lawflablog

Health Law Update

Florida Supreme Court Invalidates Nursing Home  Arbitration Agreement as Against Public Policy

By: Melanie R. Leitman, Associate Attorney

Edward Clark was admitted to OP Winter Haven, a nursing home, by his niece, Gayle Shotts. Ms. Shotts signed all of the relevant paperwork on behalf of her uncle, who had suffered brain damage as a result of a car accident many years prior. One of the documents Ms. Shotts signed on behalf of her uncle contained a clause requiring arbitration in accordance with the American Health Lawyers Association arbitration rules for “any dispute that might arise”[1] during Mr. Clark’s stay at the nursing home. The arbitration agreement also prohibited the arbitrators from awarding punitive damages and provided that the terms of the agreement were severable. Upon Mr. Clark’s death in 2003, Ms. Shotts, as personal representative, filed suit against the nursing home and several other related parties alleging negligence and breach of fiduciary duties. The defendants responded to the complaint by moving to compel arbitration and Ms. Shotts objected, arguing that the agreement was void and unenforceable as against public policy. The trial court, concluding that the agreement containing the arbitration clause was “enforceable, not severable and not repugnant to the public policy of the State of Florida[,]”[2] found in favor of the defendants and granted their motion to compel.

Ms. Shotts appealed the trial court’s decision and the Second District Court of Appeal affirmed the trial court’s ruling with respect to the motion to compel but found error in the trial court’s holding that the agreement was not severable.  Additionally, the Second DCA found that the agreement could potentially violate public policy because of its provision prohibiting punitive damages, although because this portion could be severed by the arbitrators, the agreement as a whole was not unenforceable for public policy. Ms. Shotts then appealed to the Florida Supreme Court, raising six issues. The court granted her request for discretionary review and addressed three of her claims.

First, Ms. Shotts contended that under relevant law, the court, not the arbitrator, must decide whether or not an arbitration agreement violates public policy. A review of federal and state law found that when the enforceability argument goes to the arbitration clause itself, courts are the more appropriate entity to resolve the dispute because it goes to the making of the agreement as opposed to the contract generally. Decisions on public policy concerns regarding arbitration agreements fall under the jurisdiction of the courts because if the arbitration agreement is violative of public policy, then no valid agreement exists and there is nothing for the arbitrator to decide.

Second, Ms. Shotts claimed that it was error for the Second DCA to fail to find that the agreement’s limitation of remedies (excluding punitive damages) violated public policy. A review of Florida cases found that all districts but one have found limitation of remedies clauses in nursing home contracts to be either violative of public policy or unconscionable. More specifically, the Legislature provided for certain remedies in the Nursing Home Resident’s Act and the American Health Lawyers Association rules contain provisions which are inconsistent with and thus undermine these statutory remedies.  Thus, the Florida Supreme Court held that “any arbitration agreement that substantially diminishes or circumvents [the statutory] remedies stands in violation of the public policy of the State of Florida and is unenforceable.”[3]

The third of Ms. Shotts’s claims that the Florida Supreme Court addressed involved the severability of the limitation of remedies provision. The district court found that the relevant provision’s potential to violate public policy did not render the entire agreement unenforceable because it was severable. Ms. Shotts disagreed. The Florida Supreme Court first conducted a review of relevant Florida law and found that generally, [w]hether a contract is entire or divisible depends upon the intention of the parties.”[4] More specifically, nearly all of the DCAs have ruled on the issue of public policy implications and severability of limitation of remedies provisions in nursing home contracts, reaching varying results.[5] In examination of the facts of the present case, the Court found that the limitation of remedies clause invoking the American Health Lawyers Association rules to be so inextricably intertwined with the essence of the agreement that it could not be severed without the trial court being forced to re-write the agreement, which is not an appropriate role for the court to take.[6]

Finally the Court addressed the facts of this case in light of the recent United States Supreme Court holding in Rent-A-Center, West, Inc. v. Jackson, where the U.S. Supreme Court held that the arbitrator must decide whether or not an arbitration agreement is unconscionable. The Florida Supreme Court, however, found Jackson to be distinguishable from the case at hand because the agreement that Ms. Shotts signed, unlike the agreement in Jackson, contained no delegation provision.

Justice Polston dissented from the majority opinion, reasoning that the agreement’s language providing for arbitration of “any dispute” is a delegation provision, thus bringing this case under the scope of the Jackson holding. Consequently, the enforceability of the agreement, he argued, along with other disputes arising under same, should have been determined by the arbitration panel and not by the court.

---

[1] Shotts v. OP Winter Haven, Inc., 36 Fla L. Weekly S665, S674 (2011).

[2] Id. at S666 (quoting Shotts v. OP Winter Haven, Inc., 998 So. 2d 639, 640-41 (Fla. 2d DCA 2008)).

[3] Id. at S671.

[4] Id. at S672 (quoting Local No. 234 v. Henley & Beckwith, Inc., 66 So. 2d 818, 821-22 (Fla. 1953)).

[5] The First DCA held that such a provision is severable so long as the agreement contains a severability clause. Alterra Health Care Corp. v. Estate of Linton, 953 So. 2d 574, 578 (Fla. 1st DCA 2007). The Second DCA, in the present case and in other cases, has held that severability exists, even in the presence of a nonseverability clause. See e.g., Manor Health Care Servs. v. Stiehl, 22 So. 3d 96 (Fla. 2d DCA 2009). The Fourth and Fifth DCAs both have held that regardless of the presence of language addressing severability, limitation of remedies clauses are not severable. Place at Vero Beach, Inc. v. Hanson, 953 So. 2d 773 (Fla. 4th DCA 2007); Fletcher v. Huntington Place Ltd. P’ship, 952 So. 2d 1225 (Fla. 5th DCA 2007).

[6] The Court relied heavily on the reasoning in Hanson as support for its conclusion on this issue. Id. at S672-73.

MANY BUSINESSES TO BE EXEMPTED FROM RED FLAGS RULE

It looks like the long road to the enforcement of the Fair and Accurate Credit Transactions Act of 2003, commonly known as the “Red Flags Rule”, is coming to an end for many businesses.  With the recent passage of Senate Bill S.3987, entitled the “Red Flag Program Clarification Act of 2010”, both houses of Congress agreed to exempt certain “creditors” from Red Flag Program regulations.

 By way of review, you may recall that the Red Flags Rule, (“the Rule”), was designed to protect consumers from identity theft.  The Rule, which has undergone numerous enforcement delays, including the current delay scheduled to end on December 31, 2010, broadly applied to businesses that met the definition of a “creditor” under the Equal Credit Opportunity Act, (15 U.S.C. 1691a).  Included as “creditors” were business that:

 “advances funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person”

 Under the above definition many business were considered creditors if they did not require payment in full at the time a service or good was provided and/or allowed a client to defer all or a portion of the client’s debt.  S.3987, which is expected to be signed into law by President Obama before December 31, 2010, specifically excludes business that were classified as creditors based solely on the above listed definition of a creditor.  Accordingly, unless a business is otherwise considered a creditor they are exempted from the requirements of the Rule. 

 Although many businesses can breath a sigh of relief by being exempted from yet another regulation, they may wish to continue following the policies and procedures that they previously put in place to prevent consumer identity theft. Generally, adherence to previously implement identity theft prevention policies will continue to benefit both the businesses and the clients they serve. 

 William P. Dillon is Board Certified Health Law attorney with the law firm of Messer, Caparello & Self, P.A.

Enforcement Deadline for Red Flags Rule Extended…Again.

In a press release dated May 28, 2010, the Federal Trade Commission, (FTC) at the urging of several Members of Congress, announced that enforcement of the Red Flags Rule will be delayed until December 31, 2010.  The rule, which was created to detect, prevent and mitigate identity theft, has been the subject criticism by a number of industries.

 

In addition to criticism, the FTC has also faced industry directed legal action by both lawyers and physicians.  On October 30, 2009, the U.S. District Court for the District of Columbia ruled that the FTC may not apply the Red Flags Rule to attorneys. (American Bar Association v FTC, Civil Action No. 09-1636 (RBW)).  More recently, on May 21, 2010, the American Medical Association filed suit against the FTC in the U.S. District Court for the District of Columbia alleging essentially the same complaint as the ABA.

A link to the FTC press release is found below.

http://www.ftc.gov/opa/2010/05/redflags.shtm

 

By:

Bill Dillon

Board Certified in Health Law

Enforcement of the Red Flags Rule Delayed Again - Attorneys Exempt?

On October 30, 2009, at the request of Members of Congress, the Federal Trade Commission announced that it is delaying enforcement of the Red Flags Rule until June 1, 2010.   The FTC's announcement may be viewed by clicking the following link:

http://www.ftc.gov/opa/2009/10/redflags.shtm

The Red Flags Rule requires creditors and financial institutions to implement programs to address identity theft.  The broad definition of "creditors", taken from the Fair Credit Reporting Act, has created a great deal of controversy by categorizing as creditors a number of business entities not commonly thought of as creditors.  Included among those businesses caught in the FTC's Red Flag web were hospitals, health care providers and attorneys.

Speaking of attorneys,  District Court Judge Reggie Walton of the Federal District Court for the District of Columbia entered an Order, also on October 30, 2009, granting the American Bar Association's Motion for Partial Summary Judgment in a case relating to the application of the Red Flags Rule to attorneys.  The ABA's motion alleged, among other things, that the FTC exceeded its statutory authority under the Fair and Accurate Credit Transactions Act of 2003 in violation of the Administrative Procedures Act.  The Order indicated that a Memorandum Opinion would be issued by the Court within 30 days of the date of the Order. 

A copy of the Court's Order may be view on the below link to the ABA website.

http://www.abanet.org/media/docs/ABA_v._FTC_Amended_Order.pdf

Prepared by:

Bill Dillon

Florida Board Certified Health Law Attorney

HIPAA Enforcement - The Gloves Are Off!

It appears that after years of criticism for lax enforcement of the HIPAA privacy rules the Federal government has taken the gloves off.  On October 26, 2009 the United States Attorney for the Eastern District of Arkansas announced the sentencing of a doctor and two former hospital employees convicted of violating the HIPAA privacy rules.

Dr. Jay  Holland, Sarah Miller and Candida Griffin, who were formerly employed or affiliated with the St. Vincent Infirmary Medical Center in Little Rock, Arkansas, pled guilty to intentionally and inappropriate accessing a patient's medical record.  All three admitted accessing the patient's medical record out of curiosity and without a legitimate reason.  Although the trio faced the possibility of up to 1 year in jail and a fine of $50,000.00, the Court sentenced the three to 1 year's probation and a fine.  In addition to the $5,000.00 fine, the steepest of the three, Dr. Holland was also required to perform 50 hours of community service educating other professionals on HIPAA.

A copy of the press release may be found at:

http://littlerock.fbi.gov/dojpressrel/pressrel09/lr102609.htm

Prepared by:

Bill Dillon

Board Certified in Health Law

HITECH Breach Notification Interim Final Rule

The United States Department of Health and Human Services released the HITECH Breach Notification Final Rule.  The interim final regulations will become effective 30 days after publication in the Federal Register. 

A link to the HHS Press Release, including a link to the interim final rule is listed below:

http://www.hhs.gov/ocr/privacy/hipaa/understanding/coveredentities/breachnotificationifr.html

The Agency that Cried Wolf: FTC Delays Red Flags Rule Enforcement….Again

In a press release dated July 29, 2009, the Federal Trade Commission has once again delayed the enforcement of the “Red Flags” rule until November 1, 2009.  Citing the need to further educate creditors and financial institutions, the FTC has indicated that it will “redouble” its compliance education activities.

A link to the press release may be found here.

 

Florida Governor Signs Electronic Health Records Exchange Act

On June 16, 2009, Florida Governor Charile Crist signed into law the "Florida Electronic Health Records Exchange Act", (SB 162).  The Act amends 395.3025, F.S., and 483.181, F.S., both of which were seen as  barriers to electronic health information exchange for treatment purposes.  Additionally, the Act creates 408.051, F.S., which deals with a number of issues related to health information exchange.

395.3025(4)(a), F.S., was amended to allow hospitals to release patient records, without patient consent, to health care practitioners and providers currently involved in the care or treatment of the patient for use use only in connection with the treatment of the patient.  Previously, the statute had only allow such disclosures to health care practitioners that were credentialed by the facility.  This was seen as a barrier to the appropriate and timely exchange of health of information for patient care purposes.

483.181(2), F.S., was amended to allow clinical laboratories to report laboratory results to health care practitioners and providers, other than the provider that ordered the laboratory test, so long as the health care practitioner or provider is involved in the care or treatment of the patient.  As with the amendment to the hospital statute, the clinical laboratory statute was seen as a barrier to appropriate and timely health information exchange.

408.051, F.S., the "Florida Electronic Health Records Exchange Act", sets forth guidance for Florida health care practitioners and providers engaged in the electronic exchange of health information.  The Act sets forth a number of definitions, including several directly related to "electronic health records".  

Additionally, the Act also addresses the following:

*Emergency Release of Identifiable Health Record - Allows health care providers to release or access a patient's health record, without the patient's consent, for use in the treatment of the patient for an emergency medical condition when the health care provider is unable to obtain the patient's consent due to the patient's condition or nature of the situation requiring immediate medical attention.

*Universal Patient Authorization Form - Requires the Agency for Health Care Administration to develop, in electronic and paper format, forms to document patient authorization for the use or release of the patient's health record.  Health care providers will not be required to use the form, however, they will be required to honor a properly completed form.  Health care providers releasing information upon receipt of a properly completed authorization form will enjoy a rebuttable presumption that the release of the information was appropriate. 

The Act also provides for compensatory damages to either a health care provider or patient in situations in which a person forged or materially altered a patient's authorization form without permission or otherwise obtains a patient's records under false pretenses.

*Electronic Health Records System Adoption Loan Program - Subject to the availability of funds from either public or private entities or through Section 3014 of the Public Health Service Act, the Agency for Health Care Administration may operate loan fund to assist health care practitioners and providers in obtaining certified electronic health record technology.

2nd DCA Rules on the Disclosure of Adverse Incident Reports

In an opinion filed on May 8, 2009, the Florida 2nd District Court of Appeal, held that work product materials, in the form of adverse medical incident reports, were not exempt from the provisions of the Florida Constitution's "Patient's right to know about adverse medical incidents".

As the issue affects litigation throughout the state the Court certified the following question to the Florida Supreme Court:

DOES THE RIGHT OF ACCESS GRANTED PURSUANT TO AMENDMENT 7, CODIFIED AS ARTICLE X, SECTION 25, OF THE FLORIDA CONSTITUTION, PREEMPT THE COMMON LAW WORK PRODUCT DOCTRINE AS IT APPLIES TO EXISTING REPORTS OF ADVERSE MEDICAL INCIDENTS?

The Court's opinion can be accessed at:

http://www.2dca.org/opinions/Opinion_Pages/Opinion_Page_2009/May/May%2008,%202009/2D08-4102.pdf

ONC HITECH Implementation Plan

In accordance  with the  requirements of the American Recovery and Reinvestment Act ("Recovery Act") the Office of the National Coordinator for Health Information Technology ("ONC") has posted its implementation plan designed to improve the nation's health system through the use of health information technology.  Although the Recovery Act appropriates a little over two billion dollars to the ONC,  just under 350 million has been targeted for specific projects leaving 1.65 billion unspecified. 

I link to the ONC's Implementation plan may be accessed at :

http://www.hhs.gov/recovery/reports/plans/onc_hit.pdf