An extract from The Healthcare Law Review, 4th Edition

The licensing of healthcare providers and professionals

i Regulators

Licensure of healthcare providers and professionals is primarily regulated at the state level, typically by the state departments of health, departments of public health, boards of registration, or similarly titled agencies. Such agencies serve as the primary authority that promulgates and enforces licensure requirements for healthcare facilities and individual providers, including physicians, nurses, physician assistants, pharmacists and other healthcare professionals. In some states, accreditation by a private accreditation agency, discussed below, creates 'deemed' compliance status for the provider. Regulatory boards, usually made up of other licensed practitioners, guard the 'scope of practice', often fighting to exclude new, competing professionals, like new categories of non-physician practitioners (referred to above).

Usually, licences are limited to a specified period (e.g., one to three years) and must be renewed on a periodic basis. Each type of healthcare facility and provider has its own set of licensure requirements, although there are some types of requirements that are common to all.

ii Institutional healthcare providersLicensure

As indicated above, the licensing of hospitals and other types of healthcare facilities is regulated at the state level, resulting in at least 51 different sets of licensure requirements for institutional healthcare providers. Notably, even the types of healthcare facilities that require a licence to operate vary from state to state, which can become particularly challenging as more and more healthcare providers move towards consolidation. In general, states will require licensure of hospitals (both general and specialism), nursing homes, ambulatory surgical centres, healthcare clinics (though the specific types of licensure and restricted activities can vary widely from state to state), pharmacies and other similar healthcare facilities.

For hospitals and other health facilities, the licensure laws typically cover issues such as professional and non-professional staffing; physical plant requirements; required clinical services; administrative capabilities; and a vast array of other requirements. In most states, in addition to hospital licensure, full-service hospitals require other licences and permits, such as laboratory permits, permits relating to hazardous wastes, food service permits, and transportation licences for hospital-affiliated ambulances. Other residential healthcare facilities, such as nursing homes or behavioural health homes, are typically subject to similar requirements.

States also generally impose sanctions for the provision of healthcare services without a licence by a facility, which often include penalties per violation or per day in operation without a licence. State licensure authorities also have individualised procedures for the issuance, suspension or termination of a facility licence, which typically provide for an appeal by a provider that is refused a licence or has its licence suspended or terminated. As described in Section IX below, many state governments waived certain facility licensure and operational requirements during the covid-19 public health emergency.

Certificate of need laws

There are also a number of other healthcare-related restrictions that may preclude the construction of a hospital or other health facility. In this regard, a small number of states have certificate of need (CON) (sometimes called 'determination of need') laws that regulate the construction and licensing of new hospitals and other types of healthcare facilities and the addition of new beds to existing facilities. These laws are aimed at avoiding excess capacity and inefficiencies in the delivery of healthcare.

A federal law enacted in 1974 provided for the establishment of CONs by the states. That law was repealed in 1986 and, since that time, a number of other states have repealed their CON laws or dialled back the types of healthcare facilities required a CON. However, despite the gradual fading of CONs during the 1990s and 2000s, as states seek to find ways to contain costs as Medicaid and private employer spending on healthcare becomes a serious budgetary concern, some states are revisiting their CON laws.

Certification and accreditation

In addition to the licensure requirements administered by the states, Medicare, Medicaid and other government reimbursement programmes rely on the 'power of the purse' in regulating healthcare providers in their delivery of services. These programmes impose 'conditions of participation' and 'conditions of payment', which essentially mandate compliance with specified standards set out in the government programme's regulations and policies. The process of Medicare, Medicaid and other government reimbursement programmes determining compliance by a hospital or other healthcare provider with the programme's rules is known as 'certification'. Certification is a right to participate in the government payment systems; it is distinct from state 'licensure' and private 'accreditation'. In most cases, hospitals will possess all three: certification, licensure and accreditation, although there are examples of hospitals that do not.

Although they are ultimately responsible for granting certification, the Medicare and Medicaid programmes delegate much of this responsibility to private accreditation agencies and state 'survey agencies'. The two primary private accreditation bodies in the United States are the Joint Commission (TJC) (previously referred to as the Joint Commission on Accreditation of Health Care Organisations, or JCAHO), which surveys most hospitals and other healthcare institutions, and the American Osteopathic Association (AOA), which surveys osteopathic hospitals. Foreign healthcare organisations may be most familiar with Joint Commission International, or JCI, affiliated with TJC. Compliance with TJC or AOA standards affords a hospital 'deemed status' as a certified provider under the Medicare programme, as well as the Medicaid programme, in most states. This means that a hospital is deemed to comply with the Medicare, and usually the Medicaid, requirements, if it complies with the applicable accreditation standards. Accreditation expires no later than three years from the date of the most recent survey of the hospital. The accreditation agencies can also resurvey hospitals on an unannounced basis. As noted above, accreditation also confers deemed status for state licensure purposes in some jurisdictions.

Hospitals are not required to seek private accreditation. The process of seeking accreditation is lengthy and expensive. The accrediting bodies charge considerable fees for the survey process, and also sell a variety of consulting services to accredited hospitals. These fees will often run into hundreds of thousands of dollars per year. Some smaller organisations, seeking to reduce their expenses, forego accreditation and rely on the surveys by the state survey agencies. The federal Medicare programme has contracted with the state healthcare agency in every state (usually a Department of Public Health) to be the official state survey agency for the CMS. These state survey agencies will visit and approve the certification in the Medicare programme and do not charge the hospital, other than nominal licensing fees.

The OIG has criticised the relationship between TJC and hospitals as being too 'collegial', and a reaction has been somewhat harsher TJC surveys. Consequently, more hospitals are considering relying on the state survey rather than TJC accreditation status to achieve Medicare certification.

iii Healthcare professionals

Health practitioners are subject to licensure by their respective state boards. These typically include the medical board for physicians, the nursing board for nurses, and other boards for other types of licentiates. In some states, the state department of health performs this function for some professional categories. These boards establish and enforce the criteria for initial and ongoing licensure, as well as a process for revoking such licensure or taking other disciplinary action, such as the imposition of probation. In response to the covid-19 pandemic, many state medical and nursing boards waived certain licensure requirements, as described in Section IX, below.

Although each state issues its own licence, some states permit reciprocity by honouring each other's licences. For example, there is a Nursing License Compact (NLC), under which 34 member states recognise the nursing licences granted by all the other member states (one of the 34 states, New Jersey, has only partially implemented the NLC). In addition, some states honour each other's medical licences or permit physicians who are licensed in another jurisdiction to practise medicine across their state lines using telemedicine.

In addition to government licensing and certification requirements, 'credentialling' of individual professionals occurs at the facility level. Compliance with standards and requirements established by individual health facilities permits individual licentiates to perform services within those facilities. Health plans, professional associations and licensed outpatient facilities usually also impose such requirements.

State and federal statutes applicable to physicians and certain other licentiates provide hearing and appeals rights when a state agency denies, or proposes to deny or revoke, licensure or certification. Similarly, hospitals, health plans and certain other providers or professional organisations are required by state and federal law to have formal peer review and quality assurance or quality improvement procedures in place whereby they determine whether to permit a new practitioner to provide services to their patients. These procedures also govern any adverse disciplinary actions against practitioners, such as the revocation or restriction of their clinical privileges. Under a federal law called the Health Care Quality Improvement Act (HCQIA), and under state laws in many jurisdictions, these organisations must follow specified procedures in making adverse decisions affecting a practitioner's privileges. In most states, practitioners must go through or 'exhaust' these administrative appeal procedures before they can challenge the denial or revocation of privileges or other adverse action in court. Because failure to follow these rules can result in liability to the organisation, it is incumbent on hospitals and other healthcare organisations that are subject to these rules to have a compliant peer review and appeals process in place prior to commencing operations.

Pursuant to the reporting provisions of the HCQIA, practitioners who either do not challenge adverse actions or who are unsuccessful in their challenges are identified on the National Practitioner Data Bank so that other prospective employers or hospitals become aware of any competence or conduct issues before permitting such practitioners to join their staffs. The HCQIA also confers immunity on hospitals and certain other organisations that perform peer review and on the individuals who participate in that process. To qualify for immunity under the HCQIA, certain conditions must have been met, including adequate notice and an opportunity for the affected practitioner to be heard that meets certain criteria. The peer review action must also have been taken with the reasonable belief that the action was warranted based on the facts known.

As is the case with health facilities, individual healthcare licentiates enroll in Medicare and other government payment programmes if they want to participate in these programmes. They must also meet specified requirements, such as licensure under state law.

Negligence liability

One characteristic of the US healthcare system that is viewed by many as contributing to its exorbitant cost is professional liability ('medical malpractice'). Under the US professional liability system, any patient who believes he or she has been hurt or injured by the professional negligence or wilful misconduct of a healthcare provider is entitled to damages if he or she demonstrates that it is more likely than not that the negligence or wilful misconduct caused the patient's hurt or injury.

It is believed by many providers and politicians on the right that fear of liability drives up the cost of US medicine because physicians order tests that are not medically necessary out of fear that the theory or failure to order the test will be second-guessed if the patient has a bad outcome. This is sometimes referred to as practising 'defensive medicine'.

In addition, professional liability can arise from failure to obtain appropriate informed consent. If a practitioner fails to do so, the patient may argue that he or she would not have undertaken the procedure and its inherent risks had he or she been notified of those risks.

There are some basic steps providers can take to help reduce their risk of liability. These include careful documentation; obtaining consent from patients; using validated protocols, when available; and following up with patients after they receive their treatment. Some states, including California, have enacted caps on non-economic damages in professional liability cases. This reduces the exposure that practitioners face when performing medical services. Fortunately, most states in the United States also have 'good Samaritan' laws that permit physicians and other healthcare practitioners to render aid at the scene of an emergency, or to assist in the rescue of an individual, without incurring liability.

In addition to provider liability, medical devices and pharmaceuticals experience liability for patient injuries on some different theories, most notably 'products liability'.

Despite some calls for reform, medical malpractice suits continue to be a frequent presence, based in part on real concerns regarding medical errors. A recent study by Johns Hopkins University found that more than 250,000 patient deaths per year in the United States are a result of medical error, making these types of errors the third leading cause of death in the country.

The covid-19 pandemic led the federal government and many states to pass measures waiving or limiting provider liability for care provided during the public health emergency. These measures are discussed in more detail in Section IX, below.