Understanding Third Party Vendor Relationships

By: Mathew J. Levy, Esq. & Stacey Lipitz Marder, Esq.
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Overview:

Throughout a physician’s career, he/she will enter into several relationships with third party vendors – billing companies, EMR companies, marketing companies, internet providers, staffing companies and medical device/equipment suppliers to name a few. Prior to entering into these arrangements with third parties it is imperative that the agreement be reviewed from a business and legal perspective in order to ensure that the physician is protected.  Furthermore, physicians must do their homework and research the third party vendor.  If a third party vendor is not trustworthy this could have a major impact on the practice.  We have outlined a few key concepts that need to be taken into consideration when reviewing an agreement with a third party vendor.

Compensation:

It is important to have the compensation and fee structure reviewed in order to ensure that it is appropriate.  This is not only important from a business standpoint, but is also crucial to ensure compliance with the myriad of state and federal laws regulating this area including but not limited to the Anti-Kickback Statute and the New York State law regarding Fee Splitting. Federal and state regulators and prosecutors are aggressively pursuing allegations of improper financial relationships between physicians and vendors, and failure to comply with the applicable rules and regulations can result in hefty fines, charges of professional misconduct resulting in loss of license, and potentially even jail time.

Specifically, compensation should be set in advance, be fair market value for the services provided, and not take into account the volume or value of patient referrals[1].   Physicians must also ensure that they do not allow the third party vendors to share in the fees for professional services[2]. Therefore, physicians should be weary if an agreement indicates that the compensation to be paid constitutes a percentage of, or is otherwise dependent upon, the income or receipts of the professional services rendered by the physician, or if the fee is grossly above or below fair market value.

The agreement should also clearly list when payment is due, and if there are late fees.  Final payments should also be conditioned upon the third party vendor’s complete performance of its obligations. The third party vendor’s reimbursement, if any, of expenses should be addressed as well.

Exit Strategy:

When reviewing an agreement with a third party it is important to make sure that you have an exit strategy and can terminate the agreement.  Otherwise, in the event the arrangement is not working out and you terminate the agreement you may be in breach.  Furthermore, many agreements have penalties in the event of termination. These penalties can be very high, and should be limited if not removed entirely.  It is also important that each of the party’s responsibilities be delineated in the event of termination.

Duties/Responsibilities:

It is also imperative that the parties define their specific duties and responsibilities with respect to the arrangement. If you are entering into an agreement with respect to provision of a service, you must understand and document exactly what services will be provided, how often such services will be performed, what type of training is available and how accessible a representative is.  Furthermore, the agreement should address the date, time, place, method, standards and other specific requirements of performance.  If the parties are not on the same page with respect to expectations, then the arrangement will not work out.  It is also advisable that each party appoint a point person to address specific concerns and to check-in with on a regular basis.

Governing Law/Venue:

Since many third party vendors are located out of state, many agreements will indicate that any dispute will be governed by the laws of the state of the third party vendor, and that any legal action must be brought in that state.  Physicians must be aware that the laws of the other state may not be advantageous to the physician.  Furthermore, since the third party vendor is doing business in New York, the laws of the state of New York should govern any dispute.  With respect to venue being outside of New York, physicians must recognize that they would have to travel to that state in the event they bring a lawsuit against the vendor.  If the venue is California for instance, bringing a suit would be expensive and time consuming.  This must be taken into consideration when evaluating a potential arrangement.   

Liability:

Many agreements with third party vendors include a limitation of liability provision which essentially limits the amount that the third party vendor can be sued for.  This provision should be removed or at minimum the third party vendor’s liability should be increased. Furthermore, many agreements contain a provision indicating that there are no warranties with respect to the service or product being offered.  

Confidential Information:

In the event the third party vendor will have access to confidential information involving your patients, HIPAA requires that you enter into a business associate agreement with the third party vendor.  As such, if applicable, you must enter into such an agreement with the third party vendor outlining how the third party vendor will protect the confidential information.  Especially with the passage of the Healthcare Reform Act, the government is taking a strong position with respect to the protection of patient information.

Assignment:

In order to ensure that the vendor cannot have another entity perform its duties it is recommended that there be a non-assignment provision added to the agreement.

Conclusion:

Third party vendors are an important part of a physician’s practice.  Prior to entering into a relationship with a third party vendor, it is important to evaluate the agreement in order to ensure that the arrangement is compliant and offers protections for the physician. To that end, it is in the best interest of the physician to have all potential relationships reviewed by a healthcare attorney since there may be serious implications as the result of such a relationship.

About the Authors:

Mathew J. Levy is a Partner of the firm and co-chairs the Firms corporate transaction and healthcare regulatory practice. Mr. Levy has particular experience in advising health care clients with respect to contract issues, business transactions, practice formation, regulatory compliance, mergers & acquisitions, professional discipline, healthcare fraud & billing fraud, insurance carrier audits including prepay and post payment review, litigation & arbitration, and asset protection-estate planning. You can reach Mathew Levy at 516-926-3320 or email: mlevy@app-60705ed4c1ac183264fb7857.closte.com.

Stacey Lipitz Marder is an associate at Weiss Zarett Brofman Sonnenklar & Levy, PC., with experience representing healthcare providers in connection with transactional and regulatory matters including the formation and structure of business entities, negotiating and drafting contracts and commercial real estate leases, stock and asset acquisitions and general corporate counseling.  Ms. Marder also has experience advising healthcare clients on a wide range of regulatory issues including Stark, the Anti-Kickback Statute, fraud and abuse regulations, HIPAA, reimbursement and licensing matters.

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[1]Any compensation arrangement that involves the payment of fees in connection with furnishing professional medical services subject to reimbursement by Medicare or Medicaid must be compliant with the Federal anti-kickback statute.  The Federal anti-kickback statute, provides, in pertinent part:

(1) whoever knowing and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind –

(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program …

shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both, unless the physician complies with one of the “Safe Harbors”. See 42 USCA §1320a-7b(1)

In addition to the criminal penalties described above, violation of the Federal anti-kickback statute can result in civil penalties and exclusion from participation in Medicare and Medicaid.  See42 USCA §1320a-7. 

[2] See New York Education Law Section 6530(19) and Section 6531 regarding fee-splitting.

Understanding The Process Of Starting A Chiropractic Practice

By Mathew J. Levy, Esq. & Stacey Lipitz Marder, Esq.
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Introduction:

For many chiropractors, the idea of opening a chiropractic practice is very appealing.  The chiropractor can be his/her own boss, control his/her hours and vacation time, make his/her own decisions regarding patient care, as well as control the business operations of the practice.  However, before a chiropractor goes forward with opening a chiropractic practice, there are numerous complex issues, legal and otherwise, that a chiropractor needs to consider.  This article is intended to help chiropractors recognize these issues with the goal of making the transition run more smoothly and to limit potential exposure relating to opening a chiropractic practice. 

Corporate Formation:

Among the first decisions a chiropractor must make is to determine the type of business entity through which the practice will be conducted.  This is a very critical decision that should be made on the advice of competent counsel because the choice of entity has a major impact on several aspects of the practice including the chiropractor’s liability exposure, and tax treatment.  In New York State, a chiropractor must conduct his/her practice through a professional entity including for instance a professional service corporation (“PC”); a professional limited liability partnership (“LLP”); or a professional limited liability company (“PLLC”)[1].  Once a chiropractor selects the type of entity and name of the entity, the appropriate paperwork must be filed with the New York State Secretary of State and New York State Department of Education in order to begin the corporate formation process.  Once the entity is formed, the entity will have to obtain a tax identification number, hold meetings, and have the appropriate governing agreements drafted (i.e. an operating agreement/partnership agreement/shareholder agreement).  In the event that a chiropractor decides to “partner” with another provider(s), these agreements will govern the relationship between the parties.  Furthermore, as per New York State law, it is imperative that these entities keep correct and complete books.  As such, chiropractors must ensure that they hold annual meetings, conduct elections for managers/officers/directors, and review and update any agreements relating to the entity.  Failure to comply with these requirements may result in one of the entity’s creditors being able to “pierce the corporate veil” and therefore collect from the entity’s owners.  

Practice Location/Equipment and Supplies/Technology:

Identifying an office location is also an important aspect of starting a practice.  Things to consider when looking at office space are as follows: square footage, price per square foot, local referral sources, competition, accessibility, parking, expansion opportunities, and local demographics.  Furthermore, chiropractors need to consider whether they want to rent the office space or purchase the property.  Either way, the practice will have to negotiate a good real estate agreement which protects the practice. 

The practice will also need to obtain equipment and supplies. A chiropractor can often rent large equipment, which may be more practical.  In this case, it’s important to have the equipment lease reviewed in order to ensure that liability is limited. 

Technology is another area that is often overlooked although a practice’s IT infrastructure is often vital to the success of a practice.  In addition to the decision of whether or not to invest in an Electronic Medical Records (EMR) System, chiropractors need to consider having phone lines, computer systems and appropriate computer networks in place. 

Insurance Panels:

For many chiropractors, it is vital to be on insurance panels in order to get referrals from those panels.  In the event that a chiropractor wants to be an in-network provider, he/she needs to determine which health insurance plans to participate with.   The chiropractor then needs to go forward with becoming credentialed with the plans-this is not an overnight process and requires advanced planning.  Once approved, the chiropractor will then need to sign a participation agreement which needs to be reviewed as well.  The chiropractors will also need to obtain a National Provider Identifier (“NPI”) for the practice, as well as for each chiropractor practicing at the practice.

Personnel/Staff:

When starting a practice, it is especially important to have trustworthy and reliable staff, including clerical staff (i.e. billers, receptionists) and professional staff (ie other chiropractors, chiropractic assistants).  Prior to hiring these individuals, it is important to check all references and ensure that those individuals are a good fit with the practice as these individuals will have access to the practice’s confidential information and will have direct contact with the patients of the practice.  Employment agreements must also be drafted (or independent contractor agreements if applicable) for these individuals as well.  Furthermore, when hiring staff, chiropractors need to consider obtaining health insurance, workers compensation insurance, unemployment insurance, disability insurance, and of course malpractice insurance.   In order to further protect the practice, it is recommended that all practices have a comprehensive employee manual in place that clearly articulates expectations, as well as the practice’s policies including consequences for violating these policies.

Compliance:

There are many healthcare rules and regulations that a chiropractor is expected to comply with-HIPAA, Stark and Anti-Kickback to name a few.  Due to recent initiatives by Medicare, the Office of Inspector General, Medicaid, the Office of the Medicaid Inspective and Third Party Payors to uncover fraud, waste and abuse in the healthcare system, it is inevitable that almost all chiropractors will be involved in an audit in the future.   In order to decrease the chance of audit and mitigate and potential audit results, it is advisable that all practices implement a compliance plan.  These compliance plans outline reasonable standards and procedures that the practice should comply with that are in compliance with the myriad of healthcare rules and regulations.  For instance, the practice should have appropriate HIPAA policies in place, as well as other safeguards to ensure against inappropriate relationships and billing practices.  Before implementing a compliance plan, chiropractors should consult with legal counsel regarding steps the practice should take to ensure compliance.    

Conclusion:

Staring a practice can be very exciting, however, it is a big task as there are many issues that need to be taken into account.  To that end, it is in the best interest of the chiropractor to retain a team of professionals specializing in health care – attorneys, accountants, IT professionals, etc. – to assure that the new practice has limited exposure and increased profitability.  Opening a chiropractic practice takes time, and it is advisable for chiropractors to begin planning in advance.  If you should have any questions with regard to opening a chiropractic practice, please contact Mathew J. Levy, Esq. at (516) 627-7000 or MLevy@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. 

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[1] In New York State, chiropractors are not precluded from practicing as sole proprietors or in a general partnership.  However, these arrangements are not advisable from a liability perspective.

Understanding The Process of Merging Your Medical Practice with A Large Mega Group or Hospital

By: Mathew J. Levy, Esq. & Stacey Lipitz Marder, Esq.
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Overview:

As the costs of running a medical practice increase while the reimbursement rates from third party payors decrease, many physicians are being drawn to offers from large medical groups and hospitals to take over their practices.  Although many physicians are attracted by these offers to increase their take home pay, as well as not have to deal with the day to day administrative duties of running a medical practice, physicians must weight the benefits and costs associated with entering into these relationships.  Specifically, physicians must do their due diligence with respect to the business terms, as well as have the agreements reviewed from a legal perspective.  Although these offers may seem very desirable, a more in depth analysis may result in a physician’s realization that this arrangement is not a good fit and is not as glamorous as initially presented.  Furthermore, since many medical practices are comprised of more than one physician, it is important to recognize that such offers may not be ideal for all of the members of the group.  As such, each member of the group needs to do his/her own analysis in order to ensure that such an arrangement is appropriate for his/her needs.

Autonomy:

When a physician group is taken over by a large practice or hospital, the physician group will no longer be in existence and the physicians will no longer have control regarding the operation of the practice.  For many physicians this is a positive thing, as many physicians purposely chose to pursue a medical career as opposed to a business career, and would rather devote their energy solely to patient care.   However, at the same time, physicians must recognize that they will lose autonomy with respect to the operation of their practices.  This is a major issue for many physicians as they have spent years building and developing their practices and would like to remain in control.

Compensation:

As noted above, when evaluating whether to go forward with an offer from a large medical practice or hospital, it is imperative to evaluate the offer from a business perspective.  When a large medical practice or hospital approaches a physician group, they will in almost all instances entice the physicians in the group with an increased salary based upon the fact that the large medical practice or hospital has more leverage and is in a better bargaining position to obtain higher reimbursement rates from third party payors.  Although higher reimbursement rates may be promised, the physicians need to do their own homework with respect to whether the represented reimbursement rates are indeed accurate. Specifically, physicians should obtain a copy of the large medical practice or hospital’s fee schedule for the top ten CPT codes billed in their practices. 

Additionally, many large medical practices and hospitals will offer reimbursement to the physician based upon a percentage of fees collected by the large medical practice or hospital for services personally rendered by the physician minus expenses. Physicians need to recognize that prior to joining a large medical practice or hospital, 100% of the fees collected for services rendered belonged to the physicians.  Furthermore, in many instances physicians will also be expected to pay an “administrative fee” to the large medical practice or hospital, which may be as high as a few thousand dollars a month. 

It is also important to note that in many instances the percentage paid to the physician does not include ancillary services, as well as diagnostic health services (DHS) as defined by the Stark Law, including for instance diagnostic tests and lab work.  Therefore, if a physician’s practice is heavily based on diagnostic testing, then the expected compensation may be significantly lower than the perceived compensation.  

Benefits/Buy-out:

Prior to entering into a relationship with a large medical practice or hospital, physicians must also weigh and compare the benefits being offered.  The general benefits offered through a large medical practice or hospital (ie healthcare) are generally better due to economies of scale.  However, the buy-out in the event of termination (including for retirement, death, disability, voluntary or involuntary withdrawal) are often minimal.  Physicians must recognize that if their group is structured where the physicians are paid a substantial amount of money in the event of withdrawal, they would no longer be eligible for their buy-outs pursuant to their operating/shareholders’/partnership agreement. 

Office Lease/Equipment:

When a large medical practice or hospital acquires a physician group, the physician group will likely be required to assign its office lease and equipment leases.  Although this may not initially seem like an issue, a problem arises in the event that the relationship does not work out since the agreements would have to be reassigned back to the physician group, which would require the consent of the equipment company and landlord.  Since the large medical practice or hospital will have deeper pockets so to speak compared to the physician group, the equipment company and landlord may not be so inclined to reassign the lease.  As such, in order to protect the physician group, it is our recommendation that the office lease and equipment leases be licensed to the large medical practice or hospital for a few years.  The leases would remain in the name of the physician group, and the large medical practice or hospital would pay the physician group a set fee for the use of such space and equipment based upon a fair market value analysis.  In the event the relationship is terminated, the physician group would then have the ability to continue practicing at the space and using the equipment without any issues. 

Malpractice Insurance:

Malpractice insurance is another issue that must be taken into account when determining whether to transfer a medical practice to a large medical practice or hospital.  This is especially important in the event a physician has a “claims made” policy, which only offers protection to a physician while the policy is in effect. If a “claims made” policy is discontinued, the physician would have to obtain “tail” coverage, which is very expensive.  Although the large medical practice or hospital will likely be responsible for maintaining malpractice insurance for the physician, there is a chance that a new policy will be purchased for the physician as opposed to coverage being continued. As such, physicians need to be mindful as to who will be responsible for paying for such tail coverage if such situation arises.

Restrictive Covenant:

When a physician joins a large medical practice or hospital he/she will likely be subject to a restrictive covenant which will restrict the physician from essentially competing with the large medical practice or hospital within a specified time and location following termination.  Physicians need to be aware of how their practice would be restricted should they terminate their relationship with the large medical practice or hospital, especially if the physicians were not previously subject to a restrictive covenant as per their operating documents.  Physicians also need to be careful in the event a large medical practice or hospital purchases their practice.  Specifically, physicians need to be mindful of the Anti-kickback statute as it relates to the structure of the deal, since some transactions have been deemed to be in violation of the Anti-kickback statute based upon payments made in connection with a restrictive covenant.

Conclusion:

Being presented with an offer to transfer a medical practice to a large mega group or hospital can be very exciting, however, there are many issues that need to evaluated both from a business and legal standpoint.  To that end, it is in the best interest of the physician to retain a team of professionals specializing in health care – attorneys and accountants– to ensure that the offer is appropriate and in the best interest of the physician.  Although an offer may be appropriate for some physicians, it may not be as desirable for others.  Physicians also need to recognize that if an offer seems too good to be true, it generally is.

About the Authors:

Mathew J. Levy is a Partner of the firm and co-chairs the Firms corporate transaction and healthcare regulatory practice. Mr. Levy has particular experience in advising health care clients with respect to contract issues, business transactions, practice formation, regulatory compliance, mergers & acquisitions, professional discipline, healthcare fraud & billing fraud, insurance carrier audits including prepay and post payment review, litigation & arbitration, and asset protection-estate planning. You can reach Mathew Levy at 516-926-3320 or email: mlevy@app-60705ed4c1ac183264fb7857.closte.com.

Stacey Lipitz Marder is an associate at Weiss Zarett Brofman Sonnenklar & Levy, PC., with experience representing healthcare providers in connection with transactional and regulatory matters including the formation and structure of business entities, negotiating and drafting contracts and commercial real estate leases, stock and asset acquisitions and general corporate counseling.  Ms. Marder also has experience advising healthcare clients on a wide range of regulatory issues including Stark, the Anti-Kickback Statute, fraud and abuse regulations, HIPAA, reimbursement and licensing matters.

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Understanding Partnerships, Limited Liability Companies & Corporations

By: Mathew J. Levy, Esq.
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Opening a practice or embarking upon a new business venture can be an exciting and anxiety provoking experience.  Often professionals spend too little time considering what business structure would maximize their profit and minimize their exposure to liability.  Partnerships, limited liability companies and corporations are three of the most common types of business entities and each poses different advantages and disadvantages.

Any physician 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.

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 a 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 process, 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 its 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, a member’s financial interest in the LLC is freely transferable, but her management interest is not absent the consent of the other members. 

There are many different ways to structure a business venture and the nuances of formation are rife with benefits and consequences.  As such, these considerations should first be discussed and analyzed with a knowledgeable attorney and tax advisor before going forward.  

Mathew J. Levy is a Partner of the firm and co-chairs the Firms corporate transaction and healthcare regulatory practice. Mr. Levy has particular experience in advising health care clients with respect to contract issues, business transactions, practice formation, regulatory compliance, mergers & acquisitions, professional discipline, healthcare fraud & billing fraud, insurance carrier audits including prepay and post payment review, litigation & arbitration, and asset protection-estate planning. You can reach Mathew Levy at 516-926-3320 or email: mlevy@app-60705ed4c1ac183264fb7857.closte.com.

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Understanding the Retail Based Clinic Debate

By Mathew Levy, Esq.
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In recent years, more and more Americans who visit their local retail pharmacy are presented with the option of seeing a nurse practitioner or doctor for a primary care visit instead of scheduling an appointment with their primary care provider at these retail based clinics (RBCs).  RBCs have emerged in several states, including New York.  These clinics have been met with public praise, public outcry and varied responses from local and state governments, practitioners and medical societies.  This article is intended to provide the basic information on RBCs necessary to facilitate a discussion as to how to address RBCs from a health policy standpoint.

Retail Based Clinic Set-Up

RBCs are generally located in an existing retail drug store or supermarket and consist of a reception area and examination rooms. RBCs are typically staffed with nurse practitioners who are supervised via the telephone by off-site physicians. Sometimes full-time physicians staff the RBCs.  The nurse practitioners in many RBCs use computer software during patient consultations that serve as both a diagnostic tool and check and balance on the limitation of the scope of the nurse practitioner’s medical practice.  This practice raises questions as to whether primary care provided primarily by nurse practitioners in a clinic setting, in the absence of on-site physicians, is appropriate or instead constitutes an inappropriate and illegal practice of medicine by nurse practitioners.[1] Uninsured patients are charged between $50 and $80 per visit; however, many RBCs have established contractual relationships with insurance companies and therefore, accept health care insurance. RBCs such as MinuteClinic argue that they provide affordable, accessible care for health problems such as urinary tract infections and minor bacterial infections in a clinic structure where more serious health issues are triaged and referred appropriately to qualified professionals.

New York State Law

A physician interested in contracting with an RBC to supervise the work done by nurse practitioners should consult competent counsel to review all contracts and agreements for the purpose of making sure that the work expected of the physician does not offend New York State Law. New York Education Law § 6902, which outlines the scope of practice of nursing, provides in pertinent part that, “A certified nurse practitioner may diagnose illness and physical conditions, and perform therapeutic and corrective measures within a specialty area of practice in collaboration with a licensed physician qualified to collaborate in the specialty involved, provided such services are performed in accordance with a written practice agreement and written practice protocols.”  Further, patient records must be reviewed by the collaborating physician in some manner no less than every three months.  Finally, “no physician shall enter into practice agreements with more than four nurse practitioners who are not located on the same physical premises as the collaborating physician,” which can arguably be interpreted to mean that as long as a doctor is collaborating with less than four, the physician does not have to be physically present on the premises.

Even though the definition of the practice of nursing allows for a nurse practitioner to practice under the supervision of a physician, New York Education Law § 6530(33), which defines Physician Misconduct states that “[f]ailing to exercise appropriate supervision over persons who are authorized to practice only under the supervision of the licensee” constitutes misconduct.  Therefore, it is advisable that a consulting physician at an RBC must take care to adequately supervise the RBC’s nurse practitioners and document his or her supervision meticulously. 

Continuity of Patient Care and the Quality of Medical Care Debate

The cause of the heated debate over RBCs stems from the balance between the need for affordable care that is readily accessible (absent extensive wait-times), and the need for continuity of care, the provision of high-quality medical care and appropriate case management. Additionally, RBCs are a source of competition to primary care physicians who are already struggling in a health care economy where reimbursements for primary care are often low.  The American Medical Association (AMA) [3] and the American Academy of Family Physicians (AAFP) [4] have issued guidelines advising that, among other standards, retail based health clinics meet high quality standards, adhere to appropriate scope of practice standards, and address continuity of care issues.  However, the American Academy of Pediatrics (AAP) has opposed RBCs and strongly discourages their use, citing continuity of care issues.[5] The AAP is particularly concerned with the following aspects of RBC care: (1) Fragmentation and possible lower quality of care, (2) Care for children with special health care needs, (3) Lack of access to a central health record, (3) Use of tests and diagnosis without proper follow-up, and (4) Public health issues surrounding exposure to contagious diseases in a retail environment.

Locally, The Medical Society of the State of New York has inquired of the New York State Department of Health to ascertain how, if Minute Clinic (an RBC company) was not an Article 28 Facility, it could own and operate RBCs and employ physicians or nurse practitioners to staff clinics while operating in accordance with New York State Law.

In conclusion retail based clinics present a variety of issues for New York practitioners, particularly primary care providers.  Doctors seeking to supervise RBCs should seek competent counsel to ensure that RBC agreements comply with New York State Law. Practitioners must ensure that care provided in RBCs meets acceptable quality standards and those RBCs communicate with patients’ primary care providers. Patient education on the uses and limitations of RBCs is also advisable in order to ensure that New Yorkers continue to receive the highest quality medical care.

Mathew J. Levy is a Partner of the firm and co-chairs the Firms corporate transaction and healthcare regulatory practice. Mr. Levy has particular experience in advising health care clients with respect to contract issues, business transactions, practice formation, regulatory compliance, mergers & acquisitions, professional discipline, healthcare fraud & billing fraud, insurance carrier audits including prepay and post payment review, litigation & arbitration, and asset protection-estate planning. You can reach Mathew Levy at 516-926-3320 or email: mlevy@app-60705ed4c1ac183264fb7857.closte.com.

ATTORNEY ADVERTISING: PRIOR RESULTS DO NOT GUARANTEE FUTURE OUTCOMES.


[1] Kershaw, Sarah “Drugstore Clinics Spread, and Scrutiny Grows,” New York Times Online,

http://www.nytimes.com/2007/08/23/nyregion/23clinic.html?_r=2&ref=health&oref=slogin, Accessed on August 24, 2007. 

[2] New York Education Law § 6902.

[3] See, http://www.ama-assn.org/amednews/2007/07/16/prl20716.htm, Accessed August 24, 2007.

[4] See, http://www.aafp.org/online/en/home/policy/policies/r/retailhealthclinics.html, Accessed August 24, 2007.

[5] See, http://aap.org/advocacy/releases/retailclinics.htm, Accessed August 24, 2007.