Author Archives: Daniel J. O'Brien

The Hazy Rollout of Ohio’s Medical Marijuana Control Program (MMCP)

The Hazy Rollout of Ohio’s Medical Marijuana Control Program (MMCP)

The following is an excerpt from a larger client alert regarding the “affirmative defense” provision of HB 523 and relevant considerations for doctors and patients interested in exploring its use prior to full implementation of the MMCP. Click here to read the full client alert.

By Jeff McCourt[1] and Dan O’Brien[2]

When Ohio House Bill 523 (HB 523) became effective on September 8, 2016, Ohio joined the company of 25 other states, the District of Columbia, and several U.S. territories that have legalized cannabis for medicinal purposes. Modeled after highly restrictive regimes adopted by state legislatures in Illinois, Maryland, and New York, the Medical Marijuana Control Program (MMCP) envisioned by HB 523 has the potential to be one of the most complex and heavily regulated medical cannabis programs in the country. HB 523 relies on a tightly controlled ‘Schedule II’ pharmaceutical-style regulatory framework, but the Ohio legislature left some room for flexibility in the MMCP by punting to the rulemaking process several of the toughest issues it faced, such as determining the number of licenses available under the MMCP, the cost of licenses, the geographical distribution of medical cannabis businesses, and the hurdles doctors will face in order to recommend medical cannabis to patients with qualifying medical conditions.

The ultimate functionality of the MMCP – both in terms of the opportunity for seriously ill patients to access medicine, and the opportunity for market participants to create a sustainable program to serve those patients – will be determined by the extensive rulemaking and licensure process to be carried out by the Department of Commerce, the state Pharmacy Board, and the state Medical Board over the next two years. Several early indicators, however, have begun to cast doubt on the program’s viability as written. This article recaps several recent developments in the MMCP and addresses specifically the Medical Board’s recent guidance on the “affirmative defense” provision of HB 523, the only part of the law that is currently operational.

I.                   Early Actions Hamper Implementation of the MMCP

The Ohio Supreme Court’s board of professional conduct, which is responsible for regulating Ohio lawyers, tossed a fireball into the lap of the Supreme Court in August by releasing a narrow reading of the ethics rules applicable to Ohio lawyers when advising clients involved in the cannabis industry. Just weeks before the effectiveness of HB 523, the board of professional conduct told Ohio lawyers that, among other things, it was unethical to assist clients in setting up medical cannabis businesses or to represent them in the rulemaking process. As a result, several of the largest law firms in the state were forced to suspend their activities in the space while the Supreme Court rushed through an amendment to the ethics rules. Such an amendment was adopted on September 20th, allowing doctors, patients and cannabis businesses to obtain legal representation in Ohio.

Adding further confusion to the mix, the Ohio Municipal League has launched a statewide effort to educate local governments about HB 523. Given the lack of clarity on how the state regulations will operate and where cannabis operations will be located throughout the state, dozens of local governments have chosen to preemptively adopt bans or moratoriums on all medical cannabis businesses within their jurisdictions. While most of the jurisdictions that have adopted such measures are small cities in rural areas, a growing number of larger cities with significant potential patient populations, such as Lakewood and Cleveland, have adopted or are considering moratoriums as well.[3] The rationale often cited by local officials when imposing these measures (essentially, that if cities don’t act now, their Main Streets could be populated with unregulated cannabis businesses that would be ‘grandfathered’ out of later-adopted zoning restrictions) are inconsistent with how the MMCP and zoning laws actually function. An unintended consequence of these measures is that cities with moratoriums on the books could be passed over entirely by businesses seeking to obtain licenses for significant cultivation and processing facilities, which could easily run into the tens of millions of dollars and thus will require certainty as to the viability of site selection by such businesses early on in the planning process.

Most recently, on September 24th, the state Medical Board, which is responsible for regulating Ohio doctors, dealt a significant blow to patients hoping to avail themselves of the protections provided by HB 523 prior to the opening of dispensaries two years from now.[4]  While couched in the context of guidance to doctors, the carefully worded interpretation of Ohio doctors’ ability to recommend medical cannabis during the “affirmative defense” period served only to highlight the gray area created by HB 523.

In its guidance, the Medical Board instructed physicians that they cannot issue a “state of Ohio approved written recommendation” to use medical cannabis until the Medical Board adopts rules for doing so, which could take up to a year. In the meantime, physicians who receive requests from patients for medical cannabis were encouraged to “consult with their private legal counsel and/or employer for interpretation of the legislation.”  In response to the Medical Board’s guidance, representatives from the Ohio State Medical Association (OSMA) reiterated the association’s previous stance that doctors should not recommend cannabis until the Medical Board adopts its formal rules.[5]

The OSMA’s interpretation of the Medical Board’s guidance, in turn, quickly drew widespread news coverage. One of the lead state legislators behind HB 523, Senator Dave Burke (R-Marrysville) responded in interviews that “willing physicians are in the free and clear” to recommend cannabis during the affirmative-defense period, and representatives from the Medical Board added that the Medical Board would “review a medical marijuana related complaint as they would any other… [and] would consider whether someone violated state law, including the immunity provision.”[6]  Another prominent backer of HB 523, Senator Kenny Yuko (D-Richmond Heights), issued a press release stating that “the affirmative defense section spells out everything a physician would need to do to provide patients with this limited, short-term protection without having to wait for the agencies. It simply wouldn’t make sense to read it any other way.”[7]

The affirmative defense provision and the varying interpretations of it by key actors has created quite a hairball for Ohio doctors and their patients to untangle with their lawyers. In an effort to facilitate discourse among the legal and medical professions regarding the affirmative defense provision (and by no means to provide legal advice to anyone), the rest of this article will cover some of the relevant considerations that doctors and their employers may want to evaluate with counsel in order to minimize risks when recommending cannabis to patients during the affirmative-defense period. While the recommendation and use of medical cannabis does pose at least some theoretical legal risk to all parties involved in the process, it is reasonably clear that Ohio physicians willing to face those risks do currently have the ability to recommend cannabis to patients with qualifying medical conditions.

Click here to read the full client alert examining the “affirmative defense” provision of HB 523 and relevant considerations for doctors and patients interested in exploring its use prior to full implementation of the MMCP.

Disclaimer: As with all of our publications, we remind you that we are providing this analysis for general informational and educational purposes, to help advance a general understanding and discourse around cannabis law and regulated industries. This article does not provide legal advice or create an attorney-client relationship. Perhaps most importantly, please remember that the use, possession, distribution and sale of marijuana remains a crime under federal law and (except as specifically permitted by HB 523) the laws of Ohio. This publication does not, and should not in any way be construed to, assist anyone in violating applicable law. 

 

 

[1] Jeff McCourt is an associate in the Corporate & Securities group in our Cleveland office, where he focuses on counseling cannabis businesses and other emerging-growth companies, venture capital and private equity funds in a variety of business and finance matters. He can be reached at 216-363-4428 or jmccourt@beneschlaw.com.

[2] Dan O’Brien is an associate in the Health Care & Life Sciences group in our Cleveland office, where he focuses on advising long-term care providers, durable medical equipment companies, hospitals, home health care companies and other ancillary service providers on transactional and regulatory business issues. He can be reached at 216-363-4691 or dobrien@beneschlaw.com.

[3] See Jackie Borchardt, Ohio lawmaker urges cities not to ban medical marijuana before state sets rules, Cleveland.com, September 8, 2016; Leila Atassi, Cleveland City Council proposes moratorium on issuing medical marijuana licenses, Cleveland.com, September 15, 2016; and Jackie Borchardt, Lakewood, other Ohio cities block medical marijuana business licenses months before any will be awarded, Cleveland.com, August 8, 2016.

[4] State Medical Board of Ohio, Affirmative Defense: What is required of a physician to recommend medical marijuana now that House Bill 523 is effective?.

[5] See Jim Provance, Ohio board deals blow to medical marijuana, ToledoBlade.com, September 23, 2016 (“The Ohio State Medical Association had advised its members to wait for further guidance from their state licensing and disciplinary board. That position has not changed. “We would advise our members not to do anything until the rules and regulations have been drafted and promulgated,” said spokesman Reginald Fields. “We understand that may not be for a year or so.””).

[6] See Jackie Borchardt, Ohio medical board: Doctors should talk to lawyers, employers about medical marijuana law, Cleveland.com, September 23, 2016.

[7] See Senator Yuko Responds to Medical Board Statement, OhioSenate.gov, September 24, 2016.

Ohio Senators Host Town Hall Meetings Regarding Medical Cannabis

Political discussions regarding the medical use of cannabis are ramping up in Ohio. On January 30, just two days after the first meeting of the Ohio House’s Medical Marijuana Task Force (the MMTF) in Columbus, Ohio, State Senators David Burke (R – Marysville) and Kenny Yuko (D – Richmond Heights) hosted the first of three “town hall”events to gather public opinion regarding the issue of medical cannabis.  The first town hall was held at Cleveland State University.

According to Senator Yuko, “this is our chance as legislators to listen to advocates and skeptics and come to an agreement that will benefit people living with difficult medical conditions. A Quinnipiac poll in October showed that 90% of Ohioans support medical marijuana. I am hopeful that these town hall meetings will give many faces to the support we have seen in the polls.”

The first town hall event lasted several hours, and included testimony from a variety of individuals, including a pharmacist, a physician, representatives of several agencies focused on addiction and drug treatment and members of the general public. Not surprisingly, the testimony varied greatly. Some argued passionately for access to cannabis as a medicine, while others decried any medicinal benefits.

Additional town hall events are scheduled to occur later this month in Toledo and Cincinnati, with dates and times to be determined. These town hall meetings are separate from the meetings being held by the MMTF in Columbus, as described here.

Benesch will continue to monitor developments regarding the legislative and cannabis-related ballot initiatives being considered by various groups in Ohio. We welcome the opportunity to discuss with interested parties the legal and business ramifications of these efforts.

Ohio Medical Marijuana Task Force Committee Holds First Meeting

By Ted Bibart,[1] Aaron Mendelsohn, Jeff McCourt, and Dan O’Brien

The Ohio House of Representatives’ Medical Marijuana Task Force (“Task Force”) convened its first meeting on Thursday, January 28, 2016 at the state capitol, and members of Benesch were in attendance.

The Task Force was formally announced by House Speaker Cliff Rosenberger (R-Clarksville) in early January 2016, with the stated purpose of creating a bipartisan task force “to vet all sides of the issue” of medical cannabis use. The Task Force is intended to work in partnership with various business groups, medical experts, issue advocates, state legislators and others in considering these matters.

The Task Force meetings will attempt to gather information and share policy perspectives from experts regarding a potential legislative and regulatory framework for the provision of medical cannabis to patients in Ohio. The Task Force is tasked with making a legislative proposal for consideration by the full House of Representatives by March 31, 2016.

The Task Force’s initial meeting was focused on procedural and organizational matters. No testimony was given by interested parties, but opening statements were provided from each of the Task Force members in attendance.[2]  State Representative Kirk Schuring (R-Canton) echoed prior statements by Speaker Rosenberger – that the Ohio legislature has heard from Ohioans all over the state who desire to have “a conversation” regarding the use of cannabis for medicinal purposes, and that the Task Force’s goal is to “bring to the forefront” opinions, information and knowledge on all sides of the issue.

Future meetings of the Task Force are anticipated to include more substantive engagement and testimony from experts on all sides of the topic. The Task Force will hold six more meetings prior to its March 31st reporting deadline, which can be expected to last approximately three hours each. Subsequent meetings will be held at the Ohio Statehouse on the following dates and times:

  • Thursday, February 11th at 3 p.m.
  • Thursday, February 18th at 7 p.m.
  • Thursday, February 25th at 7 p.m.
  • Thursday, March 10th at 7 p.m.
  • Thursday, March 17th at 3 p.m.
  • Thursday, March 31st at 3 p.m.

All of the Task Force members in attendance stressed an open mindedness with respect to any preconceived notions of cannabis. The fifteen-member Task Force is chaired by Rep. Schuring and includes the following additional legislators and other interested parties chosen by Speaker Rosenberger and Rep. Schuring:

  1. State Representative, and physician, Dr. Steve Huffman (R-Tipp City)
  2. State Representative Dan Ramos (D-Lorain)
  3.  Dr. Brian Santin, of the Ohio State Medical Association
  4. Nick Lashutka, president of the Ohio Children’s Hospital Association
  5. Betty Montgomery, former Ohio Attorney General
  6. Chris Stock, issue advocate and primary author of Issue 3
  7. Jimmy Gould, co-founder of ResponsibleOhio / Issue 3
  8. Bill Sopko, chair of the Ohio Manufacturers’ Association
  9. Lora Miller, Ohio Council of Retail Merchants
  10. Linda Hondros, Ohio Chamber of Commerce
  11. Matt Szollosi, Affiliated Construction Trades (ACT OHIO)
  12. Larry Moliterno, Ohio Alliance of Recovery Providers
  13. Gary Wolske, Fraternal Order of Police of Ohio (FOP)
  14. Matt Lutz, Muskingum County Sheriff and third vice president of the Buckeye State Sheriffs’ Association

The Ohio legislature’s actions in creating the Task Force (along with a parallel “town hall” style information-gathering effort in the Ohio Senate) are largely in response to increased interest in the topic of medical cannabis from various interests across Ohio, including the controversial “Issue 3” ballot initiative backed by the group Responsible Ohio, which failed to legalize recreational and medical cannabis use last November. Such efforts are set against the backdrop of a rapidly changing national landscape on the regulatory treatment of medical, recreational and industrial uses for the cannabis plant.  Twenty-three states have already legalized some form of medical cannabis use (including several of Ohio’s neighbors, such as Michigan, New York, and Illinois) and four states and the nation’s capital, Washington, D.C., have also legalized recreational use of cannabis.

If medical cannabis use is legalized in some capacity in Ohio, whether by the legislature or through one of several ballot initiatives being contemplated by varying interest groups, it could have broad impacts on medical professionals, patients, businesses, employers and Ohio residents generally. By getting ahead of the issue on the legislative side, the Ohio legislature may be able to better control the resulting legal framework and market structure than it would if medical or recreational cannabis were approved by voters through a constitutional amendment adopted by ballot initiative.

Benesch will continue to follow developments in the Task Force, the parallel legislative initiative in the Ohio Senate, as well as the various cannabis-related ballot initiatives being considered by various groups in Ohio. We welcome the opportunity to discuss with interested parties the legal and business ramifications of these efforts. For further information, please contact Jeff McCourt, Aaron Mendelsohn, or Dan O’Brien.

[1] Ted Bibart is a law clerk at Benesch and is not admitted to practice law.

[2] Not present for the initial meeting of the Task Force were Betty Montgomery, former Ohio Attorney General, and Matt Szollosi, representative of Affiliated Construction Trades (ACT OHIO).

RACs recover $2.39 billion in overpayments in FY 2014

Last week, CMS released its report to Congress regarding the results of the FY 2014 Medicare Recovery Audit Program (the “Report”). Of note, the Report notes that RACs identified and corrected more than 1 million claims for improper payments, which resulted in $2.57 billion dollars in improper payments being corrected ($2.39 billion in overpayments; $173 million in underpayments). After taking into consideration the costs of the Recovery Audit Program, this amounts to more than $1.6 billion dollars returned to the Medicare Trust Fund (and $274 million in contingency fees to the RACs).

Inpatient hospital claims resulted in the vast majority of improper payments, yielding overpayments in excess of $2 billion dollars. Auditing of skilled nursing facilities was also very active, resulting in overpayments in excess of $85 million dollars.

Given the tremendous success of RACs in returning funds to the Medicare Trust Fund, providers would be wise to be prepared for a RAC audit. In addition to simply focusing on accurate billing, being prepared means having a team in place that knows how to respond quickly and appropriately, and whom to call for help. Being well prepared can lead to big savings. For example, the Report notes that of the total number of claims appealed in FY 2014, 22.9% were overturned with decisions in the provider’s favor (Part A overturn rate = 11.7%; Part B overturn rate of 49.5%). A complete copy of the Report can be accessed here.

Should you have any questions regarding preparing for or responding to a RAC audit, please contact Dan O’Brien, or any member of Benesch’s health care practice group.

Compliance: Reporting Overpayments and the 60-day Clock

On August 3, 2015, a federal judge in New York issued an important opinion regarding the False Claims Act and what it means to “identify” an overpayment for purposes of starting the 60-day clock in which Medicare and Medicaid overpayments must be returned. The decision underscores the importance of taking overpayment allegations seriously, and makes clear that deliberate ignorance is not a viable defense. Providers should take note of this decision, and update their compliance plans accordingly.

The case, Kane v. Healthfirst, et. al., arose out of a software glitch in a managed care company’s billing system. The glitch caused providers to submit additional bills to secondary payors, above and beyond what is permitted under the New York Medicaid program. Eventually, the managed care company identified the glitch, and alerted its contracted providers, including the hospital, of the problem. The hospital tasked an employee, Mr. Kane (who eventually became the relator), with investigating the issue. Mr. Kane identified approximately 900 claims that could be affected by the software glitch, and stated that “further analysis would be needed to confirm his findings.” Shortly thereafter, Mr. Kane was terminated.

Subsequently, the hospital reimbursed the State of New York for five improperly submitted claims, but did nothing with Mr. Kane’s analysis or the rest of claims for two years. The DOJ alleged that this delay violated the Affordable Care Act requirements that Medicare/Medicaid overpayments must be reported and returned within 60 days of the date “on which the overpayment was identified.” Failure to comply with such a requirement constitutes a violation of the False Claims Act.

The instant action centers upon what it means to “identify” an overpayment. The term “identify” was not defined by Congress in the Affordable Act. The DOJ argued that the hospital acted intentionally or recklessly and “fraudulently delay[ed] its repayments for up to two years after [the hospital] knew of the extent of the overpayments.” The hospital, on the other hand, argued that Kane’s email only provided notice of potential overpayments, and did not identify actual overpayments so as to trigger the 60-day clock.

Ultimately, the district court rejected the hospital’s position, and concluded that identification occurs when health care providers are “put on notice” of potential overpayments. For providers, this means that when you receive information which suggests that an overpayment(s) may exist, you need to take action. Further, this action should be documented in an organized manner specifying the actions being taken to track down the overpayment. While it is yet to be seen whether such efforts could serve as a defense, the decision of the district suggests that good intentions could be a viable defense.

For more information regarding the False Claims Act or related compliance issues, please contact Dan O’Brien or any member of our health care practice group.

HIPAA and Jason Pierre-Paul’s Medical Chart – Setting the Record Straight

Last night, ESPN reporter Adam Schefter tweeted a photo of New York Giants defensive end Jason Pierre-Paul’s medical chart, which chart indicated that Pierre Paul had his index finger amputated. The amputation was apparently the result of a fireworks accident on the Fourth of July. Prior to the Schefter’s report of the amputation, the injury was already a major offseason story for the NFL, as Pierre-Paul is a pro-bowler, and initial reports indicated that the New York Giants withdrew an outstanding $60 million contract offer as a result of the Fourth of July injury.

Football aside, the Pierre-Paul story is yet another example of a celebrity patient’s medical information being disclosed to the media. Right now, the internet is ablaze with news stories and comments suggesting that Adam Schefter and/or ESPN violated HIPAA by posting a copy of Pierre-Paul’s medical chart. Despite the public outcry, this view highlights a fundamental misunderstanding of HIPAA and its prohibitions. Adam Schefter and/or ESPN are not the ones that should be concerned about a HIPAA violation – the hospital and its employee(s) that leaked Pierre-Paul’s medical chart, however, should be.

At its most basic level, HIPAA provides certain federal protections for protected health information (“PHI”) held by covered entities and their business associates. The definition of a “covered entity” includes health care providers, health plans, and health care clearinghouses. See 45 C.F.R. 160.103. A “business associate,” in turn, is generally defined to include a person or entity that creates, receives, maintains or transmits PHI on behalf of a covered entity. Id.

Clearly, neither ESPN nor Adam Schefter constitutes a covered entity or business associate. Absent evidence of a conspiracy with hospital employees to obtain the documents in violation of HIPAA, ESPN and Adam Schefter should be in the clear with respect to HIPAA. On the other hand, unless Pierre-Paul appropriately authorized the disclosure of his medical chart, the hospital and its employee(s) that leaked the medical chart to Adam Schefter could face significant civil and/or criminal penalties in connection with a HIPAA violation.

It is also important to note that although HIPAA does not authorize a private right of action (meaning that only the Department of Health and Human Services Office of Civil Rights or State Attorneys General can enforce HIPAA), private individuals have had some success with lawsuits alleging state law privacy violations that utilize HIPAA to establish the standard of care.

For additional information regarding HIPAA, please contact Dan O’Brien, Cliff Mull, or any other member of Benesch’s Health Care Department.

2015 Phase Two HIPAA Audits – Delayed Again

Recently, the Director of the Department of Health and Human Services Office for Civil Rights (“OCR”) confirmed that OCR is still working to finalize the procedures for “Phase Two” HIPAA audits. OCR had initially planned to launch the Phase Two audits in the Fall of 2014. Apparently, the delay is the result of behind-schedule implementation of the technology that OCR will use to collect audit-related documentation from covered entities and business associates via a web portal. An official date for the launch of Phase Two audits has not yet been announced.

The HIPAA Audit Program is authorized under Section 13411 of the HITECH Act, and is designed to test entities compliance with the Privacy Rule, Security Rule, and Breach Notification Standards. If you are a covered entity or business associate, this delay in the launch of Phase Two audits provides a great opportunity to conduct a comprehensive assessment of your current HIPAA compliance program. This means doing much more than just checking boxes and having an old binder of policies and procedures on your shelf. Instead, covered entities and business associates need to take real action, such as reviewing the audit protocol from the pilot program and applying it to your organization, conducting a risk assessment, engaging a dialogue with your compliance officer, and reviewing/updating training materials, among others.

Being proactive now will go a long-way towards easing the burden of Phase Two audit, should your organization be selected. If you have any questions concerning Phase II HIPAA audits, or general HIPAA compliance, please do not hesitate to contact a member of Benesch’s Health Care Department.