Exam/PIN Number:
LAW AND MEDICINE -- HEALTH CARE
Fall 1995
Prof. Mayo
1. Please write your Exam/PIN number in the space provided above.
2. This is an open-book exam. You may bring into the exam room the assigned casebook, class handouts, your class notes, and your outline, including any outline that may have been prepared jointly with other members of the class.
3. The exam consists of both essay and short-answer (e.g., true/false and fill-in-the-blanks) questions. Mark your answers to the short-answer questions on the exam itself, and turn in the exam at the end of the exam session. Do not answer the short-answer part of this exam in a bluebook. You must turn in this exam to receive any credit on the exam.
4. I will take off points from your total score for failure to follow the directions
provided for each part of the exam.
I. Essay - One Hour 80 points
On October 25, 1995, Harrold Summers was taken by ambulance on a spinal board to the emergency room at Baptist Hospital after he had fallen from a tree stand while hunting. Baptist is under contract with Big HMO to provide hospital services, including emergency room services, to Big HMO's members. Summers is a member of Big HMO, through his employer's self-insured health benefit plan.
Emergency room staff, nurse Paul Toll and physician Dr. Griffith H. Ferrell, attended to Summers, who complained of severe pain in his head, back, and chest. Summers also told them that he could hear a snapping and popping noise in his chest when he breathed. Nurse Toll took Summers' medical history, which included prior lower back injuries, and gave Summers a physical examination. Dr. Ferrell ordered a series of spinal x-rays. He did not, however, request an x-ray of Summers' chest area, which would have revealed Summers' injury. Dr. Ferrell does not remember Summers' complaint of chest pains, but he concedes that patients who complain of chest pain are normally given a chest x-ray. At the time, Dr. Ferrell was working 80 hours a week at four different hospital emergency rooms. After review of the x-rays and further physical examination of Summers, Dr. Ferrell determined that Summers did not have any new fractures and that his chest pain was due to muscle spasms. Dr. Ferrell gave Summers muscle relaxants and an injection for pain, told him to apply heat, and to see his personal physician the next day. Summers requested to stay at the hospital overnight, indicating that he did not feel up to the drive back home. Dr. Ferrell denied the request, stating that he did not think Summers' condition warranted hospitalization.
Two days later, after staying at home in bed due to his pain, Summers was taken by ambulance to St. Bernard's Hospital where he was diagnosed with an acute comminuted fracture of one of his vertebrae, a sternal fracture, and multiple rib fractures that led to bilateral hemo-pneumothoraces. Summers spent fourteen days in St. Bernard's intensive care unit for his condition.
Now that he is out of the hospital, Summers has come to you for legal advice. Your main concern is to be able to frame at least one cause of action that will survive a motion to dismiss, motion for judgment on the pleadings, or motion for summary judgment. Analyze all possible claims against all possible defendants, including all defenses available to the defendants. You should, of course, focus upon issues covered by this course. In addition to providing a legal analysis of the facts stated, you should also identify areas where further discovery is needed and indicate the legal rationale for such discovery (i.e., the legal issues toward which the discovery would be directed).
II. True/False - 30 Minutes 40 points
For each of the statements below, circle either "T" (for "True") or "F" (for "False"). All general statements are subject to qualification and are, therefore, somewhat incorrect. Still, the following statements are not intended to be "trick" questions and are, I believe, generally recognized as either "true" or "false."
This part of the exam has 20 statements. Each correct answer will earn two points. One point is deducted for a wrong answer. The maximum score possible for Part II is forty points.
If you feel the need to explain your answer, assume a fact not stated, or deal with a latent ambiguity in the question, you may so indicate on the back side of the page. Please indicate the number of the question to which these back-side comments relate, and keep the suggested time limit in mind when deciding whether and how much to annotate your answer to a two-point question.
T F 1. Medicare DRGs apply to acute-care and medical-surgical hospitals, but not to long-term care hospitals, which are still paid on a reasonable-cost basis.
T F 2. The JCAHO's accreditation of a nursing home or a home health agency would mean that federal regulators would deem those institutions to satisfy most requirements for Medicare certification.
T F 3. If a nurse practitioner is excluded from the medical staff of a hospital and sues the staff and hospital § 1 of the Sherman Act, the hospital may enjoy at least a qualified immunity from liability if it satisfied the requirements of the statute (in particular the "professional peer review" and "reporting" requirements).
T F 4. The National Labor Relations Act applies to both for-profit and non-profit hospitals; to employees (i.e., nonsupervisors) who are physicians or nurses; and to residents and interns alike.
T F 5. A nonphysician provider may refer patients for "designated health services" in which the provider has a financial interest without fear of violating the Stark Act, 42 U.S.C. § 1395nn.
T F 6. A Texas nonprofit hospital fails to meet its community-benefit obligation for calendar-year 1995 and carries the unmet level of benefit forward into calendar-year 1996. If the hospital fails in 1996 to meet the combined level of community benefit, it has only one more year (calendar-year 1997) in which to satisfy its 1997 community-benefit burden plus the unmet level of community benefit carried forward from 1996 (which includes the unmet level of benefit from 1995 as well).
T F 7. Under current Internal Revenue Service regulations and interpretations, an audit of a hospital that is tax-exempt under § 501(c)(3) can be expected to cover not only community benefit, inurement, private benefit, and unrelated business income, but also compliance with the Emergency Medical Treatment and Active Labor Act (EMTALA) and with HHS' fraud and abuse regulations.
T F 8. In an antitrust action in which a podiatrist (i.e., non-M.D.) challenged her denial of medical staff privileges, the Health Care Quality Improvement Act would be a likely source of immunity for the defendant hospital.
T F 9. Under the Medicare anti-kickback statute, as interpreted by the Office of Inspector General of HHS, a pediatric hospital may waive copayments and deductibles, but a hospital subject to DRGs may not.
T F 10. RBRVS is a prospective payment methodology for physicians that takes into account average practice costs, training costs, and medical malpractice premiums for various types of diagnoses and procedures.
T F 11. Most states provide peer review committee proceedings some degree of protection from discovery, but not quality assurance committee proceedings.
T F 12. In 1995, health care expenditures will account for nearly 14 percent of national gross domestic product.
T F 13. Under Medicare reimbursement law, a participating ("par") physician may not balance bill, but a physician who merely accepts assignment for some patients may balance bill those patients as to whom he or she does not accept assignment.
T F 14. The Stark Act applies to Medicare and non-Medicare patients alike.
T F 15. Outliers are taken into account when HCFA calculates DRG weights and are included in the standard reimbursement rate for each procedure; no additional reimbursement for outliers is provided under Medicare PPS.
T F 16. A nonprofit corporation certified under § 5.01(a) of Texas' Medical Practice Act generally may employ physicians without violating the corporate practice prohibition.
T F 17. Under federal Medicare law, but not Texas state law, physicians who lawfully receive remuneration from entities to which they refer (i.e., in a manner that falls within the protective embrace of a federal safe harbor) must disclose the referral relationship and the remuneration to the patient.
T F 18. A patient has suffered an iatrogenic injury because of her surgeon's negligence, which she alleges was part of a long record of such lapses by the surgeon. The hospital will be liable only if vicarious liability can be established (for example, by demonstrating the existence of ostensible agency, a nondelegable duty, or employment-in-fact).
T F 19. Certificate-of-need programs were largely abandoned because of the difficulty of achieving the planning goals of the programs without violating the antitrust laws.
T F 20. Although a PHO may not qualify for tax-exempt status under § 501(c)(3), it may jeopardize the tax-exempt status of a participating hospital.
III. Fill-in-the-Blanks - 30 Minutes 40 points
With these fill-in-the-blanks questions, you are asked to identify and briefly discuss five terms we have read about during the semester. You will receive up to 8 points for each of your responses, for a total of 40 points in Part III. Where appropriate, you should include a definition of the term and compare and contrast the term to related concepts covered in this course. Your discussion of terms that are not inherently legal in nature should include the legal significance of those terms. Terms that are generic legal concepts should be discussed in the specific context of health care law.
1. Managed care:
2. Unauthorized practice of medicine:
3. Private accreditation:
4. Foundation-model IDS:
5. Disability:
IV. Essay - One Hour 80 points
Texas hospitals A, B, C, D, and E are the largest hospitals in their respective service areas. The service areas resemble the logo of the Olympic Games: five overlapping circles more or less as follows:
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Although two or three of the hospitals compete in any given market, there are some parts of each of the five service areas where only one of the hospitals provides service. In all relevant markets, the five hospitals compete vigorously against hospitals other than one of the other four. Thus, Hospital A competes against Hospitals B and D in the fringes of its service area, but it faces major competition from Hospital Z (not shown on diagram and not part of this problem). The hospitals are all tertiary-care institutions. All five provide "the basics," although some hospitals provide unique services -- heart transplant (Hospital A), high-risk pregnancy (Hospital B), etc. In no market does one of the five hospitals enjoy greater than 30 percent market share (in terms of admissions, patient days, gross revenues, and net revenues).
The five hospitals have decided that they would accomplish a number of goals if they were to organize themselves and their respective medical staffs into a health care network -- a delivery system that is integrated both horizontally (A-B-C-D-E) and vertically (Hospital A - A's medical staff; Hospital B - B's medical staff; etc.). One goal is to offer broad geographic coverage and a complete menu of hospital and physician services to large employers and insurers ("one-stop shopping") and to enter into direct contracts with them, hopefully to the exclusion of the non-network hospitals against which they compete. The second goal is to negotiate these fee-for-service contracts from a position of strength in order to defend themselves against the extreme bargaining techniques and the demands for capitation of the large purchasers of health care.
The hospitals are considering the following plan for their network. The five hospitals would create a corporate agent whose prime function would be to negotiate contracts with the employers and insurers on their behalf and on behalf of the physicians. The corporate agent would be authorized to collect pricing information from each of the five hospitals, in the form of a range of acceptable prices for hospital services or minimum prices below which the hospitals would be unwilling to go. Physicians from each hospital would indicate the maximum discount from their usual and customary fee they would be willing to accept. Armed with this pricing information, the corporate agent would negotiate a service contract with a payor. Once a contract is negotiated, physicians and hospitals would have five business days to "opt out" or they would be bound to the contract for a period of one year. Hospitals and individual physicians are not only free to opt out of any contract, they are also free to enter into contracts without going through the agent. The corporate agent would provide contract administration services, including prospective utilization review, billing, and collecting, and the like.
The benefits of such a plan would be (1) better negotiating strength against the payors; (2) a unique geographic/service combination to compete against "nonaligned" hospitals in each service area; (3) greater convenience for the employees who will be covered under these contracts (more choices of providers, better access to services); and (4) discounted fees for consumers and payors.
The largest single group of physicians on Hospital B's staff does not like the
plan as described above and has proposed a "deal sweetener" in order to get them
to go along. They have proposed to sell all of the assets of their practice to a
"5.01(a) certified nonprofit" and enter into employment contracts with the newly
formed 5.01(a). Their clinic offices would be provided by Hospital B rent-free, all
administrative salaries and expenses would be paid by the hospital, and each physician's
compensation would consist of a base salary of $50,000 each, plus a percentage of the
patient revenues generated by their own individual professional services and another, much
smaller percentage of the gross patient revenues generated by Hospital B. There
would also be an annual, end-of-year bonus if the physicians achieved or exceeded certain
productivity goals set for individual physicians and for the group (total patient visits
and net patient revenues, for example). Hospital B does not want to commit too much
cash to this deal, so its counterproposal is to purchase the medical group's assets with a
combination of cash, a five-year note, and an equity interest (i.e., stock) in the
hospital itself.
Analyze the legal issues raised by each element of the
proposal. Indicate whether and how these legal concerns might be handled through a
modification of the plan. Also indicate what additional facts you would need in
order to complete your analysis.
EXAMINATION ENDS HERE