Published 1/1/2012
Ashlen Anderson

2011 State Legislative Update

From liability reform to imaging regulations, state laws have an impact

State policymakers considered a broad range of issues in 2011 that affect orthopaedic surgeons. State-level priorities for the American Association of Orthopaedic Surgeons (AAOS) are determined through the Board of Councilors (BOC) Committee on State Legislative and Regulatory Issues. The committee also administers $300,000 per year in Health Policy Action Fund grants to support state orthopaedic society advocacy endeavors.

In 2011, state-level priorities included preserving integrated clinical services (such as in-office physical therapy and advanced imaging services), influencing public payment system reforms, and reforming medical liability laws. A handful of the most pressing issues of the year are reviewed here.

California—integrated PT services
California became the fourth state to implement policies that forbid physicians from employing physical therapists (PTs). The AAOS helped to fund the California Orthopaedic Association’s (COA) effort to defend integrated PT services with a substantial grant from the Health Policy Action Fund and also provided the COA with significant information and analytic resources.

In 2010, the California Physical Therapy Association sought a non-binding Legislative Counsel opinion through the request of a legislator, which stated that, because the California Corporations Code (CCC) does not specifically include physical therapists on the list of those who may be employed by a medical corporation, a physical therapist is prohibited from providing physical therapy services as an employee of a medical corporation and may be subject to discipline by the Physical Therapy Board of California for doing so.

In the 2011 legislative session, the COA, California Medical Association, Kaiser Permanente, and California Podiatric Medical Association introduced legislation to add physical and occupational therapists to the list of professionals who may be employed by physicians.

The California Physical Therapy Association (CPTA), representing primarily independent physical therapists, strongly opposed the legislation, even though medical corporations have employed physical therapists and other licensed health care professionals also not listed in the CCC for decades.

The COA and other interested parties are continuing to discuss their options for resolving this issue. The CPTA is advising members who work for medical corporations to seek alternative employment.

Maryland—physician-owned imaging services
During the 2011 legislative session, Maryland became the first state to prohibit physicians from referring patients to advanced imaging services (magnetic resonance imaging, computed tomography, and radiation services) owned by the physician. In 2010, Maryland’s highest court ruled that patient referral to imaging services owned by the referring physician violated the state’s anti-kickback statute. With the support of the AAOS and many other medical specialty organizations, a coalition of Maryland physicians fought this ruling, but the Maryland legislature failed to pass legislation that would have exempted in-office imaging services from the state’s anti-kickback law.

The Maryland Orthopaedic Association (MOA) has received nearly $100,000 in grants from the Health Policy Action Fund to defend this practice through litigation and legislation. The MOA is considering its options for another round of legislative action in 2012.

Florida—THA, TKA local coverage decision
In early June 2011, First Coast Service Options—the Medicare local carrier for Medicare Administrative Contractor (MAC) Jurisdiction 9 (Florida, Puerto Rico, and the Virgin Islands)—issued a draft Local Coverage Decision (LCD) for total knee and total hip arthroplasties (TKA and THA). The LCD proposes significant changes to documentation requirements of conservative treatment and new indications for surgery.

The American Association of Hip and Knee Surgeons and the AAOS collaborated on a response that detailed recommended changes to the decision. The Florida Orthopaedic Society (FOS)was also active in discussions with the carrier and submitted separate comments.

Oregon—added co-pays for orthopaedic procedures

Oregon’s two public employee health insurance plans faced a $10.9 million budget shortfall in 2011. To fill the budget gap, the plans implemented a value-based insurance design (VBID).

With a VBID, patients pay less for higher valued healthcare services such as treatment of chronic conditions and primary care. Conversely, patients pay more for lower valued healthcare services, which may also be elective or higher cost procedures.

Oregon’s Public Employee Benefit Board determined that five common orthopaedic procedures, including TKAs and THAs, were “preference sensitive”—or of a lower value—and assigned $500 co-pays to each of them. The Oregon Association of Orthopaedists (OAO) fears that this model will appear in Oregon’s health insurance exchange basic benefits package and serve as a model to other insurers. To assist the OAO in defeating the spread of this practice, the AAOS has contributed $10,000 to the OAO through a health policy action fund grant.

Medical liability reforms
Over the past few years, the AAOS has provided more than $100,000 in Health Policy Action Fund grants to assist state orthopaedic societies with medical liability reform efforts. According to the American Medical Association’s Advocacy Resource Center, medical liability reform efforts on a state level in 2011 included actions in Florida, New York, North Carolina, Oklahoma, and Tennessee.

Florida enacted two major medical liability reform bills. The first allows certification of out-of-state expert witnesses, and enables expert witnesses to be disciplined for deceptive or fraudulent testimony. It also allows liability insurers to include contractual provisions permitting physicians to have a voice in settlement decisions and protects volunteer team physicians for their work with school teams.

The second includes language capping noneconomicnoneconomic damages for physicians treating Medicaid patients at $300,000 per claim and $200,000 per physician. This cap is pierceable if the plaintiff can prove with clear and convincing evidence that the physician acted in a wrongful manner—meaning malicious or wanton behavior.

The FOS worked very closely with the medical community on the passage of this legislation. The AAOS contributed a $5,000 Health Policy Action Fund grant and recently voted to join an amicus brief in Florida defending the constitutionality of the state’s existing cap on noneconomic damages.

Under a recently enacted law in Oklahoma, in civil actions arising from claims for bodily injury, a trier of fact may award a plaintiff a maximum of $350,000 for noneconomic damages, regardless of the number of parties against whom the action is brought or the number of actions brought. There will be no limit on the amount of noneconomic damages that may be awarded in a claim for bodily injury resulting from negligence if a judge and jury find by clear and convincing evidence that the defendant’s acts or failures to act were in reckless disregard of the rights of others, grossly negligent, fraudulent, or with malice.

Tennessee lawmakers enacted the “Tennessee Civil Justice Act of 2011,” which includes a $750,000 cap on noneconomic damages in civil actions, including healthcare liability suits. The limit on compensation for noneconomic damages may increase to $1 million in cases of catastrophic loss or injury such as spinal cord injuries resulting in paraplegia or quadriplegia, amputation of two hands or two feet or one of each, third-degree burns covering 40 percent of the body or the face, or wrongful death of a parent with a minor child(ren).

Punitive or exemplary damages cannot exceed the greater of either two times the total amount of compensatory damages awarded or $500,000. The law also creates a “fair share” rule that apportions noneconomic damages among multiple defendants based upon the percentage of fault for each defendant. For claims where the plaintiff’s comparative fault is 50 percent or more, then recovery will be barred.

The New York governor’s initial 2011 budget proposal included a cap on noneconomic damages, but this language was removed from the final budget package. The New York State Society of Orthopaedic Surgeons received emergency funding from the AAOS Health Policy Action Fund to promote the governor’s plan.

Advocacy efforts in North Carolina paid off with passage of tort reforms that limits noneconomic damages to $500,000 (indexed for inflation), bifurcates liability and damages determinations for claims over $75,000, permits periodic payment of future damages, increases the evidentiary threshold to gross negligence for claims related to emergency care, and requires the enumeration of various damage amounts to be included in verdicts. The governor initially vetoed the legislation, but the veto was overridden.

Ashlen Anderson is the manager of state legislative affairs in the AAOS office of government relations. She can be reached at aanderson@aaos.org

Learn more about AAOS activities at the state level