Indiana Law Review Survey of Recent Developments in Health Care Law John C. Render* Neal a. Cooper** Health care in Indiana, as in the rest of the United States, is governed by a dynamic body of law, both state and federal, covering a vast number of topics. Indeed, this 2003 survey discusses disciplines ranging from legislation and litigation to antitrust and immigration, demonstrating the complexities of the practice of health law today. I. Legislative Changes A. Amendments to the Hospital Carefor the Indigent Program Effective July 1, 2003, many important legislative changes were adopted affecting the Hospital Care for the Indigent Program.' Most notably, hospitals licensed under section 16-21 of the Indiana Code began on the effective date to file claims with the State Division of Family and Children^ (the Division) for payment for emergency care^ rendered to indigent persons."* Physicians^ and transportation providers^ will continue to file claims as under the former program, but total aggregate payment to these providers shall not exceed $3 million in any state fiscal year.^ Payments made to physicians and transportation providers for services rendered under this program is at the same rate as payment for the same type ofservices provided for the fee-for-service Medicaid program.^ Payment to a hospital under this program is in the form ofa Medicaid add-on and is subject to the availability of sufficient Hospital Care for the Indigent property tax levies transferred to the Medicaid Indigent Care Trust Fund to pay the non- federal share ofMedicaid payments under the Act.^ To be eligible for assistance under this program, a person must be a citizen of the United States or a lawfully admitted alien, '° whose medical condition necessitates immediate intervention * Partner, Hall, Render, Killian, Heath & Lyman, P.S.C. B.S., 1966, Butler University; J.D., 1971, Indiana University School ofLaw—Indianapolis. The authors wish to thank James M. Shafer, Associate, Hall, Render, Killian, Heath & Lymem, P.S.C, and Kevin A. Stella, Associate, Hall, Render, Killian, Heath & Lyman, P.S.C, for their contributions to this Article. ** Associate, Hall, Render, Killian, Heath & Lyman, P.S.C B.S., Milliken University; .I.D., 1998, John Marshall School of Law. 1 . See generally 2003 Ind. Acts 255 (effective July 1 , 2003). 2. iND. Code § 12-15-15-9(b) (Supp. 2003). 3. Id. § 12-16-3.5-1. 4. Id. § I2-I6-3.5-3. 5. Id § 12-16-6.5-5. 6. Id 1. Id § 12-16-7.5-5. 8. Id § 12-16-9.5-1. 9. Id § 12-15-I5-9.5(d). 10. See id § 12-16-7.5-7. 1162 INDIANA LAW REVIEW [Vol. 37:1161 and treatment," and who is an indigent person.'^ In determining eligibility, the Division shall examine whether the person is a resident of the state.'-' If the person is not a resident of the state or if residency cannot be determined, the Division shall determine the county where the onset ofthe medical condition that necessitated the care occurred.''* To receive payments under the Hospital Care for the Indigent Program, hospitals, physicians, and transportation providers must file applications with the Division within thirty days after treating the affected person.'^ If assistance is denied, the Division shall notify in writing the person affected by the denial and the hospital, physician or transportation provider, any of whom may appeal the determination within ninety days after the mailing of the notice of an adverse determination.'^ If an appeal is filed, a hearing shall be scheduled and notice shall be served upon all persons interested in the matter at least twenty days prior to the hearing.'^ Among the more important changes to the program is a modification of the methodology used to compute liability for taxes for the Hospital Indigent Care for the counties. For taxes due and payable in 2003, each county shall impose a Hospital Care for the Indigent property tax levy equal to its levy in 2002 multiplied by the county's assessed value growth quotient for taxes due and payable in 2003.'^ For 2004, 2005, and 2006, each county shall impose a Hospital Care for the Indigent property tax levy equal to its levy in the preceding year multiplied by the then current year assessed value growth quotient.'^ For taxes first due and payable in 2007, each county shall impose a Hospital Care for the Indigent tax levy equal to the average annual amount of payable claims attributed to the county during State fiscal years 2004, 2005, and 2006.^° The effect ofall these changes in the Hospital Care for the Indigent Program was to establish accountability for providers in rendering care and making claims and to ensure stability of taxation and direct per county accountability for the care of indigent persons. B. Health Care Provider Billing Practices Several sections ofHouse Enrolled Act 1407 (1407 Act),^' effective January 1, 2004, made important changes to the manner in which hospitals, hospices. 11. Id.^ 12-16-3.5-1. 12. Id. § 12-16-3.5-3. 13. Id § 12-16-5.5-1. 14. Id § 12-16-7.5-4.5(a). 15. Id. § 12- 16-4.5-2 (pertaining to hospitals); /U¥.U2A\A5. 260. Id 261 . Id (citing Le Page's Inc. v. 3M, 2000 WL 280350 (E.D. Pa. 2000)). 262. Id 263. Id 264. Id at 147. 265. Id. (quoting transcript of oral argument, Oct. 30, 2002, at 11). 266. /^. at 152. 267. Id at 169. 268. Id 1192 INDIANA LAW REVIEW [Vol. 37:1161 motivate a payor to reject the hospital's full-service scope discount. Query whether LePage 's will be adopted in the context of health care antitrust analysis of bundling arrangements in cases such as McKenzie-Willamette}^'^ V. Tax A. Sarbanes-Oxley^^^ The American Competitiveness and Corporate Accountability Act of 2002, commonly known as the Sarbanes-Oxley Act ("Sar-Ox") has imposed new duties on executives and directors of publicly traded companies concerning corporate governance and accountability since July 30, 2002. To recap, Sar-Ox regulates what boards must do to ensure that their company's "independent" auditors are truly independent.^^' It also creates and defines the role of a new federal entity—the Public Company Accounting Oversight Board, which is empowered to enforce standards for audits of public companies.^^^ Sar-Ox also explains how to elect competent audit committee members and regulates adequate reporting procedures.^^^ Finally, Sar-Ox calls for the creation ofadditional regulations and creates stringent enforcement measures for businesses, whether non-profit or for- profit concerning document destruction and protections for whistle-blowers. ^^'^ Immediately following its enactment, the Securities and Exchange Commission ("SEC") rapidly began implementation and enforcement ofSar-Ox. In the first half of 2003 alone, the SEC filed 72 enforcement actions involving financial fraud and reporting against public companies and sought to bar ninety- five dishonest corporate executives and directors from holding such positions with publicly traded companies.^^^ A closer look at the enforcement activity of the SEC reveals that the first-ever enforcement action filed under Sar-Ox was against a publicly traded health care company, HealthSouth Corporation and its CEO, for irregularities in its financial statements.^^^ Shortly thereafter, the Department ofJustice brought criminal charges against HealthSouth 's CFO, who pled guilty to several charges, including fraud and false certification of financial records.^^^ In response to the growing public scrutiny of all corporate actors and their dealings, in April 2003, the OIG, in conjunction with the American Health Lawyers Association ("AHLA"), published guidance under Sar-Ox for health 269. McKenzie-Williamette v. PeaceHealth, No. 02-6032-HA (D. Or. Oct. 31, 2003). 270. Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 1 16 Stat. 745 (2002). 271. Id. at tit. 2. 272. Id. at tit. 1. 273. Id §§406-407. 274. Id attits. 8, 9, 11. 275. SEC Chairman William H. Donaldson, Speech to the National Press Club, Washington, D.C. (July 30, 2003). 276. SEC V. HealthSouth Corp., No. CV-03-.1-0615-S (N.D. Ala. Mar. 20, 1985). 277. Press Release, U.S. Dep't of Justice, HealthSouth Office Charged with Conspiracy to Commit Wire and Securities Fraud (Mar. 31, 2003) (on file with author). 2004] HEALTH CARE LAW 1193 care entities, regardless of their public, private or non-profit status.^^^ The joint OIG/AHLA educational guidance poses several questions all health care entities should ask in light of Sar-Ox, concerning best governance practices. For example, some of the questions covered such topics as: structure of the health care entity's corporate compliance program, codes of conduct for the organization, policies and procedures governing compliance risk areas, and measures to prevent and respond to violations of the company's policies and procedures. ^^^ These recent enforcement efforts under Sar-Ox and the OIG guidance are evidence of an increasing trend toward extending Sar-Ox's duties to all health care entities, regardless of their private or public status. For example, the New York State Attorney General, Elliott Spitzer, has publicly declared his desire for a state law that applies to non-profit corporations that mirrors Sar-Ox's federal compliance requirements for public corporations. ^^° Moody's Investors Service may reflect not-for-profit hospitals' board governance in their bond ratings, through the use of a corporate compliance section in their bond rating methodology, similar to the new corporate governance ratings that apply to public companies.^^' While Sar-Ox has had a direct and immediate impact on public corporations, its influence on non-profit and health care organizations has begun to be felt and will continue to increase over the years. Through legislative and judicial recognition ofthe universal principles governing honesty and fair play contained in Sar-Ox, all corporate actors—public, private and non-profit, especially health care—will need to pay significant attention further developments in this arena. B. St. David's Healthcare System, Inc. v. United States^^^ St. David's Healthcare System, Inc. ("St. David's") has become the latest battleground for the Internal Revenue Service ("IRS") to attack certain transactions between tax-exempt organizations and for-profit entities.^^^ In 1 996, St. David's entered into a so-called whole hospital joint venture transaction with Columbia/HCA Healthcare Corporation ("HCA"), in which St. David's contributed all of its assets to a partnership in exchange for a minority ownership interest in the partnership.^^"* In 1998, the IRS audited St. David's and the 278. OIG, AHLA, CORPORATE RESPONSIBILITY AND CORPORATE COMPLIANCE: A RESOURCE FOR Health Care Boards of Directors (2003). 279. Id. 280. New York Attorney General's Legislative Program, Program Bill # 02-03 (January 2 1 , 2003). 28 1 . Mary Chris Jaklevic, Modern Healthcare: Rating Adjustment (Dec. 1 , 2003). 282. 349 F.3d 232 (5th Cir. 2003) ("5/. David's //")• 283. See, e.g., Redlands Surgical Servs. v. Comm'r, 242 F.3d 904 (9th Cir. 2001 ) (per curiam); Rev. Rul. 98-15, 1998-1 C.B. 718; Rev. Rul. 69-545, 1969-2 C.B. 117; Gen. Couns. Mem. 39862 (Nov. 21, 1991). 284. St. David's Health Care System, Inc. v. United States, 2002 WL 1335230, at *2 (W.D. 1194 INDIANA LAW REVIEW [Vol. 37:1161 partnership, and ultimately revoked St. David's tax-exempt status in 2002 because, the IRS stated, once it entered into the partnership St. David's was no longer engaged in activities that primarily furthered a charitable purpose and thus it no longer qualified to be recognized as exempt under Section 501(c)(3) ofthe Internal Revenue Code.^^^ St. David's paid the taxes the IRS alleged to be due under protest, then brought suit in district court for a refund.^^*^ In district court, the IRS explained that St. David's should forfeit its exemption for two primary reasons. First, the partnership was not run by a community board.^^^ Second, HCA received an impermissible private benefit from the partnership.^^^ The district court granted St. David's motion for summary judgment, stating that "it is difficult to imagine a corporate structure more protective of an organization's charitable purpose than the one at issue in this case."^^^ The district court also ordered the United States to pay St. David's reasonable litigation costs in the amount of$95 1,569.83 and to refund $103,000 "in taxes paid by St. David's for the 1996 tax year."^^^ The IRS appealed to the Fifth Circuit Court, arguing that the determinative issue is not whether the partnership was organized to protect St. David's charitable purposes, but whether St. David's ceased to engage primarily in activities to further St. David's charitable purposes when it ceded control of its operations to HCA.^^' St. David's countered that the issue is whether the partnership functioned in a manner that furthered St. David's exempt purpose.^^^ The court of appeals explained that the ultimate question is whether St. David's continued to operate exclusively in furtherance ofan exempt purpose.^^^ "Exclusively" in this context has been determined to mean "primarily," such that the partnership "cannot be deemed to operate exclusively or primarily for charitable purposes when a substantial portion of the organization's activities further non-charitable purposes. "^^"^ The court explained that "[i]n order to Tex. 2002) ("St. David's I"). 285. Id.\St. David's II, 349 F.3d at 234. 286. St. David's 11, 349 F.3d at 234. 287. St. David's /, 2002 WL 1335230, at *1. 288. Id 289. /^. at*8. 290. St. David's II, 349 F.3d at 234 (granting plaintiffs application for litigation costs). 291. /^. at 235. 292. Id 293. Id at 231. [l]n determining whether an organization satisfies the operational test, we do not simply consider whether the organization's activities further its charitable purposes. We must also ensure that those activities do not substantially further other (non-charitable) purposes. If more than an "insubstantial" amount ofthe partnership's activities further the non-charitable interests, then St. David's can no longer be deemed to operate exclusively for charitable purposes. Id. (emphasis added). 294. Id. at 237 n.6 (emphasis in original). 2004] HEALTH CARE LAW 1 1 95 ascertain whether an organization furthers non-charitable interests, we can examine the structure and management of the organization. ... In other words we look to which individuals or entities control the organization."^^^ To determine the issue of control, the circuit court looked to the partnership's governing documents, which required it to be operated in accordance with the IRS community benefit standard.^^^ The partnership agreement also provided that St. David's and HCA each appointed one-halfof the governing board.^^^ St. David's pointed out that the partnership agreement and management services agreement gave St. David's various powers to ensure that the partnership was operated for charitable purposes, such as the power to terminate the CEO, to terminate the company hired to manage day-to-day operations, and to dissolve and liquidate the partnership under certain circumstances.^^^ The Fifth Circuit concluded that these powers were not sufficient, as a matter of law, to ensure that St. David's retained effective control over the partnership.^^^ First, the Fifth Circuit found that the form of the governing documents did not give St. David's the power to control a majority of the partnership's board, but merely a veto power.^^^ "Thus, at best, St. David's can prevent the partnership from taking action that might undermine its charitable goals; St. David's cannot necessarily ensure that the partnership will take new action that furthers its charitable purposes. "^^' Second, the court found that although Galen Health Care, Inc. ("Galen"), the for-profit subsidiary of HCA responsible for the partnership's day-to-day management, was required under a management services agreement to abide by the IRS community benefit standard, it was a subsidiary of HCA and would naturally be inclined to prioritize HCA's for-profit motives rather than St. David's charitable purposes.-*^^ The court also indicated that St. David's sole means ofenforcement ofthis provision would be by taking legal action, a remedy so burdensome as to pull the teeth from St. David's authority. ^^^ Third, the court found that while St. David's had the unilateral power to terminate the CEO of the partnership, St. David's had already demonstrated the ineffectiveness ofthis power.^^'* Although the partnership agreement required the CEO to file annual reports to the board with the amount of charity care provided by the partnership, the CEO had not prepared any such report, and St. David's had not taken any punitive action against the CEO.^^^ 295. Id. at 237 (emphasis in original) (internal citations omitted) 296. Id. at 240. 297. /c/. at 241. 298. Id 299. /^. at 241-44. 300. /£/. at 241-42. 301. Id at 242. 302. Id 303. Id at243. 304. Id 305. Id 196 INDIANA LAW REVIEW [Vol. 37:1161 Finally, the court found that St. David's unilateral right to dissolve the partnership was illusory, as it only applied in the event of a change of \siw, and to dissolve the partnership would likely destroy St. David's business; the parties had executed a non-competition covenant triggered by dissolution.^^^ The circuit court thus vacated the lower court's ruling and remanded the case back to the district court for further proceedings.^^^ Although the circuit court ruled in favor of the government, the case is still pending before a trial judge in the district court. In vacating the district court's summary judgment ruling, the circuit court determined only that the case can move forward through trial. St. David's will thus have the opportunity to demonstrate, if it can, that it did not cede control to HCA, and that no more than an "insubstantial" amount of the partnership's activities further non-charitable interests.^^^ Exempt organizations and their counsel will be closely following the outcome of St. David's II. VI. EMTALA: INTERIM GUIDANCE On September 9, 2003, CMS published its final rule regarding the Emergency Medical Treatment and Active Labor Act ("EMTALA"),^^^ which became effective November 10, 2003, clarifying the responsibilities ofMedicare participating hospitals and Critical Access Hospitals ("CAH") in treating individuals who present to the hospital requesting examination or treatment.^ '° The fmal rule provided needed clarification of many provisions of EMTALA. CMS expanded the definition of "hospital emergency department" and the meaning of the phrase "come to the emergency department."^" The EMTALA requirements apply if an individual presents (1) at the hospital's dedicated emergency department and requests examination or treatment for a medical condition, or (2) elsewhere on the hospital's property that is not part of the 306. Id. at 244. The court noted that if St. David's dissolved to the partnership, it would be forbidden from competing in the Austin, Texas community and would effectively cause St. David's to cease to exist. Id. Moreover, without HCA as its partner, St. David's would not likely survive financially. Id. a.i239. The present case illustrates why, when a non-profit organization forms a partnership with a for-profit entity, courts should be concerned about the relinquishment ofcontrol. St. David's by its own account, entered into the partnership with HCA out of financial necessity (to obtain the revenues needed for it to stay afloat). HCA, by contrast, entered the partnership for reasons offinancial convenience (to enter a new market). The starkly different financial positions of these two parties at the beginning of their partnership negotiations undoubtedly affected their relative bargaining strength. Id. 307. Id at 244. 308. Id at 237. 309. 42U.S.C. § 1395(2003). 310. Medicare Program; Clarifying Policies Related to the Responsibilities of Medicare- Participating Hospitals in Treating Individuals with Emergency Medical Conditions, 68 Fed. Reg. 53,222 ("EMTALA Final Rule"). 311. Idai 53,227 - 53,234 (to be codified at 42 U.S.C. § 489.24(b)). 2004] HEALTH CARE LAW 1 1 97 dedicated emergency department and requests examination or treatment for what may be a medical condition.^ '^ In either case, a hospital is required to provide an appropriate medical screening examination.^'^ Ifthe individual has an emergency medical condition, the hospital must provide the necessary stabilizing treatment within the hospital's capacity or capabilities and if necessary, arrange for an appropriate transfer to another hospital.^''' EMTALA applies not only to dedicated emergency departments but also to other areas of the hospital's main campus or property when an individual presents requesting medical treatment.^'^ If an individual is in a location of the hospital other than the dedicated emergency department and, based on a "prudent layperson's" belief, that individual clearly needs medical attention or services (e.g., visitor collapses in the hospital's cafeteria or appears to be suffering chest pains in the waiting room), the hospital should have policies and procedures to assure that the individual receives an appropriate medical screening examination and EMTALA requirements are followed.^ '^ A "dedicated emergency departmenf is defined in the final rule as any hospital department or facility, regardless whether it is located on or offthe main hospital campus, meeting at least one of the following requirements: a facility licensed by the State as an emergency department (applicable only in a few states); a hospital department or clinic that is held out to the public as a place that provides care for emergency medical conditions on an urgent basis without requiring a previously scheduled appointment; or a hospital department or facility that provides at least one-third of its entire outpatient visits for the treatment of emergency medical conditions on an urgent basis without requiring a previously scheduled appointment.^'^ A hospital's dedicated emergency department would not only encompass what is generally thought of as a hospital's "emergency room," but also include other departments of a hospital (e.g., labor and delivery departments and psychiatric units of hospitals), that provide emergency or labor and delivery services, or both, to individuals who may present as unscheduled ambulatory patients but are routinely admitted to be evaluated and treated.^ '^ The third criteria, a facility that accepts patients without requiring appointments, may encompass urgent care centers owned by a hospital and 312. Id 313. Id. 314. Id 315. Id Sit 53,238 - 53,243 (to be codified at 42 U.S.C. § 489.24(b)). 316. Id at 53,240 - 53,242 (to be codified at 42 U.S.C. § 489.24(b)). 3 1 7. Id at 53,227 - 53,234 (to be codified at 42 U.S.C. § 489.24(b)). 318. Id 1198 INDIANA LAW REVIEW [Vol. 37:1161 reimbursed under the hospital's Medicare provider number.-''^ Hospital property includes "the entire main hospital campus including the parking lot, sidewalk, and driveway," but for purposes of EMTALA does not include "other areas or structures ofthe hospital's main building that are not part of the hospital, such as physician offices, or other entities that participate separately in Medicare, or restaurants, shops, or other non-medical facilities."^^° Urgent Care Centers, owned and billed under a hospital's provider number, are not categorically exempt from EMTALA regulations.^^' It would be difficult for any individual in need of emergency care to distinguish between a hospital department that provides care for an "urgent need" and one that provides care for an "emergency medical condition."^^^ Thus, if the department or facility is held out to the public as a place that provides care for emergency medical conditions, it would meet the definition ofa dedicated emergency department.^^^ Ifan urgent care center participates in Medicare through a hospital and operates as a satellite facility off the main hospital campus, the urgent care center may transfer a patient in an unstable condition to an affiliated hospital, if the urgent care center first screens the individual and determines treatment ofthe individual's condition is not within the capability or capacity of the center.^^"* That is, if a patient presents to an urgent care center owned by Hospital "X," the center must first screen the patient. If the center's screen indicates that the patient has an emergency medical condition for which the center is not equipped, the center may transfer the patient to Hospital "X." In addition, an urgent care center may transfer a patient in an unstable condition to a non-affiliated hospital if, in addition to screening the patient, the benefits of transfer exceed the risks.^^^ VII. Quality Assessment, Assurance and Improvement Several changes have developed in the role of quality assessment and improvement in health care in 2003. The Department of Health and Human Services promulgated a regulation mandating quality and performance initiatives from all Medicare-participating hospitals and skilled nursing facilities;^^^ the Joint Commission on Accreditation of Healthcare Organizations ("JCAHO") modified its survey process to include a hospital self-assessment with quality- specific goals;^^^ and managed care payors continued to increase their use of quality measurements as a component of total fees paid for health care 319. Id. 320. Id. 321. Id at 53,231. 322. Id 323. Id 324. Id 325. Id 326. Medicare and Medicaid Programs; Hospital Conditions of Participation: Quality Assessment and Performance Improvement, 68 Fed. Reg. 3435 (Jan. 24, 2003) (codified at 42 C.F.R. Part 482.21 (2004)). 327. Shared Visions—New Pathways, 22 Perspectia/ES 1, Oct. 2002 (JCAHO newsletter). 2004] HEALTH CARE LAW 1 1 99 services. ^^^ In addition, CMS partnered with Premier, an alliance of 1500 hospitals, to undertake a three-year demonstration project in which the Medicare program will pay a premium for quality by rewarding top performing hospitals with additional funds.^^^ In addition, quality assurance is receiving a great deal of attention from our nation's lawmakers. Congress took up the issue with the House of Representatives, introducing bills such as the Patient Safety and Quality Improvement Act"^ and the Patient Safety Improvement Act of 2003,•'^' and the Senate introducing its own Patient Safety and Quality Improvement Act of 2003,"^ all designed to address voluntary reporting of medical errors, the development of patient safety organizations, and the creation of a privilege applicable to information reported under such a system."^ A. Medicare Condition ofParticipation Since 1986, Medicare regulations have required hospitals, as a condition of participation in the Medicare program, to maintain a system to evaluate the provision of patient care, to assess deficiencies in the delivery of medical care. 328. See, e.g.. Profiles ofOrganizations Using Quality Incentive, NATIONAL HEALTH CARE Purchasing Institute, at http://www.nhcpi.net/pdf/profiles.pdf (finding that 14 of 14 profiled health insurers, purchasers, and employer coalitions use quality-based incentive programs in managed care contracting). In addition, Anthem Inc., one of Indiana's larger private health care insurers, uses a Hospital Quality Improvement Program to develop a Hospital Quality Scorecard for each hospital, which data is used in the computations establishing hospital reimbursement rates. Anthem regularly makes information regarding such programs available on its Internet website, www.anthem80.com. 329. See HHSto Launch Medicare Demonstration to Promote High Quality Care in Hospitals, HHS News Release, July 10, 2003; C. Becker, Time to Payfor Quality, MODERN HEALTHCARE 6 (June 30, 2003). 330. H.R. 663, 108th Cong. (2003). The Patient Safety and Quality Improvement Act was proposed to amend Title IX of the Public Health Service Act to provide for the improvement of patient safety and to reduce the incidence of events that adversely affect patient safety. H.R. 663 would also impose specific clinical improvement initiatives based on data collected under the initiatives the bill would create. As a safeguard, the bill would also provide for limited privilege and confidentiality provisions regarding reported data. See id. § 3(a) (recommended additions to "Parte" of Title IX). 331. H.R. 877, 108th Cong. (2003). The Patient Safety Improvement Act of 2003 would implement a medical information technology reporting mechanism for medical errors, along with a technology advisory board and voluntary standards intended to induce information technology interoperability in the healthcare marketplace. 332. S. 720, 108th Cong. (2003). The Patient Safety and Quality Improvement Act of 2003 (bearing the same short name as H.R. 663) would implement medical error reporting similar to that of H.R. 663, but would provide more comprehensive privilege and confidentiality provisions. See id § 3. 333. H.R. 663, H.R. 877, and S. 720 all resurrect legislation that did not survive the 107th Congress. See H.R. 5478, 107th Cong. (2002); H.R. 4889, 107th Cong. (2002). 1200 INDIANA LAW REVIEW [Vol. 37:1 161 and to take remedial action where necessary.""* In 1999, a report published by the Institute of Medicine ("lOM") announced that "at least 44,000 Americans die each year as a result of [preventable] medical errors [and] the number may be as high as 98,000.""^ The lOM report ultimately encouraged the Department of Health and Human Services and its Centers for Medicare and Medicaid Services ("CMS") to promulgate a regulation intended to modify its Medicare conditions of participation to more closely reflect the current state of quality improvement practices."^ The updated rule expands the existing regulations and requires each Medicare-certified hospital to adopt a Quality Assessment and Performance Improvement ("QAPI") program as a condition of participation in the Medicare program."^ Many privately accredited hospitals already have a quality assurance policy in place, though no such approach has previously been mandated for state- certified Medicare-participating hospitals. Hospitals that obtain JCAHO accreditation will be deemed to be in compliance with the conditions of participation including the QAPI,"* and organizations reviewed by Quality Improvement Organizations ("QIOs") are deemed to have satisfied the utilization review and evaluation conditions of participation."^ Hospitals that are not accredited by QIOs rely instead on state agencies to assess compliance with the certification requirements of the Medicare program.^'*^ A state agency or QIO will determine whether the hospital is in compliance with the QAPI condition of participation, which is directed at ensuring uniformity in quality standards for all Medicare-participating hospitals.^"*^ This rule requires, at a minimum, that each hospital must systematically examine its quality performance and implement specific improvement projects on an ongoing basis.^"*^ More importantly, QAPI is intended to identify preventable errors, and to enable hospitals to develop means to prevent them. The condition of participation requires every Medicare certified hospital to develop, implement, maintain, and evaluate its own QAPI program, which must be hospital-wide, ongoing, and focused on indicators related to the improvement of health outcomes.^"*^ Each hospital will be required to maintain and 334. 42 C.F.R. §482.21 (2002). 335. Linda T. Kohn et a!., To Err Is Human: Building a Safer Health System, COMMITTEE ON Quality of Health Care in America, Institute of Medicine, at 1 (National Academy Press, 1999). 336. Medicare and Medicaid Programs; Hospital Conditions of Participation: Quality Assessment and Performance Improvement, 68 Fed. Reg. 3435 (Jan. 24, 2003) (codified at 42 C.F.R. pt. 482). 337. Id; see also 42 C.F.R. § 482.21 (2001), as amended. 338. 42 C.F.R. § 488.5(a). 339. Id. §488.14. 340. Id §488.11. 341 . Medicare Program, 68 Fed. Reg. at 3442-43. 342. Id at 3435. 343. 42 C.F.R. §482.21 (2002). 2004] HEALTH CARE LAW 1201 demonstrate evidence of its QAPI program and related efforts for review by CMS.^'*'* The regulations Set forth five standards related to the development of a hospital's QAPI program. Standard one, Program Scope, provides that the hospital must demonstrate that its QAPI program examines and initiates measurable improvements, on an ongoing basis, in indicators that, based on objective evidence, will improve health outcomes arid identify and reduce medical errors. ^"^^ In addition, standard one requires the hospital to measure, analyze, and track quality indicators, such as "adverse patient events, and other aspects ofperformance that assess processes of care, hospital service, and operations."^'*^ CMS has declined to publish areas on which hospitals should focus their QAPI efforts because a closed list stifles innovation, does not allow hospitals to directly address their peculiar strengths and weaknesses, and would be subject to constant modification as the state ofthe art progresses and as the standards ofcare evolve.^"*^ Consequently, CMS drafted the QAPI regulations to make the program scalable for hospitals ofdiffering size and financial means and to allow for individual hospital flexibility, following a prescribed selection and evaluation process. First, the hospital must identify the hospital's critical patient care and services components. ^'^^ Next, the hospital must apply performance measures that are predictive of quality outcomes that would result from delivery of the patient care and services. ^''^ Finally, the hospital must use a continuous method of data collection and evaluation that identifies or triggers further opportunities for improvement.^^^ Standardtwo, Program Data, provides a framework and defines expectations for hospitals regarding the quality indicator data necessary for a QAPI program.^^' In particular, this standard refers to information submitted to, or received from, the hospital's QIO (if it has one).^^^ Hospitals that do not use QIOs may satisfy the conditions of participation by identifying measures of performance for the activities each such hospital identifies as a priority.^" The hospital must use the data to monitor the effectiveness and safety of services and quality of care, and to identify opportunities for improvement and changes that will lead to improvement and error prevention.^^'^ Standard three. Program Activities, defines the conduct to take place in the QAPI program, and clarifies that the hospital's responsibility under its QAPI 344. Medicare Program, 68 Fed. Reg. at 3442-43. 345. 42 C.F.R.§ 482.21(a). 346. Id. § 482.21(a)(2). 347. Medicare Program, 68 Fed. Reg. at 3437; but see id. at 3435 (describing throughout the preamble numerous sources for topics suitable for hospital quality improvement attention). 348. Id at 3439. 349. Id 350. Id 351. 42 C.F.R.§ 482.21(b) (2002). 352. Id 353. Id 354. Id 1202 INDIANA LAW REVIEW [Vol. 37:1 161 program is to focus resources on improvement, considering prevalence and severity of incidence, or both, of high-risk, high-volume or problem prone areas, and giving priority to improvement activities that affect health outcomes, patient safety, and quality of care.^^^ A hospital's QAPI activities should track adverse patient events, analyze their causes, and implement preventive actions and mechanisms of feedback and learning throughout the hospital. ^^^ This must include incidents of medical errors and adverse patient events. ^^^ Each hospital is also required to take action designed to improve performance, and to measure its success and track its performance to assure that improvements are sustained.^^^ Standard four, Performance Improvement Projects, requires that each hospital must conduct performance improvement projects as part of its QAPI program.^^^ The number of performance improvement projects a hospital undertakes must be "proportional to the scope and complexity of the hospital's services and operations."^^° The regulations expressly permit a hospital to develop and implement an information technology system as one of its performance improvement projects.^^' Hospitals must document each performance improvement project undertaken, the reasons for conducting the project, and the measurable progress achieved on the project.^^^ QIO cooperative projects will satisfy this standard's requirement for performance improvement projects. ^^^ Projects undertaken pursuant to this standard must involve a degree of effort comparable to that of a QIO project.^^"* Hospitals must ensure that the clinical topics selected for performance improvement projects, and the priorities assigned to such clinical topics, evaluate the following criteria: (1) prevalence, incidence and disease impact relative to the affected population; (2) scientific consensus regarding improvement of patient outcomes; (3) measurability of processes or outcomes; and (4) the opportunity to improve care.^^^ Standard five, Executive Responsibilities, holds the hospital's leadership responsible and accountable for QAPI activities.^^^ The hospital's governing body, medical staff, and administrative officials are responsible and accountable 355. Id. § 482.21(c). 356. Id. 357. Id 358. Id 359. Id § 482.21(d). 360. Id § 482.21(d)(1). 361. Id 362. Id 363. Medicare and Medicaid Programs; Hospital Conditions of Participation: Quality Assessment and Performance Improvement, 68 Fed. Reg. 3435, 3439-41 (Jan. 24, 2003) (codified at 42 C.F.R. pt. 482). 364. Id 365. Id at 3442. 366. 42 C.F.R. § 482.21(e). 2004] HEALTH CARE LAW 1 203 for ensuring that the hospital defines, implements and maintains an ongoing program for quality improvement and patient safety, including the reduction of medical errors. Further, these individuals must ensure that the hospital-wide quality assessment and performance improvement efforts address priorities for improved quality of care and patient safety, that clear expectations for safety are established, and that all improvement actions are evaluated. In addition, they must ensure that adequate resources are allocated for measuring, assessing, improving, and sustaining the hospital's performance and reducing risk to patients. Finally, these individuals must determine the number of distinct improvement projects to be conducted annually.^^^ The QAPI regulation identifies the minimum efforts necessary to satisfy the conditions of participation. The risk is therefore clear: a hospital that exerts less than the minimum effort may lose its Medicare certification. CMS intends information technology to ultimately be shared on a nationwide basis (within the constraints of HIPAA and analogous State laws) to construct a dynamic best practices approach to delivery of medical care.^^^ Benchmarking will be a large part ofthe process and will undergo periodic restatement to reflect development of the state of the art and evolution of the standard of care applicable to the clinical process under study.-*^^ The heightened use of information technology, in the view of CMS, will revolutionize the delivery of medical care, and will prevent the preventable error.^^^ B. JCAHO Periodic Performance Review The Joint Commission on Accreditation of Health Care Organizations ("JCAHO") has announced its Shared Visions-New Pathways initiative. ^^' This new initiative adds an intermediate accreditation review, the periodic performance review ("PPR"), at the 1 8-month midpoint between triennial onsite surveys.^^^ Under this initiative, each hospital will self-evaluate its compliance with all applicable accreditation standards, and based on the PPR will prepare a plan of action ("POA") designed to address any findings in the PPR.^^^ Hospitals have three options for the intermediate review under the new JCAHO initiative. Option one is to conduct a full PPR, prepare a POA, and submit to JCAHO the PPR results, POA and subsequent measures of success ("MOS") related to any non-compliance. Option two is to conduct a full PPR, prepare a POA and MOS, but attest that, based on advice ofcounsel, the hospital will not submit PPR results or POA to JCAHO (although any MOS are made available at time of next triennial survey). Option three allows a hospital to 367. Id. 368. Medicare Program, 68 Fed. Reg. at 3440. 369. Id. at 3444. 370. Id at 3440. 371. 22 Perspectives 1, Oct. 2003 (JCAHO newsletter). 372. Id. ; 5^ege«era//y http//:www.jcaho.org/accredited=organizations/SVNP/ (providing links to numerous JCAHO resources). 373. 22 Perspectives 1, Oct. 2003 (JCAHO newsletter). 1204 INDIANA LAW REVIEW [Vol. 37:1 161 conduct a PPR and attest that, based on advice of counsel, the hospital will instead undergo an independent JCAHO compliance assessment survey and POA development, and will report its POA to JCAHO and make any MOS available at time of next triennial survey.^^"^ Hospitals must comply with this initiative to maintain JCAHO accreditation.^^^ The approach to compliance will differ from hospital to hospital based on several considerations, including the hospital's ability to protect the information adduced during a self-evaluation. In Indiana, self-critical analysis is not subject to the peer review privilege if it is not related to the provision of patient care,^^^ so any findings that constitute admissions could create risk from litigation in the future. Thus, hospitals must assess the risks and benefits associated with the PPR. Clearly, there are advantages to conducting a full PPR (e.g., the hospital will be continuously accredited throughout the period between triennial onsite reviews), but it also creates risks relating to disclosure of self- critical analysis. While options two and three do not provide that same accreditation guarantee, they do preserve the dissemination of self-critical analysis a hospital prepares. Unless a hospital can take sufficient prophylactic measures, the self-disclosure ofself-critical analysis may lead to substantial risks that outweigh the benefits from the PPR process. VIII. In Re Managed Care^'''^ Approximately 700,000 physicians are represented in a national class action lawsuit, In re Managed Care Litigation, initiated in March of 2001 against thirteen entities representing the nation's largest insurers, including Aetna, Inc., Aetna-USHC, Inc., and Cigna.^^^ The American Medical Association in conjunction with several state and local medical societies and individual representatives of the physician population alleged that the insurers violated the Racketeer Influenced and Corrupt Organizations Act^^^ and state prompt-pay laws^^° in processing claims since 1990. Aetna and Cigna have settled the claims, but the remaining insurers are still defending the case. 374. Id. 375. Id. 376. Privileged Communications ofHealth Care Provider Peer Review Committees, Ind. Code §34-30-15-1 to -23 (1999). 377. In re Managed Care Litigation, MDL No. 1334, 00-1334-MD-MORENO (S.D. Fla. 2003). 378. The following are all named defendants in the suit: Humana, Inc.; Aetna, Inc.; Aetna- USHC, Inc.; Cigna; Coventry Health Care, Inc.; Health Net, Inc.; Humana Health Plan, Inc.; PacifiCare Health Systems, Inc.; Prudential Insurance Company ofAmerica; United Health Group; United Health Care; Wellpoint Health Networks; and Anthem, Inc. Id. at *1. 379. 18 U.S.C. §§ 1961-68 (2002). 380. See, e.g., iND. CODE §§ 27-13-36.2-1 to -7 (2003) (providing for prompt payment of claims for services furnished to patients of health maintenance organizations); id. § 27-8-5.7-5 (providing for prompt payment of claims for services furnished to patients of preferred provider organizations). 2004] HEALTH CARE LAW 1 205 Aetna settled the In re ManagedCare class' claims by means ofa settlement agreement providing for, among other things, payment to individual physicians. ^^' In the settlement agreement, Aetna agreed to modify a number of its business practices. In particular, the insurer has agreed to modify its utilization review processes, define parameters for timely claims payment, establish dispute resolution procedures, and undertake various other business practice initiatives. ^^^ In addition, Aetna paid approximately $100 million into a settlement fund to be distributed to class members who elected to participate in the settlement (approximately $142.56 per physician). ^^^ As part of the settlement, Aetna also created a charitable foundation "dedicated to promoting high quality health care [through] initiatives that assist physicians to improve [or] enhance the quality of care received by patients. "^^'* Cigna Healthcare also executed a settlement agreement that resolved the claims against it in the In re Managed Care Litigation class action. ^^^ Among other things, Cigna will pay $30 million into a settlement fund for individual physician class members to be paid based on each physician's experience with specified billing codes,^^^ and $15 million into a foundation "dedicated to promoting high quality health care [with] particular emphasis [on] initiatives that assist Physicians to improve/enhance the quality ofcare received by patients and to enhance the delivery of care to the disadvantaged members of the public."^^^ Cigna will also pay $55 million for the plaintiff class' attorneys' fees, costs and expenses. IX. Managed Care: Usual and Customary Charges— OIG Regulations The OIG has permissive exclusion authority— the authority to exclude a health care provider or individual from the Medicare program—over any individual or entity that it finds to have 38 L The settlement agreement was preliminarily approved on May 30, 2003, a Final Approval Order and Judgment was entered on October 24, 2003, and a Supplemental Final Approval Order was entered onNovember6, 2003. Inre ManagedCare Litigation, MDLNo. 1334, 00-1334-MD- MORENO (S.D. Fla. 2003). To be eligible for settlement payments, individual physicians were required to submit a "Proof of Claim" no later than September 30, 2003. Aetna Settlement Agreement § 8.5. Documents and additional information related to the Aetna settlement are available on the Internet at http://www.managed-care-litigation.com/. 382. Aetna Settlement Agreement ^ 1 . 383. Id. § 8.2. 384. Id §8.1. 385. The settlement agreement was preliminarily approved on September 4, 2003, and a Final Approval Hearing was held on December 18, 2003. In re Managed Care Litigation, MDL No. 1334, (S.D. Fla. 2003). A Final Approval Order was entered on February 2, 2004. 386. Cigna Settlement Agreement § 2. 387. Cigna Settlement Agreement, Exhibit 9, at 3. 388. Id § 14. 1206 INDIANA LAW REVIEW [Vol. 37:1161 submitted or caused to be submitted bills or requests for payment (where such bills or requests are based on charges or cost) under [Medicare or Medicaid] containing charges ... for items or services furnished substantially in excess of such individual's or entity's usual charges . . . for such items or services, unless the Secretary finds there is good TOO cause .... Since 1987, when Congress codified this power, the OIG has done very little to use it to exclude any person from the Medicare program,-*^^ largely due to the vague nature of the statute's core terms, "substantially in excess," "usual charges," and "good cause." For the third time, the OIG has published a proposed rule that would, among other things, define these three key terms.^^' Historically, "usual charges" was reflected in a hospital's charge master-'^^ as the full billed charge for services. In the proposed rule, the OIG would define the term "usual charges" to mean amounts billed to self-pay patients and patients covered by indemnity insurers with which the provider has no contractual arrangement, and any fee-for-service rates it contractually agrees to accept from any payor including any discounted fee-for-service managed care rates.^^^ The OIG's rationale for this change is that, because managed care negotiated rates may constitute a large percentage ofa hospital' s overall revenue, "usual charges" (as that term is used in the OIG's statutory permissive exclusion authority) must reflect the discounts that a hospital provides to its managed care organizations.^^'* OIG would not consider certain specified charges to be "usual," including charges for services furnished to uninsured patients free of charge or at a substantially reduced rate, capitated payments, certain hybrid fee-for-service 389. 42 U.S.C. § 1 320a-7(b)(6)(A) (2002) (emphasis added) (authorizing the Secretary ofthe Department of Health and Human Services to enforce the permissive exclusion power); 53 Fed. Reg. 12993 (Apr. 20, 1988) (delegating such authority to the OIG). 390. Virtually no case law references the exclusionary authority relating to excessive charges, although the petitioner in Green v. Sullivan, 731 F. Supp 835 (E.D. Tenn. 1990), sought, unsuccessfully, to have a mandatory exclusion recast as a permissive exclusion under § 1 320a-7(b). In a case heard in Indiana, a plaintiff sought to have a contract declared invalid because it violated § 1320a-7(b)(6). Zimmer v. NuTech Med., Inc., 54 F. Supp. 2d 850, 853 (N.D. Ind. 1999). The court determined invalidity on other grounds. Id. at 863-64. 391 . Medicare and Federal Health Care Programs: Fraud and Abuse; Clarification of Terms and Application of Program Exclusion Authority for Submitting Claims Containing Excessive Charges, 68 Fed. Reg. 53,939 (Sept. 15, 2003) (to be codified at 42 C.F.R. pt. 1001). The OIG published, but never finalized, proposed rules addressing the definitions of the key terms of its exclusion authority in 1990 and 1993. 55 Fed. Reg. 12205 (Apr. 2, 1990); 62 Fed. Reg. 46,676 (Sept. 8, 1997). 392. A hospital's charge master reflects the price charged for each of the thousands of individually-coded services the hospital offers. 393. Medicare Program, 68 Fed. Reg. at 53,944 (to be codified at 42 C.F.R. § 1001 .701 (a)). 394. Id. at 53,941. i 2004] HEALTH CARE LAW 1 207 arrangements, and fees set by Medicare or Medicaid.^^^ In determining "usual charge," the OIG has proposed two different methodologies: computing the average of a provider's charge for each particular item or service, or computing the median charge for such item or service. ^^^ Notably, claims for physician services under Medicare Part B are excluded from the proposed rule because "the fee schedule amounts for physician services ... are functionally equivalent to a prospective payment methodology."^^^ Whether a provider submits a claim for payment that is "substantially in excess" of its usual charge will be a mathematic calculation under the OIG's proposed rule.^^^ If a claim for service seeks payment that is more than 20% in excess of the provider's "usual charge," the OIG's proposed rule would deem that charge to be "substantially in excess" of the usual charge.^^^ OIG has given no concrete basis for the seemingly arbitrary 20% threshold, and has offered only the explanation that "anecdotal evidence" supports that figure.'*^^ In the event that a provider charges Medicare an amount that is "substantially in excess" of its "usual charge" but has "good cause," the provider will not be subject to the OIG's permissive exclusion authority.'*^ ^ OIG has indicated that "good cause" exists where a provider sets forth a "reasonable set of underlying facts and circumstances" necessitating the higher charge, such as unusual circumstances or medical complications experienced by the provider.'^^^ As a general rule, the OIG's proposal would equate payments with charges, but should not significantly affect payments received under the Medicare program. The determination whether a provider is charging Medicare substantially in excess of its usual charges only applies where Medicare pays the lower ofcost or charges or the appropriate fee schedule.'*^"' Because, as a general rule, providers' charges are higher than the Medicare fee schedule, the proposed rule should typically not come into play. Nonetheless, if the proposed rule is finalized in its present form, providers will need to determine, on an ongoing basis, whether their charges exceed the 20% threshold, on a service by service basis, to prevent inadvertently "overcharging" the Medicare program. Moreover, because providers update their charge masters, managed care organizations continually negotiate new agreements with providers, and the Medicare program continually modifies its fee schedules, the exercise proposed by the OIG will become time consuming and potentially quite expensive. 395. Id. 396. Id. 397. Id at 53,940. 398. Id at 53,941. 399. Id at 53,942. 400. Id 401. Id at 53,942-43. 402. Id 403. 42 U.S.C. § 1320a-7(b)(6)(A) (2002). 1208 INDIANA LAW REVIEW [Vol. 37:1 161 X. Immigration: VisaScreen Certification for Health Care Workers Shortages in health care professionals, most notably nurses, have caused U.S. employers to look outside the country's borders to fill the gap.'^^'^ Consequently, the immigration laws are an increasingly important consideration in health care staffing and human resource management. The recent modification of the VisaScreen requirement"*^^ is a noteworthy development in immigration law applicable to the health care industry. On July 25, 2003, the Department of Homeland Security ("DHS") published its fmal rule related to the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 ("IIRIRA")^^^ and the Immigration and Nationality Act ("rNA").'*°^ The IIRIRA requires that certain foreign healthcare workers have their credentials evaluated and certified before they will be allowed to work in their professions in the United States."*^^ Although IIRIRA has always required a credentials evaluation for foreign healthcare workers seeking permanent residency, under the new final rule it is also required of those seeking non- immigrant status in the United States."*^^ The rule lists seven categories of health care workers to which the VisaScreen applies: nurses, physical therapists, occupational therapists, speech-language pathologists and audiologists, medical technologists (also known as clinical laboratory scientists), medical technicians (also known as clinical laboratory technicians), and physicians' assistants.'*'^ The IIRIRA provides that the Commission on Graduates ofForeign Nursing Schools ("CGFNS"), through its International Commission on Healthcare Professionals ("ICHP") division, administers the VisaScreen verification.'*' ' The statute does not specifically list all of the healthcare professions affected by the VisaScreen requirement (although physicians are specifically exempted), so employers and employees in unlisted healthcare professions are unclear as to the status of some professionals.'*'^ A recent guidance memo issued by the Citizenship and Immigration Service does state that currently only those professionals described by the final rule's seven categories are subject to the VisaScreen requirements."'^ 404. J. Berger, From Philippines, with Scrubs: How One Ethnic Group Came to Dominate the Nursing Field, N.Y. TIMES, Nov. 24, 2003, at Bl . 405. Certificates for Certain Health Care Workers, 68 Fed. Reg. 43,901 (July 25, 2003) (the "VisaScreen"). 406. Pub. L. No. 1 04-208, 1 1 Stat. 3009, 636-37 ( 1 996) (codified at 8 U.S.C. § 11 82(a)(5)(x) (2002)). 407. 8U.S.C.§§ 1101-1537(2003). 408. IIRIRA §343. 409. 42 C.F.R. §212.15(2002). 410. Id. § 212.15(c). 411. 8 U.S.C. § 1 1 82(a)(5)(C) (2002). 412. See id 413. Memorandum from William Yates, Associate Director for Operations, Citizenship and Immigration Services, Department of Homeland Security (Sept. 22, 2003), available at 2004] HEALTH CARE LAW 1209 When originally introduced, the VisaScreen provisions of the IIRIRA established a new ground of inadmissibility for applicants seeking entry to the United States to work in health care.'^^'* The law dictates that an applicant is inadmissible unless he or she presents a certificate verifying that his or her education, training, license, and experience meet all requirements for entry to the United States and that the applicant is competent in both spoken and written English.'*'' XL Labor: Developments in the Indiana Wage Payment Statute"*'^ In Highhouse v. Midwest Orthopedic Institute, ^^^ the Indiana Court of Appeals ruled on a case concerning the Indiana Wage Payment Statute. This case was granted transfer by the Indiana Supreme Court and a ruling is expected some time in 2004. A review of the issues and the appellate court's decision is appropriate. Dr. Michael Highhouse had entered into an employment agreement with Midwest Orthopedic Institute ("MOI") in 1996.^'^ Roughly three years into the contract, Dr. Highhouse gave MOI ninety days notice that he was terminating the employment agreement and would resign from MOI effective June 30, 1 999, the end of the contract term."*'^ Thereafter a dispute arose as to what monies were owed to the physician after his resignation. Two specific issues required the trial court's interpretation. The first was whether the physician was owed any post-termination bonus payments under the employment agreement. The employment agreement provided that Dr. Highhouse would receive an annual bonus based upon his "productivity, collection of accounts, office expenses . . . and the net income of [various] offices [in] Indiana.'"*^^ Although Dr. Highhouse received his quarterly bonus for May 1999, he did not receive any further bonus payments following his resignation, while MOI continued to collect payments for services furnished by Dr. Highhouse prior to his resignation."*^' On appeal, MOI argued that the plain language ofthe employment agreement prohibited Dr. Highhouse from receiving bonuses after resigning. In support of its position, MOI cited the termination without cause section of the employment agreement that said Dr. Highhouse would only receive his regular compensation ifMOI terminated the agreement early and gave ninety-day notice. However, the court found that this provision did not apply where Dr. Highhouse terminated the http://uscis.gov/graphics/lawsregs/handbook/FHCWmemo092203.pdf. 414. Pub. L. No. 104-208, § 343, 1 10 Stat. 3009 (1996). 415. 8U.S.C§ 1182(a)(5)(C). 416. IND. Code §§22-2-5-1 to -3 (2003). 417. 782 N.E.2d 1006 (Ind. Ct. App. 2003). 418. Id. at 1009. 419. Id. at 1008. 420. Id at 1009. 421. Id. 1210 INDIANA LAW REVIEW [Vol. 37:1161 agreement, and noted that the agreement was silent on that point/^^ The court agreed with Dr. Highhouse that his right to bonus payments vested at the time he performed the services related thereto.'^^-' Therefore, the court ruled that Dr. Highhouse was due bonus payments he earned prior to his resignation.'*^'* The second issue was whether these monies owed to Dr. Highhouse were truly "bonuses," as referred to in the employment agreement, or "wages" as defmed in the Indiana Wage Payment Statute.'*^^ If the monies were "wages," then the physician would also be entitled to a mandatory award of liquidated damages pursuant to the Indiana Wage Payment Statute.'*^*^ Specifically, the statute requires an employer to pay wages to an employee who voluntarily leaves employment on the "next usual and regularday for payment ofwages" following his or her departure.'*^^ The Indiana Wage Payment Act defines wages as "all amounts at which the labor or service rendered is recompensed, whether the amount is fixed or ascertained on a time, task, piece, or commission basis, or in any other method of calculating such amount."'*^^ In past cases, Indiana courts found that a payment will constitute a wage despite being called a bonus if it relates directly to the time an employee works; is paid on a regular, periodic basis, and was not predicated on the financial success of the employer."*^^ In finding that the bonus payments were actually "wages," the court cited the mandatory language in the employment agreement: "Employer shall also pay an annual bonus to Employee based upon Employee's productivity . . . ."'^^^ In addition, the court noted that MOI historically paid bonuses on a quarterly basis (i.e. paid on a regular, periodic basis). The appellate court therefore found that the trial court erred by not granting Dr. Highhouse partial summary judgment on his claim that the bonuses constituted wages under the Indiana Wage Payment Statute.'*^' However, as noted above, the Indiana Supreme Court's ruling is expected in 2004 and is anticipated to provide additional guidance as to the definition of "wages" in Indiana. 422. /c/. at 1011. 423. id. 424. Mat 1011, 1012. 425. Id at 1012. 426. Id 427. IND. Code §22-2-5-1 (1998). 428. Id §22-2-9- 1(b). 429. Highhouse, 782N.E.2d at 1013 (citing Gurnik v. Lee, 587N.E.2d 706, 710(Ind. Ct. App. 1992)). 430. /^. at 1014. 431. Id