Singularity Health Law Blog

IRS SPOILS PHYSICIAN RECRUITMENT CONTRACTS

One of the hallmarks of physician recruitment contracts offered by hospitals and physician groups is the incentive of "foregiveness" of "loans" offered t phy;sicians who are financially underwritten as an inducement to relocate and entier profesioal practice ina particular location. Typically, there is a subidiy of the practice for a few years followdd by a three year or so period of continuing practice ofbligaiton in the community, during which the origional subsidy "loan" is written of over time and the physician is given Form 1099C (cancellation of dept) in the later years of the guarantee arrangement.

Last April, a United States District Court judge in the State of Washington, agreed with the Internal Revenue Service that those kinds of "loans" were in fact compensation and not loans at all. It held that the physician group was liable for failure to withhold from the payments to its physicians. The case was The Vancouver Clinic, Inc. v. The United States of America, 111 AFTR 2d paragraph 2031-632 (2013 DC Wash.).

The Hon. Rondal B. Leighton entered summary judgment in favor of the IRS,holding that because both the group and the physician at the inception had no expectatoin that the incentives would be repaid and that there would never be a repayment of the "loan", it was not in fact a loan.

These kind of incentive arrangments will in the future likely to be designed to have the look and feel of actual loans with effective promissory notes and periodic payments over the term of the loan agreements, including the early years. This is just aother level of complexity in the three dimensional chess game of the multiagency oversight regulation of health care systems.

JUSTICE ROBERTS AND A BRIDGE TOO FAR

In holding with the minority liberal wing of the court that the Affordable Care Act is constitutional as a tax, Justice Roberts seems to have concluded that the wholesale sinking of the Act by the Supreme Court was “a bridge too far” for the conservative majority which stopped the vote recount in Florida before it was completed, effectively anointing George W. Bush President of the United States on legal grounds not used before or since. That of course brought us 2 middle east wars on a credit card that we are just beginning to pay and the worst financial crash since the Great Depression.

 

SOCIAL SECURITY SANTA JUDGE RESIGNS

Much to the disappointment of social security plaintiff lawyers in West Virginia, Chief Judge Charlie Andrus has resigned as Chief of the Social Security Administration Judges in Huntington, West Virginia.  Judge Andrus leaves behind and unblemished record of finding for the claimant in each of 729 cases he heard in the first six months of fiscal 2011. The national average for most judges is about 60% of awards in the cases they review. Perhaps it is just luck of the draw. Perhaps there is a Robin Hood element at play here.  There are about 1500 administrative law judges  in the Social Security System. Interestingly, there are a number of outliers both for and against claimants that seem to be distortions of the system.  While there is some natural tendency not to intrude on the judicial integrity of the judges charged with operating the system, it would seem that extreme deviations from the norm in decisions either pro or con to the claimant are worth a review to determine whether more than unbiased judicial evaluation is going on. The integrity of the system is dependent upon the perception and reality of impartiality in the system.  It is not the prerogative  of administrative law judges to either play Santa or Grinch in the system but to fairly and equitably adjudicate the claims of the parties.

 

VIRGINIA HEALTHCARE REFORM DECISION: TAX OR PENALTY, INDIVIDUAL RIGHTS OR COLLECTIVE RESPONSIBILITY?

     One of the interesting components of the evisceration of the the “Minimum Essential Coverage” provision in the health care reform bill, (“ACA”) by Virginia Federal District Court Judge Henry E. Hudson, recently is his rejection of the government’s assertion that the “penalty” contained in Section 1501 of the ACA for the failure to purchase health insurance was not a viable “excise tax” under the Constitution.  The Taxation Power of the Congress is as broad as any of its enumerated powers.  Article I, Section 8, Cause 1 gives the Congress the power to lay and collect taxes and judicial review of the Congressional power to lay and collect taxes is narrow and limited.

VIRGINIA HEALTHCARE LAW DECISION: CAN CONGRESS REGULATE ECONOMIC INACTION?

     Judge Hudson’s decision invalidating Sec. 1501 of the recent health reform bill, the “Accountable Care Act” or “ACA” in Commonwealth of Virginia v. Sebelius, in the U.S. District Court for the Eastern District of Virginia, addresses the key question as to whether Congress can regulate “economic inactivity” under the provisions of the Commerce Clause of the Constitution. The inactivity is of course the action by individuals in not obtaining mandated health insurance under the ACA and the regulation is the imposition of excise taxes upon those who fail to obtain the required insurance. There are no specific precedents that directly address this issue although logical arguments can be made on both sides.

 

ANOTHER STATE TAX EXEMPTION DECISIONS SEPARATES FROM “LIBERAL” FEDERAL DEFINITION OF CHARITABLE PURPOSE.

 

With perhaps some eye toward the Illinois decision in Provena Covenant Medical Center et al. v. Department of Revenue, 2010 WL 9668858 (2010), an Ohio appellate court affirmed the denial of property tax exemption to a dialysis company that had been granted a federal Section 501(C)(3) tax exemption, finding that the liberal standard adopted by the IRS had no impact on Ohio tax exempt statutes and precedent.    The case, Dialysis Clinic, Inc v. Levin, Slip Op. Ohio 5071 is a direct appeal from the Ohio Board of tax appeals.  The case is of interest because it reflects the direction in which Sen. Grassley and others have been pushing nonprofit hospitals in the Patient Protection and Accountable Care Act enacted into law in March of this year.

 

BRING ENOUGH “CHARITY” IN HUNT FOR HOSPITAL TAX EXEMPTION?

 

Robert Ruark, the novelist and big game hunter, used to encourage his fellow hunters to “use enough gun” when hunting dangerous animals.  If the reasoning of the Illinois Supreme Court recently in Provena Covenant Medical Center V. Department of Revenue 2010 WL966858 (2010) gains traction beyond the state court ruling on local property tax exemptions and spills over into the analysis of federal and state income tax exemptions, not-for-profit hospitals may be in for some rough sledding with the Internal Revenue Service and Sen. Charles Grassley (R) Iowa.  Senator Grassley who inserted the enhanced “community benefit” requirements into the Patient Protection and Affordable Care Act enacted last fall has been anxious to hold non-for profit hospitals accountable for the very lucrative tax exemptions that they receive under the Internal Revenue Code.

 

NON PROFIT HOSPITAL CHARITY CARE “OUT OF THE CLOSET” WITH PPACA?

 

 

Sen. Charles Grassley (R) Iowa, arranged to insert language in Section 9007 of the Patient Protection and Affordable Care Act, the health reform bill signed into law in March of 2010 that requires not for profit hospitals to adopt and disclose financial assistance policies for the medically underserved who are not covered by insurance. The American Hospital Association has long argued that mandatory charitable care disclosure policies are unnecessary and that the need can be met through voluntary disclosure procedures.

GREGORY R. PICHE’ TO ADDRESS NATIONAL FORUM ON CLINICAL INTEGRATION.

 

Gregory R. Piche’ will speak on the subject of avoiding tax liability in the clinical integration of tax exempt organizations on November 17, 2010 in Washing D.C. at the National Forum on Clinical Integration.

November 15-17, 2010  |  Washington, DC American Conference Institute's  National Forum on Clinical Integration The Authoritative Guide to ACOs and other Integrated Models in the Wake of Health Care Reform.

Experts estimate that a majority of the newly formed ACOs ultimately will reach their demise within the next three years due to lack of sound financial structuring, failure to obtain physician buy-in, and overwhelming contradictory legal regulations that Congress and the Obama Administration have yet to address. While academics continue to debate theories and we wait for regulatory guidance, key hospital and physician decision makers are reserving their places at the premiere National Forum on Clinical Integration to get answers now and stay on the road to success.  Overcome financial, practical, and legal obstacles with the go-to experts that leading hospital systems will turn to first. Only here will you benefit from one on one meaningful networking opportunities and walk away with the answers to tough questions critical to financial and legal sustainability.         Gain in-depth answers for: Tailoring the integration based on location-specific site variations and technical capabilities Learning directly from the FTC's Assistant Director for the Health Care Division in the Bureau of Competition on his ACO enforcement priorities, how the agencies are working together to resolve antitrust concerns, and what will raise red flags when it crosses his desk Understanding the practical distinction between ownership interests and membership in the ACO in the eyes of the regulators Developing a flexible template for a Stark analysis to apply exceptions to emerging formations Establishing an evidence-based medicine approach without implicating CMP laws Developing cost-effective and efficient quality and performance metrics Ensuring physician incentives and avoiding limitations for growth opportunities, and much more! View Brochure: Too much is at stake to overlook these practical challenges that can devastate your investment. Click on the brochure and register today for the industries foremost event for hospital executives. www.AmericanConference.com/ACOForum We want your opinion! Take 1 Minute to fill out our 6 question survey on ACO's and find out what your peers think in the process! Click Here...

 

ARE NON PROFIT HOSPITAL TAX EXEMPTIONS RELEVANT OR NEEDED?

    

    The principal justification for the extension of billions of dollars of tax exemptions to non-profit hospitals has been their self proclaimed charitable mission.  While many of these hospitals have in the past struggled mightily to provide health care services to those uninsured in extreme need without resources, others have provided little more charitable care than for profit facilities, content with equating bad debt with charitable mission.   With the expansion of access to health care insurance under the recent health care reform legislation, the PPACA, the question of the utility and relevance of tax exemptions moves into high relief.