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The Physician Payments Sunshine Act

The Physician Payments Sunshine Act (“PPSA”) requires medical product manufacturers of drugs, devices, biologics, and medical supplies covered by Medicare, Medicaid, or the Children’s Health Insurance Program to annually disclose to the Centers for Medicare and Medicaid Services (“CMS”) any payments or transfers of value made to physicians or teaching hospitals. The PPSA is designed to increase transparency around the financial relationships between physicians and manufacturers by requiring manufacturers to report to CMS in three broad categories of payments or transfers of value:

(A) payments for meals, travel reimbursement, and consulting fees

(B) ownership and investment interests in manufacturers held by physicians and their immediate family members

(C) research payments, including any payment made for participation in preclinical research, clinical trials, or other product development activities

While these categories cover a wide range of relationships, certain transactions and transfers are exempt from disclosure.  Manufacturers are not required to report on any payments under $10 (unless those individual payments total more than $100 annually), on educational materials intended solely for patients, or on product samples. After undergoing a verification process, any data reported under the three categories listed above, will be published annually in a publicly searchable database.

These reports inform patients of any incentive their physician may have for recommending a certain medical device or drug and allows them to make an informed decision on whether to follow the physician’s recommendation or not.

In addition, the PPSA imposes penalties for failure to comply with these reporting requirements. For each payment that a manufacturer or GPO fails to report, a penalty of $1,000 to $10,000 may be applied. The maximum annual penalty for failure to report is $150,000. However, the penalties are more severe in cases where the manufacturer or GPO knowingly fails to report, in which case the penalties range from $10,000-$100,000 per payment, up to a maximum penalty of $1 million. Individual physicians are not required to report, but physicians are encouraged to monitor the manufacturers’ reports for inaccuracies.

The PPSA is not the only federal statute that governs financial relationships between physicians and medical product manufacturers but it is unique in that it creates a report of such relationships.

In order to determine if a payment made by a manufacturer to a physician needs to be reported in compliance with the PPSA, please consult a healthcare attorney.


Tahlia Clement Headshot

Author Scott Chase is a health law and corporate attorney at Farrow-Gillespie Heath Witter LLP.  Scott has been named to the lists of Best Lawyers in America, Texas Super Lawyers, and Best Lawyers in Dallas in every year for more than a decade.

Tahlia Clement is a clerk at FGHW. Ms. Clement is a 2019 candidate for a Juris Doctor at SMU Dedman School of Law, where she is the Editor-in-Chief for SMU’s Science and Technology Law Review. She holds a B.A. in journalism and mass communications from Arizona State University.

The Expansion (Finally) of Telemedicine in Texas: A Brief History and Future Applications and Considerations for Healthcare Providers

If you are a healthcare provider in Texas looking to supplement, or even transition, your practice into telemedicine, now is your time. Texas has always been a prime candidate for the benefits of telemedicine. It is an expansive state, with a large rural population that is often distant from medical care.

Thus, Texas residents are uniquely situated to take advantage of the outcome improvements and cost savings that telemedicine can provide.

Nevertheless, Texas was the last state to welcome telemedicine into its borders, in that it was the last state to abolish the requirement that a telemedicine provider first establish a patient-physician relationship via an in-patient visit. Now, after a lengthy court battle, this requirement has been eliminated, and providers are free to initiate patient-physician relationships in the telemedicine realm. While there was an immediate reaction by key players in the healthcare landscape to expand telemedicine in Texas, there remain a lot of unknowns that Texas healthcare providers should be aware of as they enter the world of telemedicine.

The Genesis and Outcome of Teladoc, Inc. v. Texas Medical Board

Teladoc, Inc. (“Teladoc”), one of the largest telemedicine providers in the United States, is based in Dallas and had been operating in Texas since 2005. Following amendments by the Texas Medical Board (“TMB”) to the state’s telemedicine regulatory scheme, Teladoc was forced to cease its telemedicine operations.

Eventually, Teladoc filed suit in federal court, alleging the TMB’s actions violated federal antitrust laws and the Commerce Clause of the Constitution. The parties then agreed to stay the proceedings to pursue settlement negotiations. These negotiations culminated in Texas Senate Bill 1107 (“SB 1107”), which was signed into law on May 27, 2017. Senate Bill 1107 abolished the requirement of an in-patient visit prior to utilizing telemedicine services. The new legislation applies across all telemedicine platforms.

Expansion Plans for Texas Telemedicine and Beyond

On September 22, 2017, the DWC announced “New 28 Texas Administrative Code § 133.30, Telemedicine Services” (the “Proposed Rule”). The Proposed Rule’s stated purpose is to “expand the accessibility of telemedicine services in the Texas workers’ compensation system by allowing health care providers to bill and be reimbursed for telemedicine services regardless of where the injured employee is located at the time the services are delivered.”

To reach this goal, the Proposed Rule included the removal of a Medicare-based reimbursement restriction that services be provided to injured employees at an originating site located in an area where there is a shortage of healthcare professionals. In other words, the Proposed Rule now allows a provider to bill and be reimbursed for telemedicine services no matter where the injured employee is located at the time the services are delivered.

Similarly, federal lawmakers are taking heed of the benefits of telemedicine. On November 7, 2017, the U.S. House of Representatives passed The Veterans E-Health and Telemedicine Support Act of 2017 (“VETS Act”). Much like the Proposed Rule issued by the DWC, the VETS Act eases geographic restrictions on telemedicine provided to veterans and aims to ensure that veterans, rural and disabled veterans in particular, can receive care across state lines.

The U.S. Senate passed its version of the VETS Act on January 4, 2018, which is slightly different than the House’s version, in that it bars individual states from taking disciplinary action against physicians who practice telemedicine across state lines.

Private employers are also noticing the benefits of telemedicine, and there has been a sharp increase in the number of large employers who see telemedicine services as a way to optimize how health care is accessed and delivered, while offsetting overall healthcare costs. More specifically, the Large Employers’ 2018 Health Care Strategy and Plan Design Survey found that 96 percent of large employers intend to make telemedicine services available to their employees at some point in calendar year 2018.

Considerations for the Telemedicine Provider

Whether a provider has been offering telemedicine services for some time or is just now getting in the game, there are some important issues to consider in updating or implementing telemedicine policies and procedures:

  • Telemedicine is a moving target – As of now, there is no uniformity across state lines in the regulation of telemedicine. From state-to-state, many crucial statutory definitions vary significantly. It is unclear how federal legislation like the VETS Act will resolve these discrepancies, if at all. Therefore, providers licensed in different states or providing services across state lines should comply with the rules and regulations of every state they encounter, including formal, regulatory schemes and the practice requirements set forth by the state’s medical board.
  • Data breach and cybersecurity risks – The provision of telemedicine exposes patients to increased cyber, privacy, and data security risks. Before launching a telemedicine practice, providers should conduct a thorough risk analysis aiming to implement policies and procedures that, at a minimum, comply with the HIPAA Security Rule and set forth an incident response plan that incorporates all applicable regulatory requirements.
  • The battle for universal reimbursement – One of the major barriers to a provider’s implementation of a robust telemedicine practice is the lack of universal reimbursement, both from Medicare and private payers. Providers should consider this issue in building their telemedicine business models, as ultimately, the telemedicine industry needs universal reimbursement to become widespread and economically sustainable.

Katie M. Ackels is a ligation attorney with broad experience for a diverse client base. Ms. Ackels primary practice areas are business litigation, employment litigation defense, personal injury litigation defense, and healthcare litigation. She graduated magna cum laude from Texas Tech University School of Law.

Blurry Physician

The 5 Most Important Decisions in a Physician Employment Agreement

Over the years, physician employment agreements have become very standardized. However, there are several provisions in such agreements that the to-be-employed physician must review carefully with his/her attorney.  The following is a brief summary of what I consider to be the 5 most important provisions for a physician to understand and negotiate with the employer.

1. Compensation

First and foremost, the compensation needs to be clearly written and understood.  Many compensation models are based on “Work Relative Value Units (WRVUs),” which are calculated by independent third parties and can be a trap for the unwary.  For example, the calculation of WRVUs can change from year to year and the employment contract usually provides for the current WRVU value to be the compensation model.  What happens if the WRVU value decreases substantially in a given year?  Answer:  The physician’s pay could decrease substantially as well.  Careful negotiation of the compensation provision could ameliorate that occurrence.

Additionally, compensation usually includes employee benefits, e.g., vacation, health insurance, and those can sometimes be negotiated as well.  Attention should also be paid to the reimbursement of expenses such as CME, credentialing fees and professional society fees.

2. Non-Compete

Texas has a statute specifically addressing physician non-competes, i.e., restrictions on where and when a physician can practice his/her specialty after termination of the employment agreement.  However, the statute does not mandate the time period, extent of the restricted area, or the exact type of physician actions that would constitute a violation of the non-compete.  Furthermore,
certain termination circumstances could be negotiated that would render the non-compete unenforceable or inapplicable.  Thus, the non-compete should be negotiated in that it provides ample opportunities to advocate for favorable terms on the physician’s behalf.

3. Outside Activities

Most physician employment agreements require the employed physician to work full-time and often provide that any outside fees earned, e.g., expert witness fees, belong to the practice.  However, many physicians have pre-existing consulting arrangements, charitable activities or other professional endeavors that should be excepted from the restrictions on outside activities and ownership of fees.  Again, this is a provision that can and should be negotiated.

4. Working Facilities and Staff

An employed physician needs adequate facilities, equipment, supplies and staff to fulfill his/her responsibilities.  Yet, most employment agreements do not contain a provision that requires the employer to provide those items.

The adequacy of staff could also affect compensation.  Consider a scenario in which the employed physician is on a bonus system that relies on collections of his bills by the practice.  The contract should contain a provision that the employer will have adequate billing and collection services.

5. Liability Insurance

The employment agreement will generally contain a provision for the employee/doctor to purchase “tail” insurance in case the agreement is terminated.  Tail coverage can be a substantial cost and, thus, the contract should be written to ensure the employee is not responsible for that coverage in all circumstances, e.g., in case of termination for cause by the physician. This provision is also one that can and should be negotiated.

Physician employment contracts are one of the most important financial undertakings in a doctor’s life.  While tedious, provisions should be reviewed, understood, and negotiated to the fullest.  The entire contract should be carefully reviewed but the above items should receive the most attention.


Scott Chase | Health Law

Scott Chase has practiced health law, corporate law, and intellectual property law for over 35 years.  Mr. Chase is Board Certified in Health Law by the Texas Board of Legal Specialization.

Scott’s primary practice focus is business transactions for physicians and healthcare facilities, as well as healthcare regulatory issues such as the Affordable Care Act, HIPAA and peer review.  Mr. Chase handles general corporate matters and trademark/copyright issues for physicians and also for a variety of non-healthcare clients.

Team of doctors and nurses

Physician non-competition agreements

Many people erroneously believe that non-competes are not enforceable against physicians in Texas.  To the contrary, non-competes that are ancillary to or part of otherwise enforceable contracts generally are enforceable, provided that they meet certain statutory requirements.  For example, these covenants must contain reasonable limitations as to time, geographical area, and scope of activity to be restrained.  They also must not deny a doctor access to his patient list, must provide access to medical records upon patient authorization, and must provide for a buy-out of the covenant at a reasonable price.  A physician may not be prohibited by a non-compete provision from providing continuing care to a patient during the course of an acute illness.

In addition to imposing an undesirable non-competition clause, a poorly reviewed employment contract can expose a doctor to many other unanticipated risks as well, including call coverage and payback obligations.

For more information on review and negotiation of physician employment contracts, please contact board-certified health care law attorney Scott Chase.

Farrow-Gillespie Heath Witter LLP - Health Care Law

Corporate practice of medicine

Texas law generally prohibits the practice of medicine by any corporation, entity, or non-physician individual.  The “corporate practice of medicine” doctrine forbids a physician from entering into an agreement with a non-physician under which the non-physician would in any way control the physician’s medical practice.  Based on this doctrine, non-physician individuals and entities generally cannot employ physicians.

There are, of course, exceptions to this general rule.  For example, a nonprofit certified by the Texas Medical Board under Section 162.001(b) of the Texas Occupations Code — often called a “5.01(a) corporation” after the section of the Texas Medical Practice Act under which they were originally formed—may employ a physician if certain requirements are met.  The directors of such a corporation must all be licensed by the Texas State Board of Medical Examiners and must retain the sole authority to direct all medical, professional, and ethical aspects of the practice of medicine within the corporation.  Additional requirements must be met in case of any non-physician members of the corporation.  Further, a 5.01(a) corporation, like any Texas non-profit corporation, may not pay dividends to its members, so any profits must be paid through management agreements or as compensation.

In 2011, the Texas Legislature enacted laws designed to allow specific types of hospitals and hospital districts to hire physicians and to allow physicians to form certain ownership-sharing agreements with physician assistants.  Critical access hospitals, sole community hospitals, and hospitals in counties of 50,000 or fewer people may now employ physicians if certain protections are in place.  Physicians may also form corporations, partnerships, professional associations, and professional limited liability companies together with physician assistants, provided that statutory ownership and control requirements are met.