DGS Health Law Blog : Denver Health Care Lawyers & Attorneys : Davis Graham & Stubbs Law Firm : HIPAA & Patient Privacy : Colorado, Rocky Mountain West

The Second Circuit Court of Appeals decided yesterday that the Vermont law restricting pharmaceutical companies’ uses of information about the drugs that physician prescribe is unconstitutional as a violation of free speech. This ruling is a particularly interesting development because Maine and New Hampshire laws prohibiting data mining have both been upheld by the First Circuit Court of Appeals in the last several years. All of these laws involve limiting the type of information that pharmacies can give to pharmaceutical and health information companies, as those companies use the prescribing pattern information for marketing purposes.

In 2007, Vermont enacted a law to increase transparency in prescription drug information and pricing.   The law limited companies’ access to prescriber data for marketing purposes unless the prescribing physician consents by notifying the state licensing board.  Later in 2007, three health information companies, Verispan, LLC, Wolters Kluwer Health, and IMS Health Inc., filed a lawsuit against the State of Vermont to declare portions of its “Prescription Restraint” law unconstitutional, claiming the law violates the First Amendment by improperly restricting commercial speech. In 2009, a federal district court judge in Vermont held that the law was constitutional, rejecting the health information companies’ challenge.

In yesterday’s ruling, however, the Second Circuit struck down the Vermont law in a 2-1 decision, finding that the law is a restriction on commercial free speech in violation of the First Amendment. In the majority opinion, the court determined that “[Vermont] has not demonstrated that its interests in protecting public health and containing health care costs could not be as well served by a more limited restriction on speech.” Vermont officials have stated that the state is considering appealing this ruling to the U.S. Supreme Court.

This decision follows two previous rulings—the first in November 2008 and the second in August 2010—by the First Circuit Court of Appeals upholding similar laws in New Hampshire and Maine, respectively.  Interestingly, Vermont’s data mining law was modeled after the New Hampshire law. Given the Second Circuit’s ruling this week, however, there is now a circuit split between the First Circuit and Second Circuit on these data mining restrictions, making it increasingly difficult for companies to navigate compliance with the different restrictions in each state. This is especially true given that many other state legislatures currently have similar data mining laws pending. Although last year the U.S. Supreme Court refused to grant cert to the First Circuit Court of Appeals decision upholding the New Hampshire law, the Second Circuit’s decision this week on the Vermont law has created a divergence in the Circuit Courts’ decisions, making this issue particularly suited for U.S. Supreme Court review.

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The Centers for Medicare and Medicaid Services ("CMS") announced today the creation of its Center for Medicare and Medicaid Innovation (the "Innovation Center").  The Innovation Center was established in the health care reform law, the Patient Protection and Affordable Care Act.  CMS explains that the purpose of the Innovation Center is "to explore new approaches to the way we pay for and deliver care to patients so that we have better results both in terms of the quality of care and the affordability of coverage."  At first, the Innovation Center will focus on the following three key areas: (1) improving care for patients, making it more efficient, effective and safer; (2) developing new models of care to ensure health care providers work together to coordinate care for patients; and (3) fighting public health problems such as obesity and smoking at the community level.

CMS has also unveiled a website in conjunction with the Innovation Center.  CMS describes the website as not only a way to obtain information from CMS about various innovative approaches to health care, but also as a way in which people from a variety of backgrounds can share their knowledge with one another.  At the moment, the website contains little information, but we expect it will expand considerably over the coming months.  For a link to the Innovation Center's blog, click here.

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Congress reconvenes next week for a lame duck session.  While most observers seem to feel nothing will get done due to the upcoming changes in the composition of both the House and Senate, it is hard to believe they won't tackle the impending SGR problem.

As all physicians know, under the decade old law that adjusts Medicare rates paid to physicians if the actual utilization and costs exceed what is deemed the appropriate rate of growth, the physician reimbursement rates are to be reduced for the following year.  In past years, Congress has continually postponed the effective date of such reductions, which then accumulate annually. 

CMS in its final Medicare Physician fee Schedule for 2011 has made it clear that these accumulated SGR adjustments, the postponement of which ends this month, will take effect in December (with a 23% cut in payment rates December 1) and will continue in 2011 (with an additional 1.9% cut January 1).

Congress is between a rock and a hard place, as it certainly doesn't want to have deal with the uproar of the physician community and the potential refusal to treat more Medicare patients.  On the other hand, the financial structure of the PPACA changes is premised on letting the SGR adjustments take effect.  The additional cost of the health care reform without applying the SGR reductions has been estimated at between $250-350 Billion Dollars.  With the public screaming that reform is too expensive as now planned, what will the reaction be to another $250 Billion?

I see only one politically expedient solution for Congress:  allow a slight SGR reduction each year for the next couple of years, but continue to postpone a major fix until the new independent payment board takes over the annual responsibility for setting rates to address increasing medicare costs.  That Board can make SGR cuts and will not be directly subject to the physicians' or voters' wrath, or better yet, devise a better way to pay physicians and other providers.

At this point, let's hope the lame duck session of Congress is willing to at least take on this looming crisis before December.

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How secure is patient data at hospitals?  Not as secure as it should be says a new study released yesterday by the Ponemon Institute, an independent research organization dedicated to privacy, data protection and information security policy.  Despite HITECH's mandates and the move toward EMR, the study found that "data breaches remain a frequent occurrence at healthcare organizations - threatening patient privacy and leaving healthcare organizations with a heavy financial burden." 

Not only is data not as secure as it should be, but data breaches are costing hospitals an estimate of $1 million per year.  With 5,815 registered hospitals in the United States, data breach incidents are costing the health care industry almost $6 billion per year.

Among the study's more interesting findings are the following:

• Only 29% of hospitals surveyed responded that they have sufficient resources to prevent or quickly detect patient data loss or theft.  
• Employees are the best line of defense in detecting data breaches, underscoring the importance and value of training data handlers.
• Of the hospitals that have implemented EMR, 74% believe EMR's have made their data more secure.

Notably, the study was sponsored by ID Experts, a self-described "leading provider of comprehensive data breach solutions."  The results, however, are hardly surprising considering that as of September 20, 2010, almost 5 million patients have had their PHI exposed through the largest 166 data breaches. 

Investment in secure data storage coupled with vigilant training should be on on every health care provider's agenda for 2011.       

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