A Distinguished Health Care Law Practice Addresses The Future

Wednesday, March 1, 2006 - 01:00

Editor: Mr. Kornreich, would you give our readers some idea of your
professional experience?

Kornreich: After graduating from Harvard Law School in 1977, I went to
work for the Legal Aid Society. After two years I joined a firm and quickly
became involved in a case involving the representation of the New York City
hospitals and the fairly new Health and Hospitals Corporation in a suit against
the state and federal governments over millions of dollars in Medicaid
reimbursement. That was my introduction to health care law.

Several years later the firm began to represent St. Luke's-Roosevelt
Hospital, the largest hospital in the state at that time. In May of 1984 the
Hospital's general counsel left, and I became general counsel later that year. I
spent four years at St. Luke's-Roosevelt.

Following that experience, I joined Garfunkel, Wild & Travis to practice
health law, and, in 1990, went on to Proskauer. I have been here ever since.

While I came to the practice of health law by chance, my work with Legal Aid
reflected, I think, a sense of mission that you find in most lawyers engaged in
this practice. There is a definite reward in being part of an effort to improve
health care, and most of us are conscious of being beneficiaries of that reward.

Editor: Would you share with us the things that attracted you to
Proskauer?

Kornreich: The principal factors that attracted me to Proskauer were
the quality of the people at Proskauer and the quality of the firm's work. With
respect to the former, I knew of Bob Kaufman and Irwin Birnbaum, two giants in
the health care field, and I took a certain pride in the fact that they wished
me to join their firm. In addition, Ed Silver and Stanley Komaroff were chairs
of the firm at about that time, and they had a strong interest in the health
care field. The firm's reputation for the quality of its health care work and
the obvious support for the practice among the firm's leadership convinced me
that this was the right place to be.

Editor: How has your practice evolved over the course of your career?

Kornreich: The work is constantly changing, which means that my
practice entails continuous and ongoing learning. When I began, the key issues
in health law revolved around reimbursement - prying money out of government
agencies - and there were significant end-of-life issues, including the right to
die, as well. Health care compliance issues, which are so crucial today, were
not a significant part of the practice at that time.

The Anti-Kickback Law was already in place when I began my practice, and it
grew in significance over time. The government began to focus increasingly on
the abuse of referral relationships, and the adoption of the Stark Law, which is
aimed at certain health care relationships, was meant to enhance the weaponry
available to prosecutors. For example, the Stark Law made intent irrelevant in
scrutinizing a relationship that involved billing for Medicare or Medicaid
referrals. This factor added considerably to the complexity of handling these
cases.

The biggest change in health care law has been the invigoration of the False
Claims Act in 1986 and the expansion of its application to include regulatory
violations. It is well established that there is no private right of action
under the Stark Law, the Anti-Kickback Law, or the Medicare conditions of
participation. Courts have held, however, that where there is a required
certification of compliance with such laws (or an implied certification where
compliance is a stated condition of payment), and a knowingly false
certification of such compliance (actual or implied) is made, there is a
potential violation of the False Claims Act. Under that law, individuals are
authorized to file qui tam actions as relators - private attorneys
general - on behalf of the federal government. That allows them to get a
substantial piece of any recovery, which serves as an incentive to bring these
actions in the first place.

Another key change in my practice results from the increasing concern by
employers about the costs of providing for the health care of their employees.
It is imperative for ERISA lawyers to know something about health law as a
result, and vice versa. "Managed care" also did not exist when I began my
practice; today it is dominant. Corporate governance has always been a
significant aspect of any health law practice, but today it is at the center of
any such practice.

Across all of this time, there is one constant: the ever increasing awareness
of the need for compliance, both on the corporate governance side and on the
service side, particularly as it relates to Medicare and Medicaid.

Editor: And Proskauer's Health Care Department? What is the origin of this
practice?

Kornreich: For many years one of our partners, Al Rose, served on the
board of Mount Sinai Hospital and other health care institutions. He was also
involved statewide in early health planning initiatives. The firm's practice
grew out of his public service involvement. When Bob Kaufman began to represent
the Greater New York Hospital Association in the late 1960s, the practice took a
great step forward.

Editor: How large is the group, and what subspecialties does it
include?

Kornreich: We have about 30 attorneys in the department. We also rely
on attorneys from other practice groups in the firm, including ERISA and Labor
& Employment. The group has some segmentation - litigation, ERISA,
regulatory issues, managed care, transactions, and so on - but these are
orientations, not full-time commitments. A good health care lawyer is someone
who knows a great deal across a broad range of subjects. He or she is
characterized by both depth and breadth of knowledge, and a rigid segmentation
tends to pull in the opposite direction.

Editor: What kinds of backgrounds do your people bring to this
practice?

Kornreich: It is important for a health lawyer to have a real
knowledge of the industry. It is a complicated industry, and one must know the
players and their strengths and weaknesses. In addition, a good health lawyer
must have a breadth of knowledge. It is unusual for a client to bring a problem
that is limited to a single substantive area of the law. One must have
substantive knowledge across a wide range of disciplines, know where they
intersect and overlap and, since no one can know everything, where to go for
help in coming up with the answers. The laws that govern these practice areas
are changing all the time, so a penchant for continual study is mandatory.

Editor: How do you go about staffing your projects? Are you able to draw
upon, say, the litigation or M&A groups when necessary?

Kornreich: We are fortunate in being able to draw upon other
departments and practice groups on an as-needed basis. There are few issues that
come to us today that are not multifaceted. In my practice, for example, I work
with our tax lawyers on a daily basis.

Editor: Please tell us about some of the significant matters that the
department has handled recently.

Kornreich: Among our most recent matters is the representation of a
major academic center in a large False Claims qui tam settlement. We are
also involved in due diligence on behalf of a number of entities engaged in
M&A transactions, including a large private equity hospital acquisition last
year. We are currently defending a pharmaceutical company in an average
wholesale price case structured as a False Claims Act action (something we see
with increasing frequency). We have represented a medical center in Brooklyn in
a large managed care case. We represent both health care providers and the
companies that contract with them in connection with referral relationships. We
are also involved in numerous financing transactions for long-term medical
facilities. The range is considerable.

Editor: Since the recent corporate scandals, corporate governance has
become a major issue in just about every corporate setting. How has this
impacted your practice?

Kornreich: It has had a substantial effect. While, strictly speaking,
Sarbanes-Oxley does not generally apply to not-for-profit organizations -
including most hospitals - there are certain provisions, including the
provisions prohibiting the destruction of records and one (of the two) governing
whistleblowers, that apply to all entities. More importantly, Sarbanes reflects
a major shift - cultural, legal and social - regarding corporate governance, and
many not-for-profits are adopting the imperatives of that shift on a voluntary
basis. Many have adopted language requiring the audit committee to possess some
financial expertise, for example, and the movement toward compensation, audit
and nominating committees that are independent of management control is very
substantial. All governing boards are concerned with openness and transparency,
in addition to the enhancement of internal controls. All of this activity
reflects a new culture of compliance.

Editor: What are the key health law issues that need to be addressed over
the next few years?

Kornreich: The biggest issue concerns the increase in qui tam
matters. The statute does not require the relator to bring the matter first to
the alleged perpetrator of the fraud to give it an opportunity to fix the
problem before the claim is brought. Indeed, the False Claims Act does not
prevent someone who has been substantially involved in the alleged wrongdoing
from filing an action. In light of how catastrophic the damages can be, the
governing board - acting in the interests of the shareholders or the mission (in
a not-for-profit) - will settle the matter rather than resist. There is not a
level playing field insofar as these disputes are concerned.

We will also see substantial issues in drug pricing, including claims under
Part D and Part B of Medicare, whose reimbursement calculations require data
from pharmaceutical companies.

I think that we will see more health care bankruptcies. In not-for-profit
health care systems, the parent-subsidiary relationship is different from what
prevails with respect to for-profits. The allocation of assets across a
not-for-profit health care system will need to be addressed, and I think the
bankruptcy principles and rules will continue to grow in significance.

Antitrust is also a critical area. We now see increasing consolidation on
both the payor side and the provider side, which implicates several antitrust
issues. On the payor side, consolidation tends to be by way of merger, and there
is more legal clarity in light of the for-profit status of most payors. With
respect to providers, the key issue concerns at what point a system becomes a
single entity for antitrust purposes. Transactions must be structured in such a
way as to result in clinical integration that the government can recognize as a
basis for single-entity treatment. We are going to see providers move towards
these consolidation models with or without corporate structure integration.

Please email the interviewee at ekornreich@proskauer.com with questions about this
interview.