Health Update - July 2014

In This Issue:

  • Avoiding the Regulatory Land Mines of Commercial ACOs
  • The Legacy of Halifax: A New Stark Law Enforcement Landscape?
  • Understanding the FDA’s Social Media Guidance
  • HIPAA Enforcement Trends: From Mobile Devices to Maximum Penalties
  • EHR Impact on Medical Practice: Reducing Errors, Addressing Safety and Understanding Risks

Avoiding the Regulatory Land Mines of Commercial ACOs

Authors: Robert Belfort, Partner, Healthcare Industry, Manatt, Phelps & Phillips, LLP

Editor’s Note: Commercial Accountable Care Organizations (ACOs) are increasingly attractive to providers, because they offer more flexibility but less burdensome requirements than Medicare. They also present greater risks, however, because the regulations under which they operate are not as clear. In a new article in Hospitals & Health Networks Daily, Manatt Health guides hospitals and physicians in avoiding the regulatory land mines of commercial ACOs. Key points are summarized below. Click here to read the full article.  

While providers are showing great interest in creating ACOs to participate in the Medicare Shared Savings Program (MSSP), they are showing even greater enthusiasm for organizing ACOs to contract with private insurers. Commercial ACOs are attractive to providers because private insurers are less likely than Medicare to impose extensive governance, reporting and certification requirements. At the same time, they are more likely to offer greater flexibility in tailoring risk-sharing models and quality metrics to the needs of individual ACOs.

While commercial ACOs provide benefits, they also present risks. It’s important to proceed cautiously, because the regulations governing them are less certain than those governing Medicare.

Antitrust Concerns

Joint price negotiations by multiple healthcare providers may constitute illegal price fixing under the antitrust laws. To avoid a claim of per se price fixing, a multi-provider organization must be financially or clinically integrated. Financial integration means that participating providers share significant financial risk for the cost of the healthcare services they collectively provide. Clinical integration is defined as providers creating joint practice guidelines, peer review systems, care management programs and data sharing arrangements that enable them to improve the coordination and quality of medical care.

An ACO that is accepted into the MSSP is deemed clinically integrated. But there is no framework for obtaining such a designation for commercial ACO arrangements, other than a lengthy and costly effort to obtain an opinion from the Federal Trade Commission.

Moreover, while financial or clinical integration precludes a per se price fixing claim, it does not protect providers from antitrust scrutiny. An integrated, multi-provider network must demonstrate that the benefits it delivers outweigh any anticompetitive effects.

Fraud and Abuse Issues

Collaborations between hospitals and physicians usually implicate two primary federal fraud and abuse laws—the Stark Law and the Anti-Kickback Statute. These laws are designed for a fee-for-service world, where physicians and hospitals are expected to keep their financial relationships at arm’s length.

Recognizing the need for fraud and abuse flexibility in an environment in which physicians and hospitals are creating integrated clinical and financial organizations, the Centers for Medicare and Medicaid Services (CMS) and the Health & Human Services Office of the Inspector General established waivers from the Stark Law and Anti-Kickback Statute covering ACOs participating in the MSSP. There are no similar waivers for providers participating in commercial ACOs. While there may be relevant exceptions or safe harbors, they often do not cover all aspects of a commercial ACO arrangement.

Structuring Considerations

While the territory is uncharted, there are a few paths commercial ACOs can take that may minimize compliance risks:

  • Integrate commercial and Medicare ACO activities. Participation in the MSSP can provide a framework for reducing compliance risks associated with comparable commercial ACO contracts. If a Medicare ACO creates infrastructure that advances the purposes of the MSSP, its waiver protection can extend to its commercial ACOs that rely on the same infrastructure.
  • Avoid creating “financial relationships” between the hospital and physicians under Stark. If a hospital and physicians create a joint venture to operate an ACO, there typically is no direct financial relationship between the parties. Instead, each has a financial relationship with the ACO. Whether the transactions between the parties and the ACO create an indirect financial relationship between the hospital and physicians for Stark purposes likely hinges on the extent to which the doctors’ compensation is based on the volume or value of their referrals to the hospital.

Careful structuring may take commercial ACOs outside of the Stark regulatory scheme but is unlikely to insulate them from the Anti-Kickback Statute. Unlike Stark, however, the Anti-Kickback Statute is only violated if there is improper intent and safe harbor compliance is not mandated.

  • Refine the way in which fair market value is calculated. If MSSP waiver protection is not available, commercial ACOs may feel compelled to demonstrate that their financial relationships with physicians are consistent with fair market value. Traditionally, fair market value is calculated by determining the amount of time it takes to provide a service and assigning an hourly rate based on physician compensation surveys. In a value-based compensation environment, however, hospitals and physicians need to develop new ways of measuring fair market value.


There is no silver bullet for eliminating the compliance challenges raised by hospital-physician commercial ACOs, butcareful planning and creative thinking can significantly mitigate risks.

The Legacy of Halifax: A New Stark Law Enforcement Landscape?

Authors: Robert Belfort, Partner, Healthcare Industry, Manatt, Phelps & Phillips, LLP | Michelle McGovern, Associate, Healthcare Industry, Manatt, Phelps & Phillips, LLP

Editor’s Note: The Halifax case—which includes actions leading up to the recent $85 million settlement with the Department of Justice—has raised a number of legal issues critical to our understanding of the federal physician self-referral prohibition (the Stark Law). In a new article in Bloomberg BNA’s Health Care Fraud Report, Manatt Health discusses the details of the Halifax case and the implications for Stark Law compliance. Highlights are below. Click here to download the full article.

On March 10, 2014, Halifax Hospital Medical Center and Halifax Staffing, Inc. entered into an $85 million settlement with the Department of Justice in connection with a qui tam whistleblower lawsuit. The settlement amount included claims for referrals of services payable by Medicaid.

In addition to the settlement agreement, Halifax entered into a five-year corporate integrity agreement with the Department of Health and Human Services’ Office of the Inspector General to ensure ongoing compliance with fraud and abuse laws. The case also includes a November 13, 2013 partial summary judgment order that could significantly impact bonus arrangements with physicians employed by hospitals or controlled medical groups.

Rough Waters in Bonus Pools

On November 13, 2013, the U.S. District Court of the Middle District of Florida found in favor of the federal government in a partial summary judgment order in United States of America ex rel. Baklid-Kunz v. Halifax Hospital Medical Center and Halifax Staffing, Inc. This decision addressed whether incentive bonus pools based on the operating margin generated by a group of employed physicians took into account volume or value of referrals in violation of the Stark Law.

Elin Baklid-Kunz, Halifax’s director of physician services (previously, its compliance officer) filed a qui tam lawsuit against the hospital when her concerns about whether certain bonus arrangements with oncologists were appropriate under the Stark Law were not addressed. The government later joined the suit.

The case alleged that bonus arrangements with six oncologists did not fit into the employment agreement exception of the Stark Law, which prohibits physicians from making referrals for designated health services (DHS) payable by Medicare to an entity with which the physician (or an immediate family member) has a financial relationship, unless an exception applies. 42 U.S.C. 1395nn(a)(1)(A). The Stark Law also prohibits billing for DHS provided as a result of an improper referral. 42 U.S.C. 1395nn(a)(1)(A).

The government alleged that the incentive bonuses offered to Halifax oncologists did not fit into the bona fide employment relationship exception to the Stark Law. Under this exception, a hospital may compensate an employed physician without violating the Stark Law under certain conditions, including:

  • Payments to physicians do not take into account the volume or value of referrals for DHS. 42 U.S.C. 1395nn(e)(B).
  • Physician bonuses are not based on DHS referrals. Bonuses must be based on services that physicians perform personally.

The bonuses in question were paid by Halifax Staffing, Inc. (Halifax Staffing)—which employs the individuals who work at Halifax Hospital Medical Center (Halifax Hospital)—to six oncologists from 2005 until 2008. The physicians were entitled to an “equitable portion” of an incentive compensation pool that was equal to 15% of the operating margin for the medical oncology program at Halifax Hospital.

Although the incentive compensation pool was divided based on each physician’s share of personally performed services, the pool included profits earned from delivering DHS. Because revenues from DHS were included in the bonus pool, the oncologists could increase the size of the pool by increasing their referrals to the hospital.

The hospital argued that the bonuses fit within the employment exception, because they were divided based on each physician’s personally performed services. The United States countered that the DHS revenues included in the bonus pool would grow with additional referrals from the oncologists.

In the Halifax summary judgment order, the court held that merely dividing a bonus pool based on personally performed physician services does not necessarily insulate the bonus from scrutiny under the Stark Law. If the pool includes any DHS revenues or profits tied to referrals made by physicians receiving the bonuses, Stark’s employment exception is not satisfied.

Stark Law and Medicaid—A Unique Pairing

When it was initially enacted in 1989, the Stark Law’s prohibitions extended to Medicare claims only. In 1993, the enactment of the Omnibus Budget Reconciliation Act brought Medicaid within Stark’s reach. See 42 U.S.C. 1396b(s). Since implementing regulations have never been finalized, however, the Stark Law has generally been interpreted to apply only to referrals for services payable by Medicare. Importantly, when entering into negotiations with regulators, settlement proposals historically have accounted only for Medicare claims.

In a significant departure, the Halifax case alleged that the hospital violated the Stark Law by submitting claims from tainted referrals to both Medicare and the Florida Medicaid program. Although the hospital argued that the Medicaid claims could not be included in the case, the Department of Justice asserted that tainted referrals of claims to the Medicaid program can constitute violations of the False Claims Act. To make this assertion, the government argued that by submitting tainted claims to the Florida Medicaid program—which were then submitted to the Centers for Medicare & Medicaid Services (CMS)—Halifax caused the Florida Medicaid program to submit false claims.

When the partial settlement of the Halifax case—which included Medicaid claims—was announced in March, it potentially heralded a new enforcement era for Stark. Enforcing the Stark Law in a Medicaid context could affect providers in important ways:

  • The inclusion of Medicaid claims in False Claims Act cases for Stark Law violations will raise the stakes for providers—and could increase settlement amounts.
  • Providers that serve patient populations primarily covered by Medicaid (such as children’s hospitals) may have to focus more heavily on Stark Law compliance than they have in the past.

Halifax Takeaways

Although claims relating to admitting patients for allegedly medically unnecessary care remain outstanding, the Halifax case is already having a significant impact. Last fall’s summary judgment motion clarified that dividing a bonus pool based on personal productivity is not enough to insulate it from Stark liability if the pool includes revenues from DHS referred by the physicians receiving bonuses. The recent settlement agreement, which included claims for referrals of services payable by Medicare and Medicaid, could substantially expand the Stark Law’s reach. Though the Halifax case is winding down, its legacy is just beginning.

Understanding the FDA’s Social Media Guidance

Authors: Ian Spatz, Senior Managing Director, Manatt Health Solutions

On June 17, 2014, the Food and Drug Administration (FDA) released two additional draft guidances that put greater definition around how pharmaceutical and medical device companies can use social media. The first guidance focuses on using social media platforms with space limitations, such as Twitter. The second deals with how to correct third-party misinformation about prescription drugs and medical devices.

The long-awaited draft guidances are consistent with the FDA’s previous statements and enforcement actions that set out a conservative and limited role for product sponsors. It does appear, however, that the FDA is willing to give companies more freedom than might be expected to correct inaccurate information about their products that appears on the web.

Although the documents tackle different topics, Thomas Abrams, the director of the FDA’s Office of Prescription Drug Promotion, sees them as having a common goal. In a blog posted on “FDA Voice,” Mr. Abrams says the documents both “strive to ensure that the information provided by drug and device companies is accurate and will help patients make well-informed decisions in consultation with their healthcare providers.”

The Growing Need for Clear Direction

Few would argue that there has been a pressing need for guidance around social media use. A survey for the CDC shows that 59% of physicians use social media sites—and a Pew Research Center study reveals that 80% of adults who use the Internet have looked online for health information, a quarter for reviews of specific drugs and treatments. Yet an IMS Health study announced early this year that just 23 of the top 50 global pharmaceutical companies make regular use of social media. In addition, Tufts University research shows that just one in five companies uses social media to engage with patients.

The lack of clear guidance has contributed greatly to the industry’s reticence to use social media. Abrams acknowledged on his blog that companies have been seeking greater clarity, saying “We developed these new guidances, in part, to respond to requests for best practices from companies and other stakeholders.”

Greater Certainty around Engagement—but Strict Limits Remain

The guidances provide drug and device manufacturers with more certainty about the rules governing their engagements in web and social media communications. They continue, however, to reinforce the FDA’s very strict limits on those vehicles. Overall, the guidances:

  • Confirm that FDA insists that social media communications be complete and balanced within the initial message (i.e., the tweet).
  • Make it clear that it may be impossible for some products and services to use certain social media and Internet contexts—particularly those with limited character counts—and still meet the FDA’s requirements.
  • Clarify when the FDA will hold a company responsible for Internet and social media content and when it will not.
  • Allow companies to host un-moderated discussions on controlled web sites without being accountable for all that is said.
  • Give permission and pathways for companies to correct misinformation on independent sites—but do not require that they create comprehensive programs or monitor all web sites or even all discussions on the sites they choose to correct.

Internet/Social Media Platforms with Character Space Limitations: Presenting Risk and Benefit Information for Prescription Drugs and Medical Devices

(Click here to access the full guidance.)

The draft guidance on platforms with character space limitations covers current platforms, such as Twitter and sponsored links, as well as future platforms that may impose similar limitations. Its focus is on “the communication of benefit and risk information on Internet/social media platforms with character space limitations.…”

The central theme is fair balance—ensuring that any communication conveys both benefit and risk information in a balanced fashion. In its language, the guidance clearly drives home the need to achieve fair balance within a single communication:

  • “FDA acknowledges that Internet/social media platforms associated with character space limitations may pose challenges for firms in providing a balanced presentation of both risks and benefits of medical products.”
  • “If an accurate and balanced presentation of both risks and benefits of a specific product is not possible within the constraints of the platform, then the firm should reconsider using that platform for the intended promotional message….”
  • “[I]f a firm chooses to make a product benefit claim, the firm should also incorporate risk information within the same character-space-limited communication. The firm should also provide a mechanism to allow direct access to a more complete discussion of the risks associated with its product.”

Following is a summary of the key requirements set forth in the FDA guidance:

  • Benefit information should be accurate and non-misleading and reveal material facts within each individual character-space-limited communication (e.g., each individual message or tweet).
  • Benefit information should be accompanied by risk information within each individual character-space-limited communication.
  • If a firm concludes that adequate benefit and risk information, as well as other required information, cannot all be communicated within the same character-space-limited communication, the firm should reconsider using that platform for the intended promotional message.
  • The content of risk information presented within each individual character-space-limited communication should, at a minimum, include the most serious risks associated with the product. For a prescription human drug, the most serious risks would generally include all risk concepts from a boxed warning, all risks that are known to be fatal or life-threatening, and all contraindications from the approved product labeling (the PI).
  • A mechanism, such as a hyperlink, should also be provided within each individual character-space-limited communication to allow direct access to a more complete discussion of risk information about the product. Firms may include supplemental hyperlinks (e.g., to a product home page, a PI or a brief summary) either within the character-space-limited communication itself or on the landing page of risk information. FDA recommends, however, that a direct hyperlink to a landing page that is devoted exclusively to comprehensive risk information about the product be initially included within the original character-space-limited communication.
  • The prominence of risk information should be comparable to the benefit information within each individual character-space-limited communication, taking into consideration any formatting capabilities available on the specific Internet/social media platform.

Internet/Social Media Platforms: Correcting Independent Third-Party Misinformation About Prescription Drugs and Medical Devices

(Click here to access the full guidance.)

The draft guidance on correcting third-party misinformation states that companies “should respond, if they choose to respond, to misinformation related to a firm’s own FDA-approved or -cleared products when that information is created or disseminated by independent third parties on the Internet or through social media or other technological venues (Internet/social media)….” For the guidance to apply, the misinformation must be within content generated by a third party, regardless of where it appears. In other words, even comments on the company’s own web site, if posted by an independent third party, are covered by the guidance.

Following is a summary of key requirements set forth in the FDA guidance:

  • Misinformation is defined as positive or negative incorrect representations or implications about a firm’s product created or disseminated by independent third parties who are not under the firm’s control or influence and that is not produced by, or on behalf of, or prompted by the firm in any particular way. FDA has determined it may benefit the public health for firms to correct misinformation about their products (including, for example, situations in which a firm is aware of misinformation that may be dangerous or harmful to the public health).
  • This draft guidance does not apply when a firm is responsible for the product communication that contains misinformation. A firm is responsible for communications that are owned, controlled, created, influenced, or affirmatively adopted or endorsed, by, or on behalf of, the firm. A firm is therefore responsible for communications on the Internet and Internet-based platforms, such as social media, made by its employees or any agents acting on its behalf to promote its product. These communications must comply with any applicable regulatory requirements.
  • Firms are generally not responsible for third-party user generated content (UGC) about their products when the UGC is truly independent of the firm (e.g., is not produced by, or on behalf of, or prompted by the firm in any particular way) regardless of whether the firm owns or operates the platform on which the communication appears. If the firm owns or operates the platform or created or initiated the forum on which the UGC appears, the firm should include an overarching clear and conspicuous statement that the firm did not create or control the UGC. (It is permissible, however, to monitor the forum for profanity and obscenity without triggering responsibility for its content.)
  • A firm may choose to provide appropriate truthful and non-misleading corrective information. Alternatively, it may provide a reputable source from which to obtain the correct information, such as the firm’s contact information.

The draft guidance sets out specific requirements for corrective information, including:

  • The corrective information must either:
    • Be posted in conjunction with the misinformation in the same area or forum (if posted directly to the forum), or
    • Reference the misinformation and be intended to be posted in conjunction with the misinformation (if provided to the forum’s operator or author).
  • The corrective information must disclose that the person providing it is affiliated with the firm that manufactures, packs or distributes the product.
  • If a firm corrects one or more occurrences of misinformation, it is not expected to correct each piece of misinformation in an entire forum. A firm should, however:
  • Clearly identify the misinformation it is correcting,
  • Define the portion of the forum it is correcting, and
  • Correct all the misinformation that appears in that clearly defined portion.
  • If a firm chooses to correct misinformation, it may do so by correcting misinformation directly on the forum. Alternatively, the firm may provide the corrective information to the independent author for the author to incorporate. The firm may request that the author remove the misinformation or allow comments to be posted. The firm also may request that the site administrator remove the misinformation or allow comments to be posted.
  • FDA will not hold a firm accountable for an independent third party’s subsequent actions or lack of action.

The draft guidance suggests that firms keep records of their efforts to correct misinformation. The records should include:

  • The content in the misinformation.
  • The date it was posted or located.
  • The forum to which it was posted.
  • The corrective information provided.
  • The date the corrected information was provided.

To Be Continued…

The draft guidances are the latest in a series. The agency is planning to continue refining and expanding its guidance around social media and Internet communications. As Abrams says in concluding his blog, “FDA sees social media as an important resource for industry and is committed to developing additional guidance for drug and device manufacturers that outline the agency’s current thinking. We do all this work with the best interests of patients in mind.”

Manatt Health will continue to monitor emerging guidance and keep you updated on the implications.

HIPAA Enforcement Trends: From Mobile Devices to Maximum Penalties

Authors: Helen Pfister, Partner, Healthcare Industry, Manatt, Phelps & Phillips, LLP | Michelle McGovern, Associate, Healthcare Industry, Manatt, Phelps & Phillips, LLP

Editor’s Note: Although the U.S. Department of Health and Human Services (HHS) has collected more than $10 million in settlements over the past 12 months from covered entities under the Health Insurance Portability and Accountability Act (HIPAA), HHS officials say that a stronger period of enforcement is on the horizon. In a new article for the New York Law Journal, summarized below, Manatt Health examines the latest trends in HIPAA enforcement and their implications. Click here to read the full article.  

On May 7, New York Presbyterian Hospital (NYP) and Columbia University (CU) entered into the largest settlement agreement to date with the HHS Office for Civil Rights (OCR) for alleged HIPAA violations. According to an HHS official, the settlement, which totaled $4.8 million, is part of a more aggressive enforcement period at OCR. Settlements collected so far in 2014—totaling just shy of $7 million—have already surpassed OCR’s most aggressive enforcement period to date.

The NYP-CU settlement agreement is the most recent in a series of enforcement actions taken against healthcare organizations that have failed to protect patient healthcare data on computer systems, electronic networks or other portable media. According to Jerome Meites, a Chief Regional Civil Rights Counsel at HHS, portable media is at the root of “an enormous number” of HIPAA complaints.

NYP-CU Settlement: Shared Networks, Shared Responsibility

The settlement with NYP and CU, which is greater than the last five HHS settlements for HIPAA violations combined, involved an alleged breach of electronic protected health information (ePHI) that impacted approximately 6,800 individuals.

NYP and CU are parties to a joint arrangement whereby CU faculty members serve as attending physicians at NYP, through an affiliation called the New York Presbyterian Hospital/Columbia University Medical Center. As part of this affiliation, NYP and CU store ePHI on a shared electronic network that links the entities’ patient information systems.

In September 2010, New York Presbyterian Hospital/Columbia University Medical Center submitted a joint breach report to OCR, after a CU physician attempted to deactivate a personally-owned computer server on the shared network. The attempted deactivation resulted in the disclosure of ePHI to public databases. The partner of a former patient first alerted NYP and CU to the alleged breach, after finding that patient’s information on the Internet.

While investigating the breach, OCR also uncovered a number of data security risks, including failures to:

  • Implement security measures to reduce the risk of ePHI disclosure, resulting in inadequate risk management at both entities.
  • Conduct an accurate and thorough risk analysis of all information technology equipment, applications and data systems using ePHI.

In addition, OCR found that NYP did not have appropriate policies and procedures in place for authorizing access to databases containing patient information. Further, NYP did not comply with the policies that were in place to manage information access.

OCR stressed that joint healthcare arrangements can result in liability for all covered entities involved. “When entities participate in joint compliance arrangements, they share the burden of addressing the risks to protected health information,” said Christina Heide, OCR’s Acting Deputy Director of Health Information Privacy.

NYP’s share of the settlement agreement ($3.3 million) was more than twice the share paid by CU ($1.5 million). In addition, both entities entered into Corrective Action Plans (CAPs) with HHS, which will be in effect for three years, and will require each entity to:

  • Undertake a risk analysis.
  • Create a risk management plan.
  • Revise policies and procedures on information access management and device and media controls.
  • Develop a privacy and security awareness training program.

Security, Technology and Risk: The Importance of Protecting ePHI

The NYP and CU settlement agreements are among a number of notable recent HIPAA settlements:

  • On April 22, 2014, HHS announced a settlement with provider Concentra Health Services (Concentra) in connection with a stolen laptop that stored unencrypted ePHI. OCR’s investigation uncovered evidence that Concentra had recognized–but failed to respond appropriately to—issues involving lack of encryption on multiple devices. OCR also noted that Concentra’s security management processes did not appropriately safeguard necessary information. In addition to paying a $1,725,229 settlement, Concentra also entered into a CAP with HHS.
  • On December 26, 2013, HHS announced a settlement with a provider entity, Adult & Pediatric Dermatology, P.C. (APD), for $150,000 for failing to have HIPAA breach notification policies and procedures in place. The case marked the first settlement with a HIPAA-covered entity for failure to have appropriate breach notification policies and procedures. OCR launched its investigation after an unencrypted thumb drive containing ePHI of approximately 2,200 patients was stolen.

Both of these cases underscore the importance of ensuring that devices storing ePHI are secure. They also reinforce the need to have policies and procedures in place for preventing unintended disclosure of ePHI and promptly addressing actual or suspected breaches.

Enforcement of HIPAA Breaches Impacting Fewer Than 500 Individuals

Though the enforcement landscape has grown increasingly rigorous, the number of individuals impacted by data breaches continues to rise. According to Modern Healthcare, nearly 31.7 million people—or one in ten in the United States—have had their medical records exposed through reported breaches.1

To strengthen protections, in recent years, OCR has indicated a willingness to pursue enforcement actions involving breaches of fewer than 500 patients’ protected health information (PHI), which is less than the amount that would require immediate notification of HHS and local media:

  • On January 2, 2013, the first settlement of a breach involving less than 500 patients’ PHI was announced. The Hospice of North Idaho agreed to pay $50,000 and entered into a CAP with HHS after reporting the theft of an unencrypted laptop computer containing ePHI of 441 patients in June 2010.
  • On April 22, 2014, QCA Health Plan, Inc. of Arkansas settled with OCR for $250,000 after reporting the theft of an unencrypted laptop containing ePHI of 148 individuals in February 2012.

While the settlement agreements involving fewer than 500 patients are far smaller than the nearly $5 million paid by NYP-CU in May, they indicate OCR’s willingness to investigate breaches at any level and across all provider types. Smaller, singular entities are held to the same standards, and subject to the same enforcement actions, as larger providers.

The Importance of Risk Assessment

HHS has also brought enforcement actions against entities that have failed to detect—and protect against—security risks:

  • In July 2013, managed care company WellPoint, Inc. entered into a $1.7 million settlement agreement for (among other things) failing to implement the safeguards required by the HIPAA Security Rule. The WellPoint breach impacted nearly 613,000 people.
  • In June 2012, the Alaska Department of Health and Social Services settled with HHS for $1.7 million after OCR, while investigating a reported HIPAA breach, determined that the department failed to implement adequate policies and procedures to safeguard PHI.

Clearly, implementing and complying with HIPAA policies and procedures is critically important to providers of all sizes and all levels of sophistication. As the NYP-CU settlement indicates, the cost of noncompliance can be extreme.

EHR Impact on Medical Practice: Reducing Errors, Addressing Safety and Understanding Risks

Authors: William Bernstein, Partner, Chairman, Healthcare Division, Manatt, Phelps & Phillips, LLP | Jonah Frohlich, Managing Director, Manatt Health Solutions | Anne Karl, Associate, Healthcare Industry, Manatt, Phelps & Phillips, LLP

Editor’s Note: How has health IT emerged in its first 10 years? How is it reshaping the medical and legal landscape? How are electronic health records (EHRs) transforming healthcare? Manatt Health answered these questions and more in our recent webinar for Bloomberg BNA, “The Evolution of Health IT and EHRs: Setting the Stage for Growth and Value.” The webinar detailed the emergence of health IT, focusing primarily on developments over the last decade that have accelerated the adoption and use of EHRs. The article below, which focuses on issues around EHR-related errors, safety issues and liability, is the second in a series summarizing key segments of the presentation. Click here for a hard copy of the full presentation. Or, if you missed the webinar, click here and enter LGNBBNA1 to view the program free.  

While health IT presents opportunities to improve patient care and safety, it also can create potential hazards. Designed or applied inappropriately, health IT in general and EHRs in particular can lead to unintended adverse consequences including dosing errors, failures to detect illness and delays in treatment.2

EHR-Related Errors

Using EHRs can lead to the unintended creation of new errors or the propagation of existing ones. There are four main categories of potential errors:

  • Inappropriate use of templates, default settings and copy and paste features. EHR vendors often add functionalities to assist with documentation, such as copy and paste capabilities, templates, use of standard phrases and paragraphs, and automatic object insertion (e.g., clinical values brought in from other parts of the electronic record).3 Benefits of these features include improved efficiency, timeliness, legibility, consistency and completeness of documentation.4 When used inappropriately or without proper education, however, these features can lead to inaccurate documentation and potentially result in medical errors or allegations of fraud.5 Errors related to default settings and copy/paste functionality represent two of the most common EHR risks associated with inappropriate documentation capture.6
  • Alert fatigue. EHR systems often include decision support functionalities such as drug-drug interaction, drug-dose, drug-lab and contraindication alerting. Several studies have identified “alert fatigue” (choosing to ignore alerts) as a common condition among clinicians using EHRs with decision support.7
  • Patient matching problems. Enabling a clinician to view a comprehensive picture of the patient requires accurately “matching” individual patients to their health records. Error rates—which average eight percent and can be as high as 20 percent—can result in sub-optimal care and medical errors.8,9 Incorrectly matching a patient to a health record may also have privacy and security implications, such as wrongful disclosure or inappropriate treatment based on another patient’s health information.10
  • Poor user interface design. Poor interface design can lead to unclear information displays that contribute to clinician misinterpretations11 and negatively impact clinical workflow, leading to errors.12

Federal Efforts to Address EHR Safety

In response to growing concern about potential harm from health IT use, the Office of the National Coordinator of Health Information Technology (ONC) released the Health IT Patient Safety Action and Surveillance Plan (Health IT Safety Plan) in July 2013.13 The Health IT Safety Plan:

  • Addresses the role of health IT within HHS’s commitment to patient safety.
  • Highlights current and future efforts to strengthen patient safety across both government and the private sector.
  • Outlines tangible actions through which stakeholders can fulfill their obligation to increase knowledge about health IT’s impact on patient safety.

Coinciding with the report’s release, ONC announced the creation of the Health IT Patient Safety Program within the Office of the Chief Medical Officer with support from the Office of Policy and Planning.14 On December 5, 2013, ONC released a patient safety guide designed to “help clinicians and other EHR users address health IT-related safety issues.”15

Through the 2014 Edition EHR Standards and Certification Criteria final rule,16 ONC incorporated two new patient safety features into the EHR Incentive Program standards and certification criteria requiring technology developers to:

  • Identify publicly the method they used to incorporate user-centered design processes into the development of their EHR technology for the capabilities included in eight medication-related certification criteria.17
  • Provide transparency regarding their approach to “quality management systems” in the development of their products.18

Enacted in July 2012, the Food and Drug Administration Safety and Innovation Act (FDASIA)19 also addresses health IT product safety. Section 618 of FDASIA instructs the Secretary of HHS, acting through the FDA Commissioner—in collaboration with ONC and the Federal Communications Commission—to issue a report by January 2014 on a proposed strategy and recommendations for an appropriate risk-based HIT regulatory framework that promotes innovation, protects patient safety and avoids regulatory duplication.20

To assist with developing the report, the FDA in collaboration with ONC and FCC formed a new workgroup under ONC’s HIT Policy Committee to provide input and recommendations.21 On September 4, 2013, the HITPC approved the FDASIA Workgroup’s initial health IT safety framework.22

EHR Use, Risks and Legal Liability

When properly used, EHRs can improve care quality and safety. When improper use creates or propagates errors, however, there can be legal consequences for providers.

The liability implications of EHRs are likely to vary over the adoption life cycle. Healthcare providers’ adoption of EHR systems increases liability risk in the short term but may lower it over time by improving outcomes and conforming with the evolving legal standard of care.23

During the initial transition from paper to electronic processes, providers may increase their liability risk. As with any new technology, the risk of error increases as providers move from a familiar system to a new one.

At least one case suggests that providers have a duty to minimize risks during the transition period.24 A federal court held that a hospital that switched from a paper to an electronic system for delivering test results had a duty to “implement a reasonable procedure during the transition phase” to ensure the timely delivery of test results to physicians.25

It is unclear whether the use of EHRs is likely to increase or decrease malpractice claims and liability.26 Some experts hypothesize that using EHRs will become a standard of practice and could be a factor in evaluating the propriety of clinician conduct. There are other possible scenarios where one can envision use or non-use of an EHR as part of a malpractice claim. For example, a plaintiff’s attorney stating that failure to view readily available information through an EHR itself supports a malpractice claim.

Generally, to prove medical malpractice, a plaintiff must establish the applicable standard of care and prove that the defendant caused injury by falling short of that standard. As the use of EHRs grows, it may reshape medical liability by altering how to determine the standard of care and by changing the standard of care itself.

1. Joseph Conn, Major medical records breaches pass 1,000 milestone as enforcement ramps up, “Vital Signs,” Modern Healthcare, June 13, 2014.
2. Institute of Medicine, Health IT and Patient Safety: Building Safer Systems for Better Care, NATIONAL ACADEMY PRESS (2012).
3. C. R. Weir et al., Direct Text Entry in Electronic Progress Notes, 42 METHODS OF INFO. IN MED. 61 (2003).
4. Reed Gelzer et al., Copy Functionality Toolkit: A Practical Guide: Information Management and Governance of Copy Functions in Electronic Health Record Systems, AHIMA Report (2012).
5. Donald W. Simborg, Promoting Electronic Health Record Adoption: Is It the Correct Focus?, 15 J. AM. MED. INFORMATICS ASS’N. 127 (2008).
6. Sue Bowman, Impact of Electronic Health Record Systems on Information Integrity: Quality and Safety Implications, PERSP. HEALTH INFO. MGMT. (Fall 2013).
7. Nidhi R. Shah et al.,,. Improving Acceptance Of Computerized Prescribing Alerts In Ambulatory Care, 13 J. AM. MED. INFORMATICS ASS’N 5 (Jan.-Feb. 2006). Heleen van der Sijs et al., Overriding Of Drug Safety Alerts In Computerized Physician Order Entry, 13 J. AM. MED. INFORMATICS ASS’N 138 (Apr. 2006).
8. RAND Corporation, Identity Crisis: An Examination Of The Costs And Benefits Of A Unique Patient Identifier For The U.S. Health Care System (2008).
9. College of Healthcare Information Management Executives, Summary Of CHIME Survey On Patient Data-Matching (2012).
10. Shaun J. Grannis et al., Privacy and Security Solutions for Interoperable Health Information Exchange, OFFICE OF NATIONAL COORDINATOR FOR HEALTH INFORMATION TECHNOLOGY AND AGENCY FOR HEALTHCARE RESEARCH AND QUALITY (2009).
11. Institute of Medicine, Health IT and Patient Safety: Building Safer Systems for Better Care, NATIONAL ACADEMY PRESS (2012).
12. Arthur Kellermann & Spencer S. Jones, What It Will Take To Achieve The As-Yet-Unfulfilled Promises of Health Information Technology, 32 HEALTH AFF. 163 (2013).
13. Office of the National Coordinator for Health IT, Health Information Technology Patient Safety Action & Surveillance Plan (July 2, 2013).
14. Id., p. 27.
15. Office of the National Coordinator for Health IT, How to Identify and Address Unsafe Conditions Associated with Health IT (Nov. 15, 2013).
16. 77 Fed. Reg. 54, 163.
17. 45 C.F.R. § 170.314(g)(3) requires that user-centered design processes be applied to each capability an EHR technology includes that is specified in the following certification criteria: § 170.314(a)(1) (CPOE), (a)(2) (drug-drug, drug-allergy interaction checks), (a)(6) (medication list), (a)(7) (medication allergy list), (a)(8) (CDS), (a)(16) (eMAR), (b)(3) (e-prescribing), and (b)(4) (clinical information reconciliation).
18. 45 C.F.R. § 170.314(g)(4).
19. Pub. L. No. 112-144, 126 Stat. 993.
20. Id.
21. Workgroup charter and information.
22. U.S. Dep’t of Health and Human Services, Minutes of the September 4, 2013 Health IT Policy Committee Meeting (Sept. 2013). The FDASIA Workgroup’s draft recommendations and supporting material:
23. Nancy Lorenzi et al., Crossing The Implementation Chasm: A Proposal For Bold Action, 15 J. AM. MED. INFORMATICS ASS’N 290 (2008).
24. Smith v. United States, 119 F. Supp. 2d 561 (D.S.C. 2000).
25. Id.
26. The limited literature provides conflicting results: a study out of Colorado published in November 2012 showed no change in the number of claims, while one out of Massachusetts published in August 2012 showed a marked decrease.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

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