Healthcare Alert

MVA Healthcare Team


With a new President in office and an economic stimulus package allocating billions of dollars for healthcare and related activities, 2009 promises to be a very exciting year for the healthcare industry.  Providers of all types can expect changes in legislation impacting their specific practice areas and heightened scrutiny by the Federal and state governments. Also in 2009, numerous rules and regulations adopted in previous years will become effective and require providers’ compliance.  This Alert provides a brief overview of five healthcare related developments to watch in 2009.  We will share five more topics in a future Alert.

I.  A New President; a New Healthcare Agenda

Now that President Obama has officially taken over the Oval Office, healthcare reform remains at the forefront of his political agenda.  President Obama has promised to push for universal or expanded healthcare coverage during his tenure.  In the event the government expands its role as a payor, the government likely will increase scrutiny of physician relationships and billing for healthcare services.  While the economy may delay President Obama’s efforts to revamp the healthcare industry, the economic stimulus package will immediately deliver billions of dollars to various sectors of the healthcare system.

The House and the Senate are expected to approve a $798 billion compromise economic stimulus package on Friday, February 13, 2009.  The proposed economic stimulus package includes a number of provisions related to health care spending, including, without limitation, the following:

  • over $85 billion to expand Medicaid and increase the amount of matching funds paid to individual states;
  • $24.7 billion to pay 65% of COBRA premiums for those workers involuntarily terminated between September 1, 2008, and December 31, 2009; and
  • $10 billion to NIH to be used for research grants and to renovate research facilities. 


A central part of the Obama Administration’s reform effort is the investment in electronic health information technology systems.  The adoption of electronic health record systems is viewed as essential for improving quality of care and reigning in healthcare costs.  The proposed Federal economic stimulus package allocates $19 billion to accelerate the use of electronic medical records by healthcare providers.  In addition, some States have accelerated the pace of enacting their own measures to spur the development of electronic healthcare systems.  Over the course of this year, we anticipate new legislation related to the adoption of electronic health records and related issues, such as privacy and security of health information.


If patient safety is not enough of a reason to upgrade health information technology, healthcare providers are now eligible for financial incentives for adopting electronic prescribing methods.  Under Section 132 of the Medicare Improvements for Patients and Providers Act of 2008 (“MIPPA”), physicians are eligible, beginning in 2009, to receive up to 2% of Medicare revenue per year for using e-prescribing methods.  In order to receive the incentive, providers must report the use of e-prescribing on at least 50% of eligible patients.  However, starting in 2012, Medicare will reduce reimbursements for those physicians who are not using e-prescribing systems.

CMS defines e-prescribing as “a prescriber’s ability to electronically send an accurate, error-free, and understandable prescription directly to a pharmacy from a point-of-care.”  E-prescribing uses a software application that transmits the script to the pharmacy.  The e-prescribing system must be approved by CMS and capable of doing the following:

  • Generate a medication list;
  • Select medications, transmit prescriptions electronically and conduct safety checks;
  • Provide information on lower cost alternatives;
  • Provide information on formulary or tiered formulary medications, patient eligibility, and authorization requirements received electronically from the patient’s drug plan. 


Effective October 1, 2008, Medicare will no longer pay for 12 categories of medical errors and preventable complications, including complications related to falls in a hospital, pressure ulcers acquired during a hospital stay, surgical site infections, and blood transfusions using the wrong blood type.  These errors or complications are called “never events” because, according to CMS, they should never happen to any patient.  In December 2008, CMS proposed to add to the list of “never events” three additional categories related to surgical errors.  CMS is expected to issue final coverage determinations related to those categories by March of this year. 

Health insurers often follow Medicare’s lead.  Therefore, if they have not done so already, payors will likely implement similar policies concerning nonpayment for medical errors.  States are also likely to implement similar policies for their Medicaid programs.  Further, at least one state has already proposed legislation that would prohibit hospitals and physicians from charging patients for certain medical errors, regardless of whether the patient is a beneficiary of any federal healthcare program. (NJ Bill S2471).  Other states may soon follow with similar legislation. 


CMS’s 2009 Inpatient Prospective Payment System final rule (“IPPS Rule”) includes significant changes to the federal Physician Self-Referral, or “Stark Law”, regulations effective October 1, 2009.  Under the Stark Law, a physician may not make referrals for designated health services (“DHS”) to an entity with which the physician or a member of the physician’s immediate family has a financial relationship.  The IPPS Rule expanded the definition of “entity” to include not only the entity that submits claims to Medicare for DHS, but also the person or entity that performs the DHS.  As a result of this change, certain “under arrangements” will be deemed to violate the Stark Law.  A joint venture between a hospital and a physician group in which the hospital pays the joint venture to provide a hospital “technical” service will be considered an entity that provides a designated health service.  As such, the physicians’ ownership in the joint venture must satisfy a Stark ownership exception.  The IPPS Rule also revised the Stark Law so as to prohibit per-click or percentage-based compensation formulae for equipment and office space leases.  Such lease arrangements must either be restructured to meet a Stark exception or unwound prior to the October 1, 2009 deadline. 

For Healthcare Related Developments to Watch in 2009- Part II, click here.



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