2019 was a slow year for healthcare-related developments in the Kentucky legislature. Nothing was enacted that was as major – or as controversial – within the healthcare community as 2017’s medical review panels law. A few noteworthy laws take effect this year that might otherwise fly under the radar.
HB 151 became law on June 27, 2019 and seeks to crack down on insurance fraud in the state.
This new law extends anti-referral restrictions to healthcare providers who have opted out of Medicaid. This is most significant for healthcare professionals who structure their practices on a cash-only basis and make referrals for payment of reparation benefits. Note the new law covers indirect financial relationships with referral sources. This could have broad implications.
One of the more physician-focused provisions of the new law creates a Kentucky analog to the federal Stark Law, and this should have every provider’s attention:
(a) If a health care provider, directly or indirectly, has either of the following financial relationships with a person or entity, the provider shall not make a referral to the person or entity for the furnishing of health care services for which payment may be made from basic or added reparation benefits provided under this subtitle:
An ownership or investment interest in the person or entity, whether through debt, equity, or other means; or
A compensation arrangement between the provider, directly or indirectly, and the person or entity; and
(b) No person or entity shall present, cause to be presented, or collect payment on a claim or bill for healthcare services referred to the person or entity that the person or entity knows or should know is in violation of paragraph 3(a) of this subsection. (KRS 304.39-215(2).)
Kentucky’s version of Stark Law substitutes automobile insurance proceeds in lieu of payment from federal healthcare programs (in other words, self-referral of a patient whose care is reimbursed by an insurance company under Kentucky’s Motor Vehicle Reparations Act is prohibited, unless an applicable exception applies). This is a crucial distinction, as it defines “provider” to mean all licensed practitioners not participating in Medicaid. This state statute therefore enlarges the net cast by the federal Stark Law.
There are numerous exceptions to the state version, which track the exceptions to the federal law through direct reference. These exceptions include in-office ancillary services such as lab services and radiology, physician-to-physician referrals in the same group practice, bona fide employment of the physician by a hospital and more.
One important thing to note about the Stark Law and Kentucky’s new adoption of it in the auto insurance context is that it is a strict liability law; these laws do not require actual negligence or any kind of intent to violate the law for a violation to occur. Accidental Stark violations are commonplace, and although the state penalties are nonpayment or a refund of any amount paid, these can be costly for a healthcare practice, especially over time. The importance of adopting Stark considerations into a compliance plan cannot be overstated.
Under the new law, the Kentucky Board of Medical Licensure (“KBML”), the Board of Nursing, and others have an affirmative duty to notify the Department of Insurance (“DOI”) whenever they have knowledge or the belief that insurance fraud is taking place, and the DOI will investigate and refer for criminal charges, if necessary. These boards also must provide any information requested by the Commissioner of Insurance.
Another key issue for healthcare providers will be their obligation to report legal violations of their partners or affiliates. Under KRS 311.597(5), unchanged by HB 151, physicians are obligated to report violations to the KBML. Keep in mind this reporting obligation is a licensure requirement, and KBML can discipline providers for failure to report. This means that if a doctor knows about a violation of anti-reparations violations and/or questionable insurance reimbursements, he/she must report it.
The insurance fraud sections create a new tiered classification system for insurance fraud offenses of $500 or more, classifying them in a manner similar to theft offenses with increased penalties at specific intervals. Prior to the new law, all insurance fraud outside of organized crime was treated with the same penalties as a Class D felony. Now, the tiered system ratchets up the penalties at ever-higher levels, with the highest classification being instances of insurance fraud totaling $1 million or more. These now garner the Class B felony distinction, carrying a minimum of 10 years and up to 20 years in prison.
SB 84 provides certification and regulation for midwives, as well as creating a new public council to implement new licensure requirements.
Kentucky stopped certifying midwives in 1975, and there have been no clear regulations on the practice for more than thirty years. Bills to regulate the process have been proposed in recent years but nothing was passed. SB 84 provides requirements of collaboration with healthcare providers and new reporting requirements.
The advisory council is set up under the Board of Nursing, which will promulgate regulations to establish standards for training programs, licensing, transfer of care from a midwife to a hospital, disciplinary actions, and more, as well as define a list of conditions that require the collaboration, consultation or referral of a client to a physician or other appropriate healthcare provider.
The law also criminalizes unlicensed midwife services, although it does provide exceptions for traditional birth attendants for religious or cultural purposes and for family members and friends providing uncompensated care. It is unclear how these statutory terms will be interpreted and enforced.
HB 439 allows doctors and Advanced Practice Registered Nurses (“APRNs”) to designate someone to communicate with patients about the results of HIV testing. Prior law restricted this communication to doctors or APRNs. The purpose of KRS 214.181 is to protect patient privacy in connection with HIV testing. Fear, uncertainty and stigma associated with HIV can serve as a deterrent to testing, treatment and counseling. This new law may encourage patients to undergo HIV testing. HB 439 provides flexibility to practitioners by giving them the ability to choose a designee to handle those communications.
In closing, we cannot leave the topic without addressing medical review panels. HB 429 served to repeal the law authorizing them in full. This was a formality, as that law had been declared unconstitutional under the Kentucky Constitution by the Kentucky Supreme Court. HB 429 does, however, require claimants to file a “certificate of merit” when filing suit for malpractice against healthcare entities, healthcare practitioners or long-term care facilities. This certificate takes the form of an affidavit that states that the plaintiff has consulted with at least one qualified expert who has concluded that the claim has merit.
In lieu of filing this certificate, a plaintiff may provide the defendant with “expert information in the form required by the Kentucky Rules of Civil Procedure.” There are also exceptions to the requirement, such as when the plaintiff has made at least three efforts to consult with an expert and none would agree to the consultation, or if the plaintiff intends to rely solely on a cause of action that does not require expert testimony.
Depending on how courts interpret and enforce this new statute, HB 429 could become an impediment to plaintiffs’ malpractice claims.
Alan D. Pauw is a member of McBrayer PLLC and practices out of the firm’s Louisville office. His practice focuses on healthcare, employee benefit matters, estate planning, and general business and tax matters. Mr. Pauw can be reached at firstname.lastname@example.org or 502.327.5400, ext. 2350.
This is a summary of state and federal law and regulation and does not constitute legal advice.