What Your Attorney Didn’t Tell You about Your New Healthcare Practice

Do you have a HIPAA plan? A corporate compliance plan? You might be surprised to learn that your new healthcare practice is not up-to-par when it comes to healthcare regulations. Here are four common healthcare startup mistakes that your startup attorney may have overlooked.

Launching a new healthcare practice involves a long list of legal tasks, from corporate structure (e.g. LLC or corporation) to an employee handbook to a lease negotiation. For innovative ventures involving telemedicine or technology, we usually begin with a feasibility opinion — that is, we create a “legal blueprint” for the path forward, determining whether your vision is legally practicable.

Most small business or general practice attorneys (or even accountants) will happily help you with the most basic startup requirements so that you can begin doing what you love– serving patients. But a healthcare practice is not like other startups. Complex laws and regulations govern even the minutiae, with steep penalties for non-compliance. Furthermore, these regulations change constantly. And just as you focus your practice on a certain subspecialty, so do we.

What you don’t know can hurt you. In fact, it can damage you and your business beyond repair. An agreement to provide remuneration in exchange for a referral, for example, is a felony, risking possible jail time.  And a failure to maintain HIPAA-compliant privacy policies carry up to $1.5 million in penalties annually. Yet many healthcare providers operate blissfully unaware of the perils — that is, until an HHS-OIG federal agent or CMS auditor comes knocking at the door.

So what did your startup attorney miss?
Here are four commonly-overlooked details we see:

1) You don’t have a plan for avoiding False Claims Act violations.

The False Claims Act (FCA) is a federal law which penalizes providers who “knowingly” file false or fraudulent reimbursement claims with government payors like Medicare. For FCA purposes, reckless or deliberate ignorance to the law to means “knowingly,” so the old adage “ignorance isn’t a defense” rings true here.

From Day One of operations, it’s crucial that your practice maintain comprehensive fraud, waste and abuse compliance plans that satisfy the Department of Health and Human Services, Office of the Inspector General’s standards. If you accidentally file a false claim with the government, the damage will be lessened if you’re able to demonstrate your considerable attentiveness to compliance, rather than defiance, of the FCA. (View our blog Does Your Practice Accept Medicare or Medicaid? You Need a Fraud, Waste, and Abuse Compliance Plan to learn more).

 2) You don’t have legally sufficient HIPAA policies and procedures.

Surprisingly, many new healthcare practices begin operations prior to implementing HIPAA policies and procedures. Some simply download a sample Notice of Privacy Practices from their professional association or another practice, believing that is sufficient to meet their HIPAA privacy obligations. It is not. (View our blog Why your Notice of Privacy Practices alone doesn’t satisfy your HIPAA obligations to learn more).

Nearly all healthcare practices are required to maintain written HIPAA privacy policies and procedures, perform regular risk assessments, and conduct regular trainings of all employees, staff, providers, and contractors. Practice size is irrelevant as to whether these policies are required. The government has amped up audits of small practices in recent years, knowing they have the highest levels of noncompliance. (View our blog How Small Practices Can Avoid HIPAA Audits or Penalties to learn more).

HIPAA isn’t optional, and it’s crucial that an attorney help you craft and implement these policies from the very start.

3) Your business isn’t owned or managed wholly by licensed healthcare professionals.

Although each state is a little different, a healthcare practice can usually only be co-owned by similarly licensed practitioners (there are exceptions, but this can be complex to navigate). For example, co-owning a practice with a non-licensed spouse or a non-licensed investor may violate your practice act and, possibly, your state’s corporate practice of medicine doctrine (which essentially says that medicine must be practiced only by licensed professionals, not corporations). To remedy this, we may need to revise your filings with the state and amend your bylaws or operating agreement.

4) Your corporate structure is improper.

Some states require healthcare professionals to practice within a professional limited liability company (PLLC) or professional corporation (PC). In these states, operating as a regular LLC or corporation might violate state law.

Your corporate governance documents might also be missing crucial clauses. For example, your operating agreement or bylaws should dictate how your practice will be managed if one of its owners loses his or her professional licensure and can no longer legally own the practice.

Jackson LLP’s attorneys focus exclusively on healthcare-related businesses.

Not compliant in all of these areas? To protect your business and keep track of fast-paced changes in the industry, you need to consult an attorney with deep knowledge of health law.

If you operate in Illinois, Wisconsin, Michigan, Florida, or New Mexico, Jackson LLP can help you understand your practice’s legal exposure and determine if you may need additional services. Begin the conversation by scheduling a complimentary consultation with one of our attorneys. While the ultimate choice to comply is yours, we’ll give you the knowledge and tools to make that decision and assess your risk.

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