensation; however, under current SEC regulations, such finders must be registered with the SEC as brokers.  Such registration is prohibitively costly and burdensome for finders seeking to assist small to middle market businesses.  As a result, many businesses are unable to connect with important sources of capital, leading to many of such businesses failing to execute on their business plan and, in many cases, reaching the unfortunate conclusion of ceasing operations.    

To address this issue, the SEC recently proposed a new exemption from broker registration requirements for finders who assist companies with raising capital in private markets from accredited investors.  If adopted, the proposed exemption would, under certain circumstances, permit individuals to solicit investments on behalf of companies seeking capital from accredited investors without registering with the SEC as brokers.  

The SEC’s proposal addresses a problem area in the SEC’s regulatory framework and, in doing so, seeks to facilitate investments for smaller businesses, including women- and minority-owned businesses.  Smaller businesses and their investors frequently encounter challenges connecting with each other in the private market, particularly in regions that lack established robust capital-raising networks.  In these areas, finders can play an important and discrete role in bridging the gap between small businesses that need capital and investors who are interested in supporting emerging enterprises.

Under current federal law, such finders are subject to essentially the same regulations and registration requirements as brokers who facilitate the trading of Fortune 500 companies in public exchanges.  The cost and burden of both the initial registration and the ongoing administration and reporting are enormous and the SEC seeks to address the current regulatory structure which makes it difficult for an individual to connect an investor to a small business seeking to raise start-up capital.  

The effect of the proposal on finder’s obligations would be sweeping.  Finders would not be required to register with the SEC or FINRA, and they would not need to notify the SEC of their intent to rely on the relief offered under the proposed exemption.  Moreover, finders would not be subject to periodic inspections or examinations, nor would they be required to maintain records of their activities.  Further, the proposal does not impose any limitations on the amounts that can be raised from investors, the size of the offerings, or the types of companies that can take advantage of the relief.  

This proposal would not affect the investment restrictions applicable to physician practices and other healthcare providers, which are subject to the prohibition on the “corporate practice of medicine” in most states.  The corporate practice of medicine doctrine has traditionally limited the ability of non-professional individuals and entities from investing in an ownership interest in healthcare providers.  

The SEC’s press release and summary of the proposal can be found here.  It is important to note that the proposed exemption on federal registration, if adopted, would not preempt related state regulations on finders and, as such, finders would need to analyze applicable state laws to ensure they are complying with relevant requirements.  In New York, a recent proposal would require all finders to be subject to all of the filing and exam requirements of brokers, broker-dealers and salespersons under New York law.  Such requirements, however, would be less onerous than the current federal broker registration requirements.  We will continue to monitor and provide updates on the New York proposal. 

Weiss Zarett represents business owners and investors in connection with a broad range of private investment transactions. If you are raising capital for your business venture or considering to participate as an investor in a private offering, please email Mauro Viskovic, Esq. at mviskovic@weisszarett.com or call us at (516) 627-7000.

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 and financial services industries, including corporate and transactional matters, employment, civil and administrative litigation, regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.