Category: Other

New Proposed Legislation Seeks To Restore Tax Exempt Status to Non-Profit Acute Care Hospitals In New Jersey and Implement Instead a Community Service Contribution Payment

In the wake of the 2015 court case challenging the tax exempt status of a nonprofit hospital here in New Jersey, the fight continues over this issue with many of the non-profit hospitals in New Jersey currently engaged in litigation before the Tax Courts and various bills having been proposed and debated in the Legislature. This past week a bill (A4985) was introduced in the Assembly of the New Jersey Legislature that seeks to restore the property tax exemption for nonprofit hospitals that operate with on-site for-profit providers. The bill was sponsored by Assemblyman Troy Singleton. The Statement to the bill makes clear that the bill “would establish a clear and predictable system in which nonprofit hospitals make a reasonable contribution to their host communities.”

In addition to restoring the tax exempt status, the proposed bill requires these hospitals to pay community service contributions to host municipalities and it establishes a Nonprofit Hospital Community Service Contribution Study Commission.

With regard to the contribution, the community service contribution would be equal to $2.50 a day for each licensed bed at the exempt acute care hospital property except in the case of a satellite emergency care facility in which case the contribution would be equal to $250 a day. Following 2018, and for each subsequent tax year, the per day amount utilized for the calculation will be increased by two percent over the prior tax year.

Up to 75% of that annual community service contribution can be reduced by the amount of payments remitted to the municipality in which the acute care hospital or satellite emergency care facility is located pursuant to a voluntary agreement operative in the prior tax year to compensate for public safety services.  Similarly, up to 25% of the annual community service contribution can be reduced pursuant to any agreement to provide compensation for the provision of affordable housing in the municipality.

The municipalities will be required to utilize a portion of these contribution funds for police or fire protection; first aid, emergency, rescue, or ambulance services; any other public safety purpose; or to reduce the property tax levy and the remainder for affordable housing.

Acute care hospitals are permitted to apply to the New Jersey Health Care Facilities Financing Authority in the Department of Health for a certificate of exemption for a given tax year in the event the hospital is either in financial distress or at risk of being in financial distress. Such an application would require significant information including audited financial records. A response from the government will be promptly required within 60 days of receipt of the records.

Beyond the financial requirement, the bill also proposes the creation of the Nonprofit Hospital Community Service Contribution Study Commission. The Commission would consist of nine members made up of agency heads, members of the Senate and Assembly, mayors of municipalities and chief executive officers of nonprofit hospitals. The Commission will be tasked with studying the implementation of this bill and reporting on its financial impact on both nonprofit hospitals and the municipalities receiving the contributions. The report shall also include any recommendations to improve the administration, equity or other aspect of the nonprofit community service contribution system including the adequacy of the amount of the contribution.

Finally, the bill contemplates having exemptions for a large number of properties including buildings used for colleges, schools, academies, public libraries, asylums or schools for those with developmental disabilities, religious sites and many others.

While this bill will not eliminate the financial obligation nonprofit acute care hospitals are now faced with following the 2015 ruling, this legislation appears to at least help to alleviate the amount that will need to be remitted by these hospitals and provides oversight on how the money will be utilized by the municipalities. Time will tell whether this newest legislative effort will have more success than its predecessors and whether the Tax Courts will act prior to it having a chance to work its way through the Legislature.

The Patient Safety Act and Appelgrad Impact on Privilege Protection

The Patient Safety Act was enacted in 2004 to reduce the incidence of errors in health care facilities. The law requires the facilities to evaluate and report adverse events with the policy goal of lowering recurrence of system failures in the health care facilities. There is an absolute privilege attached to the documents developed in accordance with the act in order to encourage candor of the individual engaged in the process. The information developed during this process is sought after by plaintiffs in malpractice cases that follow the adverse event. The health care facilities claim the documents are privileged and protected by the statute. The Appelgrad case is the first reported case to interpret this statute and the privilege.

Appelgrad is an obstetrical malpractice case resulting from an event that occurred at a hospital in 2007. At issue in the case were documents created by a round table discussion that occurred among hospital staff after the event. The documents were not created by the Patient Safety Committee as the matter did not reach the committee since there was a determination that there the event was not preventable. The trial court determined that although the hospital did not strictly follow the requirements of the statute, it substantially complied with it thus it was protected. The Appellate Division reversed as to one key memorandum holding that the statutory privilege only protects the documents created in the process in accordance with the specified procedures of the act and regulations. Applying the regulations adopted in 2008, the Appellate Panel concluded that the memorandum at issue was not created in full compliance with the processes and procedures of the Act and therefore should be disclosed.

The N.J. Supreme Court granted leave for appeal and heard oral argument twice. In late September the N.J. Supreme Court reversed the Appellate Division regarding the memorandum at issue deeming that the evaluative process conformed to the PSA’s requirements and the memorandum is privileged pursuant to the Act. However, the grounds for the reversal deem it a fairly limited holding. The basis of the N.J. Supreme Court’s reversal was primarily that the regulations cited by the Appellate Division (particularly the “exclusivity rule” regulation) had not been adopted at the time of the creation of the memorandum. As such, the hospital could not have expected to follow a regulation that was not promulgated and the high court deemed the regulation requirements could not be retroactively applied.

However, this argument is only availing to documents created prior to 2008. The high court affirmed that the health care facility must comply with the mandates of the regulations going forward including the exclusivity rule. That rule deems that only documents created exclusively within the patient safety process will have the protection of the statutory privilege. Documents or communications created through other processes of the health care facility [e.g. non-PSA peer review or quality assurance committees] will not have this protection. These processes may still have the benefit of common law self-critical analysis privileges but that is a conditional privilege where aspects of same may still be discoverable.

The takeaway would be that in order to gain the absolute privilege protection offered by the statute, full compliance with the PSA statute and regulations regarding the process must be observed. This includes creating of a Patient Safety Plan, and greater emphasis on the investigation and root cause analysis being performed by the Patient Safety Committee and that committee making the determination of whether there was a serious preventable adverse event occurred which needs to be reported.

Ongoing Stealthy “Spear Phishing” Attack Focused on Publicly Traded Healthcare and Pharmaceutical Industries

Security firm FireEye on December 1, 2014 issued a report describing its discovery of an extraordinarily sophisticated and potentially damaging spear-phishing attack which has targeted the healthcare and pharmaceutical sectors with the apparent goal of obtaining advance, non-public information such as that concerning mergers and acquisitions, drug development, insurance reimbursement rates, government approvals, pending legal cases, product information and other data that would likely influence the price of a company’s stock.

Since mid-2013, a group known as “FIN4,” has targeted over 100 publicly traded companies or their advisory firms, of which more than two-thirds were healthcare or pharmaceutical companies, and an additional 20 percent were advisors to public companies on securities, legal and mergers and acquisition (M&A) matters.  The group appears to focus on acquiring information, sometimes months in advance, about ongoing M&A discussions by identifying the individuals most likely involved such as C-level executives, legal counsel, regulatory, risk management and compliance personnel, researchers, scientists and other advisors, and gaining surreptitious access their email accounts.

This attack, which remains ongoing, comes in the heels of another so-called “Advanced Persistent Threat” previously discussed on this blog which resulted in the compromise of “non-medical patient identification data” including names, addresses, birthdates, telephone numbers and social security numbers affecting 4.5 million individuals who were patients in the last five years at Community Health Systems, Inc., which operates over 206 hospitals in twenty-nine states.

FIN4 take advantage of sensitivity over shareholders dissatisfaction and public disclosure of confidential information to entice the target into clicking on a link and providing credentials to be sent to the attackers.  Other lures used include using Microsoft Office macros, fake SEC filing documents and fake Outlook Web App (OWA) login pages to obtain email credentials.  Once an email account is compromised, FIN4 impersonates the owner to send out emails which deploy more lures.  Since these come from an unwittingly compromised email account that is oftentimes trusted by recipients, they are more likely to be trusted by recipients.  Attackers have also been observed to seamlessly inject themselves into email threads while taking steps to obfuscate the fact that they are quietly manipulating and observing communications inside a company.  For example, FIN4 is known to create a rule in compromised Outlook accounts that immediately filters out any messages containing the words that might alert the account owner to that they have been hacked, thus making it more difficult for outsiders to alert the victim to the infiltration.

These attacks, which continue to this date, are as ingenious as they are potentially far-reaching.  Although it cannot be said with certainty what the group does with the information it acquires, the inference is that the information acquired by the group is used by them or resold to others who then profit off fluctuations in the stock prices of the affected companies.

Although FIN4’s tactics of spear phishing and stealing credentials are among the oldest tricks in the cybercrime book, the clandestine nature of the attack increases its success and makes it more difficult to detect.  Users should be cautious about opening even supposedly trusted documents and emails that contain links or request unusual logins or permissions.  Network administrators should consider disabling of macros in Microsoft Office, enabling two-factor authentication for Outlook and other remote access systems and blocking known command-and-control (C2) domains and Tor exit nodes used by FIN4.

New “Ban the Box” Law Set to Go Into Effect in New Jersey on March 1, 2015

According to media reports, Governor Christie recently signed the NJ “Ban the Box” law.  A copy of the Senate bill can be found here.  The law, which would go into effect on March 1, 2015, prohibits employers with New Jersey based employees from inquiring (either on the job application or otherwise) about a job applicant’s criminal or arrest background during the “initial employment application process.”  The initial employment application process is defined as the time from application until the applicant’s first interview (whether in person “or by any other means”).  After the initial employment application process is complete, the employer may inquire about the applicant’s criminal and arrest history.  Employers also are barred from posting advertisements stating that applicants with criminal or arrest histories need not apply for the job.  While individuals have no private cause of action under the law, the NJ Department of Labor can impose civil penalties ranging from $1,000 to $10,000 per violation.

The law has several important exceptions that are potentially applicable to Medical Centers (depending on the job title).  First, an employer may initially inquire about an applicant’s criminal record during the initial employment process if:

(a)  the employment position is one where a criminal history background check is required by law, rule or regulation

(b) where an arrest or conviction by the applicant for one or more crimes or offenses would or may preclude the applicant from holding such employment as required by any law, rule or regulation, or

(c)  where any law, rule, or regulation restricts the employer’s ability to engage in specified business activities based on the criminal records of its employees;

Employment positions in law enforcement, corrections, judiciary, homeland security, and emergency management also are excepted.

Cesarean Section Rates: Standard of Care or Standard of Fear and the Potential Impact of the Affordable Care Act

A recent New York Times article reported the filing of a lawsuit on behalf of a Staten Island woman alleging a forced cesarean section.  This may provide an impetus to look – once again – at the high rate of cesarean section deliveries and perhaps take the initiative to bring about some reforms within the context of reimbursement policy and the Affordable Care Act.

The concerns regarding cesarean section rates involve both the initial or primary delivery of a woman’s baby and the handling of repeat pregnancies.   In particular, controversy persists regarding vaginal birth after cesareans, the so-called VBAC procedure.  For a number of years, the cesarean section rate in New   Jersey has been in excess of 30% and approaching 40%.   The rate for c-sections in repeat pregnancies where the primary delivery was by c-section may even be higher, and the common belief is that once a woman delivers by c-section, she is destined to deliver all subsequent children by the same method.  According to some scales, New Jersey has the second highest cesarean section rate in the United States.  A 2009 publication of the World Health Organization stated that the acceptable level of cesarean section births is “not more than 15%.”  The United States Public Health Service had a similar target figure in 1998.

The New York lawsuit presents a number of challenging issues involving patient autonomy, bioethical standards, and the balancing of the sometimes divergent interests of mother and unborn child.  A published opinion of the New Jersey Appellate Division in Draper v. Jasionowski, 372 N.J. Super. 368, 858 A.2d 1141 (2004), recognized a duty on the part of the obstetrician to not only the pregnant mother but to her unborn child in the context of informed consent and the possibility of a cesarean section as opposed to a vaginal birth.   As a result of the vaginal birth in that case, the child developed an Erb’s palsy and suffered hypoxia and brain damage.  In contrast, the patient in the New York case had previously given birth by cesarean section procedures but wished to have a vaginal delivery for this child.  She refused consent.  The attending physicians explicitly “overrode” her decision and did the cesarean section because of the fetus being “at risk for serious harm without the C-section.”  There was an injury to her bladder in the course of the operation but a healthy child was born.

The decision-making leading to the performance of a cesarean section has many facets.    There are a number of clinical situations that present risk to the well-being of the fetus.  But there are times when c-sections have been done for the convenience of either the laboring mother or the attending physician.  The availability of staffing in some hospitals has also come into play.  Nonetheless, there are a number of studies that have demonstrated that the medical-legal concern of liability exposure influences the judgment of many physicians so as to lower the threshold for doing the operation.  See, e.g., Minkoff, Fear of litigation and cesarean section rates, 36 Semin. Perinatol. 390 (2012); Yang, Mello, Subramanian, & Studdert, Relationship between malpractice litigation pressure and rates of cesarean section and vaginal birth after cesarean section, 47 Med. Care 234 (2009).

The impact of the Affordable Care Act on malpractice claims remains to be seen.  In the view of some, the number of claims will increase as the number of people using healthcare services expand.  On the other hand, there are those who believe that fewer patients will need to bring claims because they will now have a means for covering the expense of their injury claims.  Medical malpractice reform is barely mentioned in the Affordable Care Act. Section 6801 articulates the nonbinding “sense of the Senate,” and recognized that health care reform presented an opportunity to address issues related to medical malpractice and “encouraged” States to develop and test alternatives to the existing civil litigation system to improve patient safety, reduce medical errors, and stimulate efficiency in the resolution of disputes while preserving an individual’s right to seek redress through the courts. Moreover, Section 10607 provides potential federal grant money to support demonstration or pilot programs to develop alternatives to tort litigation.

The many evolving changes being implemented through the Affordable Care Act make it likely that the malpractice aspect of healthcare will also change.  And change brings opportunity.

The issue of cesarean section rates can be one of these opportunities.

One path to consider involves effective use of Clinical Practice Guidelines (CPGs), an approach considered in the past but meriting renewed evaluation.   There are several underlying assumptions necessary for practice guidelines to exert influence in the context of litigation.  They have to be developed for conditions or procedures that frequently lead to events for which negligence claims are filed.  They have to be widely accepted in the medical profession and fully integrated into clinical practice.  They also must be straightforward and readily interpreted in a litigation setting.  Proposals have been advanced to give CPGs a role in medical malpractice litigation in several different ways. One requires that courts take judicial notice of CPGs as the standard of care, with deviations conclusively establishing negligence. An alternative and more sensible approach would have compliance with CPGs constitute an affirmative defense for physicians, but that deviations from CPGs should not be used as inculpatory evidence.  See, e.g., Bovbjerg & Berenson, The Value of Clinical Practice Guidelines as Malpractice “Safe Harbors,” Timely Analysis of Immediate Health Policy Issues: Urban Institute (2012);  Mello, Of Swords and Shields: The Role of Clinical Practice Guidelines in Medical Malpractice Litigation, 149 U. Penn. L.Rev. 645 (2001).  The increasing recognition of Evidence-Based Medicine holds out hope that effective CPGs could be developed with regard to the indication and non-indications for cesarean section procedures.

Another possibility involves reimbursement policy.  This might take several forms.  One might involve financial disincentives for elective cesarean sections, those performed before 39 weeks of gestation without a documented medical indication for the procedure.  Payments for a planned VBAC delivery that nonetheless become a cesarean section might be limited to centers that have a demonstrated adequate staffing and resources for these procedures.

There is a compelling public health need to explore and resolve the issue of cesarean section rates.  Babies born by Cesarean section are more likely to have breathing problems and to develop several chronic diseases, childhood-onset diabetes, allergies with cold-like symptoms and asthma.  The surgery presents risks to the mother, including infection, blood clots, wound healing problems, prolonged recovery, and permanent scarring.  That the New Jersey cesarean section rate of greater than 30% is not a necessary circumstance is manifested by the fact that in a few counties the section rate occurs in one out of four births.  One must wonder why.


State of New Jersey, Department of Health, Safety and Quality in Maternity Care available at

State of New Jersey, Department of Health – Maternal & Child Health Epidemiology: Cesarean Delivery: Comparing New Jersey Hospitals, 2012 available at

New Employee Notification Requirements for New Jersey Employers Regarding Gender Inequality and Bias

Effective January 6, 2014, all New Jersey employers with at least 50 employees (whether working within or outside of New Jersey) must begin complying with the State’s new gender equity notice requirements.  The purpose of the notice is to notify employees of their rights to be free from gender inequality or bias under the New Jersey Law Against Discrimination, Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963.  Employers who reasonably believe that Spanish is the first language of a significant number of its workforce also will be required to post and distribute the notice in Spanish.

New Jersey employers with at least 50 employees must do the following:

  •  Beginning January 6, 2014, conspicuously post the notice in place(s) accessible to all employees in each workplace.
  • No later than February 5, 2014, provide all employees hired on or before January 6, 2014 with a written copy of the notice, along with a form acknowledgment that the employee has received, read and understands the notice.
  • Provide each employee hired after January 6, 2014 with a written copy of the notice at the time of the employee’s hiring, along with a form acknowledgment that the employee has received, read and understands the notice.
  • Beginning January 6, 2014, annually provide each employee with a written copy of the notice on or before December 31 of each year, along with a form acknowledgment that the employee has received, read and understands the notice.
  • Beginning January 6, 2014, provide each employee with a written copy of the notice upon that employee’s first request, along with a form acknowledgment that the employee has received, read and understands the notice.

Employers with an internet or intranet site for exclusive use by its employees, and to which all employees have access, may satisfy the January 6th posting requirement by posting the notice on that site.

Employers may satisfy the “written copy” requirements by any of the following methods:  (a) e-mail delivery; (b) delivering a printed copy; or (c) through an internet or intranet site for exclusive use by its employees, and to which all employees have access, if the employer provides notice to all employees of the posting.

The notice is available for download from the New Jersey Department of Labor and Workforce Development’s website at the following link:  Click Here

Silence…This Is A Hospital!

Patient safety and monitoring is always at the forefront of concern to hospitals. However, the idea of too many alarms going off and posing a danger to safety is a relatively new concept that hospitals should now consider. A recent Boston Globe investigation uncovered evidence that more than 200 deaths nationwide over the past five years have been associated with patient alarms. In many cases, it is believed that “alarm fatigue” is to blame.

“Alarm fatigue” refers to the response – or lack of it – of nurses to more than a dozen types of alarms that can sound hundreds of times a day – many of which are false alarms. This in turn can result in catastrophic instances where a nurse becomes desensitized to calls of distress and fails to react with the urgency necessary. Although exact data is difficult to ascertain at the moment since disclosure of such incidents are voluntary, hospitals are constantly using more and more devices that are hooked up to patients and sound an alarm when a situation arises.

Hospitals are now beginning to improve their monitoring as the Joint Commission has identified this as a 2014 national patient safety goal but unfortunate events will likely continue until the manufactures also improve the technology on their end by reducing the significant number of false alarms.

Walk into any hospital in this country and you will hear a constant stream of beeps which sound similar to Morse code. However, these beeps contain important information interpreted by the skilled doctors and nurses. It is important that the technology does not begin to do more harm than good by overwhelming the providers.


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