Chapter 10 (or 3):  Introduction:

An excellent source for recent and ongoing trends in the health care system is the Center for Studying Health System Change.

See generally Joseph White, Markets and Medical Care: The United States, 1993-2005, 85(3) Milbank Q. (2007).

There has been a great deal of controversy involving the increase in the number of physician-owned specialty hospitals.   See U.S. Government Accounting Office, Specialty Hospitals:  Geographic Location, Services Provided, and Financial Performance (GAO-04-167, Oct. 2003).  The report summarizes:

Advocates of these newer specialty hospitals contend that the focused mission and dedicated resources of specialty hospitals allow physicians to treat more patients needing the same specialty services than they could in general hospitals and that, through such specialization and economies of scale, the potential exists to improve quality and reduce costs. In contrast, critics are concerned that specialty hospitals may concentrate on the most profitable procedures and serve patients that have fewer complicating conditions—leaving general hospitals with a sicker, higher-cost patient population. They contend that this practice of drawing away a more favorable selection of patients makes it more financially difficult for general hospitals to fulfill their broad mission to serve all of a community’s needs, including charity care, emergency services, and stand-by capacity to respond to communitywide disasters. Critics have also raised concerns that physician ownership of specialty hospitals creates financial incentives that could inappropriately affect physicians’ clinical and referral behavior.

See also Jon R. Gabel, Where Do I Send Thee? Does Physician-Ownership Affect Referral Patterns To Ambulatory Surgery Centers? 23(3) Health Aff. w162 (March 2008). Lawrence P. Casalino, Physician Self-Referral and Physician-Owned Specialty Facilities, Robert Wood Johnson Foundation Synthesis Report (June 2008); Symposium, 65 Med. Care Res. & Rev. 531 (2008).

To allow time to study the issues, Congress placed a moratorium on Medicare payments to any new physician-owned speciality hospitals.   Discussing various legal and policy issues, see Note, 2006 Colum. Bus. L. Rev. 215.

Hospital-physician joint ventures continue to be an especially active area of legal practice.  Surveying the provider-based reimbusement issues, see Barry Alexander, The Intersection of Contractual Joint Ventures and Medicare Reimbursement, Health Lawyers News, Feb. 2007, p. 4.  See generally  Symposium: Hospital-Physician Joint Ventures: A Promising Partnership? 4 Ind. Health L. Rev. 205-286 (2007).

On tiered provider networks, see Sara Rosenbaum, et al.  An Assessment of Legal Issues Raised in 'High Performing' Health Plan Quality and Efficiency Tiering Arrangements: Can the Patient Be Saved?  16 BNA Health L. 1267 (Oct. 18, 2007).

Yet another new term has emerged for a provider-focused organizational form: “accountable care organizations” (ACOs). These are a set of providers willing to be held accountable for the quality and cost of care for a population of patients. Initially, the term is being used by Medicare, to determine organization types that qualify for bonus payments that reward hitting quality and cost targets. See MedPac Report to Congress, Improving Incentives in the Medicare Program (June 2009); E. Fisher, et al., Fostering Accountable Health Care, 28(2) Health Aff. w219 (Feb. 2009).

An emerging development implicating licensure, reimbursement, and corporate laws are in-store retail medical clinics staffed by nurse practioners, which provide simple and routine urgent care and medical screening services.  See Wm. Sage, The Wal-Martization of Health Care, 28 J. Leg. Med. 503 (2007); Wm. Sage, Might the fact that 90% of Americans live within 15 miles of a Wal-Mart help achieve universal health care? 55 U. Kan. L. Rev. 1233-1245 (2007); Kaj Rozga, Retail Health Clinics: How the Next Innovation in Market-Driven Health Care is Testing State and Federal Law, 35 Am. J. L. & Med. 205 (2009); Nancy LeGros & Adam Robison, Retail Clinics: Coming Soon to a Store Near You, Health Layers News, Sept. 2008, p. 32; Symposium, 27(5) Health Aff. 1271 (Oct. 2008).

Chapter 10.A.1 (or 3.A.1 or 2.C.2) -- Professional Licensure

Here is additional information about challenges to the administrative procedures of professional disciplinary actions:

1. Standard of Proof. The Modi court notes that the Board was required to prove its case by “full, preponderating, and clear evidence.” This is hybrid between the majority “preponderance of the evidence” approach and a minority of jurisdictions that employ the “clear and convincing evidence” burden of proof. See Johnson v. Board of Governors of Registered Dentists of Oklahoma, 913 P.2d 1339, 1345-1347 (Okla. 1996). The Johnson court emphasized the serious impact of license revocation on the licensee. What is the likely impact of a heightened burden of proof on the ability of an agency to prove a violation? What is the impact on public health and safety if violations are difficult to prove? How great is the risk of erroneous deprivation under the ordinary preponderance of the evidence standard of proof?

2. Other Due Process Issues Within the Administrative Process. A medical board's disciplinary process can give rise to a number of different due process concerns. From a procedural due process standpoint, a licensee is entitled to adequate notice and hearing before the imposition of sanctions. The scope of the notice generally must be sufficient to inform the licensee of the basis for the proposed disciplinary action. See, e.g., Cooper v. Board of Professional Discipline of the Idaho State Board of Medicine, 4 P.3d 561 (Idaho 2000) (physician's due process rights violated by inadequate notice of charges). A licensee must have an opportunity to contest the alleged violations in an appropriate hearing. See, e.g., Petition of Smith, 652 A.2d 154 (N.H. 1994) (due process rights violated when some members of hearing panel absent during key testimony), but see Appeal of Dell, M.D., 668 A.2d 1024 (N.H. 1995) (no due process violation where board members failed to attend evidentiary hearing).

The hearing process does not need to be as procedurally precise as a formal trial.  For example, health care providers often are given only limited discovery rights in disciplinary proceedings. Medical Licensing Board of Indiana v. Provisor, 669 N.E.2d 406 (Ind. 1996); State ex rel. Hoover v. Smith, 482 S.E.2d 124 (W. Va. 1997). But see Painter v. Abels, 998 P.2d 931 (Wyo. 2000) (board violates due process by withholding examination report).

A licensee is entitled to a hearing before an impartial decisionmaker. This constitutional requirement can be problematic because boards are composed of other licensees and because boards perform multiple, possibly conflicting, functions. In Winthrow v. Larkin, 421 U.S. 35 (1975), the Court held that there is no constitutional barrier to a board of medical examiners conducting a license revocation hearing after it had previously conducted an investigation into the initial charge. State courts still have struggled to determine when a board is no longer an impartial decisionmaker. See, e.g., Artman v. State Board of Registration for the Healing Arts, 918 S.W.2d 247 (Mo. 1996) (en banc) (board may both initiate charges and try charges without violating due process); Lyness v. State Board of Medicine, 605 A.2d 1204 (Pa. 1992) (due process rights violated by commingling of prosecutorial and adjudicatory functions within single multiadministrative board); Devous v. Wyoming State Board of Medical Examiners, 845 P.2d 408 (Wyo. 1993) (due process rights violated by bias of board member who participated in disciplinary proceedings).

Licensees have alleged other forms of bias as well. In Gibson v. Berryhill, 411 U.S. 564 (1973), the Court disqualified an entire board of optometry, composed solely of optometrists in independent practice, as being per se biased against optometrists who work for chain stores. Nevertheless, the Court upheld as facially valid a similar arrangement that gave majority membership to independent optometrists. Friedman v. Rogers, 440 U.S. 1 (1979). See also Marler v. Missouri State Board of Optometry, 102 F.3d 1453 (8th Cir. 1996) (pecuniary interest of board member did not jeopardize licensee's right to an impartial decisionmaker); Rojas v. Sobol, 563 N.Y.S.2d 284 (App. Div. 1990) (rejecting claim that all-female hearing panel could not be impartial and fair with respect to claims of abuse of female staff and client).

3. Judicial Review and Substantial Evidence. When and how will a court review the determinations of an administrative body? Generally, licensees must exhaust their administrative remedies before seeking judicial review. Courts will then exercise only a limited judicial review of the administrative determination. This limitation on the scope of judicial review makes sense from a policy standpoint. The administrative agency is staffed by experts in some health-related discipline, after all, and the agency presumably has greater expertise than the generalist judges to whom the decision will be appealed. Furthermore, de novo review of agency determinations by the judiciary would be wasteful and duplicative. On the other hand, some level of judicial review would seem appropriate because of the important rights involved and the risk of rogue agency determinations insulated from the normal democratic process.

The Modi court held that the board's decision should be overturned because it failed to articulate the basis of its findings. See also Herridge v. Board of Registration in Medicine, 675 N.E.2d 386 (Mass. 1997) (board determination overturned where board failed to explain why it credited some of patient's damaging testimony while rejecting other significant portions of testimony as noncredible).

The “substantial evidence” standard is a particularly important basis for judicial review. A court will not conduct a de novo review of the contested violations. Instead, it will review the administrative record to determine whether the agency decision is supported by “substantial evidence.” The phrase clearly is a term of art; it is generally applied to uphold agency decisions so long as there is some probative evidence in the record to support the agency's determination. See, e.g., State Board of Medical Examiners v. McCroskey, 880 P.2d 1188 (Colo. 1994) (en banc) (substantial evidence supported board determination that physician violated generally accepted standards of medical practice); Laurino v. Board of Professional Discipline of the Idaho State Board of Medicine, 51 P.3d 410 (Idaho 2002) (reversing board's order).

How should courts respond when the “experts” in an administrative agency disagree? See, e.g., Webb v. West Virginia Board of Medicine, 569 S.E.2d 225 (W. Va. 2002) (evidence must be clear and convincing where experts hold conflicting views). Suppose that the hearing officer or panel finds that the licensee has violated some regulatory provision but not others and proposes a specific penalty. The board then rejects the initial determination, finding additional violations or imposing greater sanctions. Should a reviewing court still defer to the final agency determination? The answer generally is “yes,” although courts often impose a duty on the agency to explain in the final decision any deviations from the initial determination. Thus the Modi court emphasized the board's failure to adequately explain its rejection of the hearing officer's decision. See also Pearl v. Board of Professional Discipline of the Idaho State Board of Medicine, 44 P.3d 1162 (Idaho 2002) (board decision given greater scrutiny if board has refused to accept hearing officer's recommendations).

4. Judicial Review of Sanctions. Courts generally will not interfere with the sanctions imposed by the administrative agency unless the agency has abused its discretion or exceeded its statutory authority. In Waisbren v. Board of Registration in Medicine, 641 N.E.2d 700 (Mass. 1994), for example, a hearing officer found that a physician had engaged in gross misconduct by distributing inappropriate weight loss medication and by performing improper HIV-antibody testing. The physician admitted wrongful conduct, but claimed that his mental illness should be considered a mitigating factor. The hearing officer recommended that the physician be permitted to return to the supervised practice of medicine. The board adopted the hearing officer's findings of fact, but imposed license revocation. On appeal, the court concluded that the board's decision to impose a revocation was not an abuse of discretion given the physician's grave betrayal of his responsibilities. See also Kabnick v. Chassin, 675 N.E.2d 457 (N.Y. 1996) (board free to impose more serious penalty than hearing officer sua sponte).

Mere harshness of the sanction is not a sufficient basis for judicial intervention. Heinmiller v. Department of Health, 903 P.2d 433, 440 (Wash. 1995) (en banc). In Heinmiller, the department imposed an indefinite license suspension with certain conditions upon a social worker accused of engaging in a sexual relationship with a client the day after the formal treatment relationship ended. The court noted that a harsh sanction is not necessarily an arbitrary and capricious sanction: “Arbitrary and capricious action has been defined as willful and unreasoning action, without consideration and in disregard for facts and circumstances. Where there is room for two opinions, action is not arbitrary and capricious even though one may believe an erroneous conclusion has been reached.” Id. at 440-441.

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