Legal Updates

HITECH Act HIGH ANXIETY: Electronic Health Records Development May Expose Entities to ARRA Employee Whistleblowing

Any person or entity receiving funds under the American Recovery and Reinvestment Act of 2009[1] (“ARRA”) is also subject to its wide-reaching enforcement provisions. Given the government’s recent focus on combating fraud,[2] attention to the breadth of ARRA’s provisions is both timely and important. The Attorney General specifically focused on ARRA in a recent statement, pointedly noting, “[t]he department’s improved ability to…prosecute fraud will likely have high rates of return on the federal government’s investment of resources through the American Recovery and Reinvestment Act of 2009. This request will enable the department to help protect American savers and investors, the national financial market, and the U.S. Treasury.” [3]

The government’s recent focus on fraud enforcement in conjunction with the specific emphasis on protecting ARRA funds means both direct and indirect recipients of ARRA funds should be aware of certain provisions within ARRA that may unwittingly cause Office of Inspector general (“OIG”) scrutiny or employee claims. One such area is ARRA’s unprecedented whistleblowing protection provisions and the risk they pose to recipients of Health Information Technology for Economic and Clinical Health Act (“HITECH Act”) funds.

ARRA Whistleblower Protections

The ARRA whistleblower protection provisions[4] protect employees of non-federal employers receiving ARRA funds from being discharged, demoted, or otherwise discriminated against for disclosing information that the employee reasonably believes is evidence of:

(1) a gross mismanagement of an agency contract or grant relating to covered funds;

(2) a gross waste of covered funds;

(3) a substantial and specific danger to public health or safety related to the implementation or use of covered funds;

(4) an abuse of authority related to the implementation or use of covered funds; or

(5) a violation of law, rule, or regulation related to an agency contract (including the competition for or negotiation of a contract) or grant awarded or issued relating to covered funds.

The Act broadly defines non-federal employers to include (1) contractors, subcontractors, grantees or recipients of ARRA funds; (2) professional membership organizations, certification or other professional bodies, agents or licensees of the federal government; and (3) state and local governments with respect to covered funds. The provisions have a broad scope of prohibited retaliatory acts beyond discharge or demotion. Other discrimination or negative effects on terms and conditions of employment or any action that would dissuade a reasonable person from engaging in whistleblowing are covered.

The whistleblower provisions protect employees against any reprisal for disclosing information, including disclosures made in the ordinary course of business, to any person having supervisory authority over the employee, or to a designated compliance officer or other individual who has authority to perform internal investigations. The incorporation of protections for disclosures in the ordinary course of business in ARRA contrasts with interpretations of whistleblower protections under other statutes. Beyond the protections for internal disclosures, employee disclosures to a member of Congress or government personnel, including an inspector general or state or federal regulatory or law enforcement agency member, are protected. Given that ARRA whistleblowers can make protected disclosure to a wide array of entities and individuals, employers will want to foster an open dialogue with employees to encourage employees to report any perceived mismanagement or waste internally.

How HITECH and ARRA’s Whistleblower Provisions Interrelate

The whistleblower provisions in ARRA pose significant risk to those persons or entities receiving money under the HITECH Act provisions of ARRA. Those at risk include entities receiving grants and loans from the federal government under the HITECH Act to assist them in the implementation of electronic health record (“EHR”) technology. HITECH was touted as a way to improve and facilitate the implementation of EHRs, which, it is believed, will result in overall cost savings and better quality health care. Because of the nature of the technology and the revolutionary concepts in evolving health information technology, it is likely that the EHR infrastructure and integration will go through many iterations before efficiently and effectively being implemented. It is becoming clear that current versions of EHR have unique properties that may not integrate and fully operate with other current and future technologies. Different entities working with EHRs have different platforms, and the development of the wider enterprise integration anticipated by the HITECH Act will require ongoing revisions and modifications to current strategies. Because of the broad nature of the whistleblower protections in ARRA, many of these first generation attempts in EHR may fall prey to ARRA’s undefined terms of “gross mismanagement” or “waste of funds,” as noted above. This could be a particular risk area for those entities trying to incorporate existing systems with those contemplated under the HITECH Act. It is only natural that these transitions will be neither smooth nor flawless and the extent to which problems in this process may be deemed “gross mismanagement” or “waste” potentially opens up opportunities for employees to attract government scrutiny through the use of ARRA’s whistleblower protections.

If a report of gross waste or mismanagement or abuse of authority in connection with ARRA funds is made, the inspector general of the agency having jurisdiction over the ARRA funds is required, within 180 days, to investigate and make a determination regarding the employee’s complaint of reprisal. An employee alleging a reprisal must only prove that a protected disclosure was a “contributing factor” in the reprisal. It is important to note that circumstantial evidence including “(i) evidence that the official undertaking the reprisal knew of the disclosure; or (ii) evidence that the reprisal occurred within a period of time after the disclosure such that a reasonable person could conclude that the disclosure was a contributing factor in the reprisal” is permitted.[5] An employer’s rebuttal must demonstrate with clear and convincing evidence that they would have taken the action in the absence of the employee’s disclosure where the Inspector General finds a disclosure was “a” contributory factor in a reprisal. If, after reviewing the OIG report, the agency concerned with the ARRA funds finds that the employee was the victim of a reprisal, it has the authority to require the employer to (1) take affirmative steps to stop the reprisal; (2) reinstate the employee with back pay; and/or (3) pay compensatory damages, employment benefits or other awards to restore the employee to a position as if no reprisal had occurred. The employer may also be required to pay the costs and expenses associated with the complaint, including reasonable fees for the employee’s attorneys and experts. In addition, there are no expressed caps on damages, making employer liability under this section largely unknown. If the agency decides not to take action, the whistleblower may proceed against the employer in court.

Considerations for HITECH Fund Recipients

Because of the lack of clarity regarding how the expansive whistleblower protections will be implemented and enforced, recipients of HITECH funds should consider the following:

  • There are specific posting requirements for entities receiving ARRA funds. Each entity must post a notice to employees of ARRA whistleblower rights and remedies.
  • The whistleblower protections protect disclosures regardless of whether there was a claim of fraud or intentional misuse of ARRA funds. Therefore, any time an employee reasonably believes that a HITECH fund recipient has “grossly mismanaged” or “wasted” government funds, their disclosures or complaints are protected.
  • Gross mismanagement or gross waste of ARRA funds can be highly subjective. The lack of definitions generally and specifically related to the “gross mismanagement” and “waste” provisions leave much more room for dispute over the appropriate use of ARRA funds or abuse of authority related to the use of the ARRA funds. Because of the nature of EHR and dramatic changes in the technology and processes, the lack of definitional guidance creates a situation ripe for an entity using HITECH funds to become scrutinized by an agency for gross management or waste or for the complaint of an employee about trial and error efforts.
  • Organizations that may not have been on the OIG’s radar for fraud and abuse matters may suddenly become the target of a broader investigation. Once the OIG has gained access to an entity’s records in connection with a whistleblower’s complaint, there is nothing to prevent it from reviewing the records for other potential violations, including overpayments, fraud, and compliance with regulatory conditions of participation. Those entities developing EHR using HITECH Act funds are especially susceptible to this, given the government’s announced enforcement efforts directed at health care fraud and integrity in ARRA spending.

There are no express statutory provisions for an evidentiary hearing with cross examination or an administrative appeal. This is very different from procedures before the U.S. Department of Labor, which provide for hearings before administrative law judges and the Administrative Review Board under Sarbanes-Oxley and other statutes with whistleblower provisions. Because of this, it appears that an agency can take unilateral administrative action which could ultimately put an entity’s HITECH funds at risk and expose the entity to other sanctions including qui tam actions and claims under state law. This again strongly suggests prompt attention to internal complaints and prompt and thorough responses in any whistleblower complaints and investigations.


For those entities using HITECH funds to develop EHR systems, the broadness of the ARRA whistleblower provisions make it clear that entities must be thinking both from a fraud and abuse and an employment law perspective to develop prevention and protection safeguards. Going forward, employers receiving HITECH funds may want to take specific actions to foster an open environment to ensure that employees feel that their complaints and concerns are heard and meaningfully addressed. In addition, the environment should be one that cultivates EHR development without focusing on blame for ineffective or unworkable technologies while maintaining performance standards. Good documentation of performance problems will be important in many cases. Specific actions should focus on (1) developing or reinforcing effective compliance and ethics programs; (2) enhancing corporate code of conducts; (3) establishing and publishing a system for handling and investigating internal reports of misconduct or complaints of retaliation; (4) developing strategies to respond properly to any governmental inquiry or investigation; and (5) implementing structures for how to intake and investigate allegations of waste or mismanagement, even those that come in the ordinary course of business. Because of the broadness of the ordinary course of business inclusion, supervisors must be trained to recognize potential whistleblowers and to take these more general day-to-day complaints seriously.


For more information about this Client Alert, please contact:


Frank C. Morris, Jr.
Washington, DC
Patricia M. Wagner
Washington, DC

Associates Anjali Downs and Karen Schandler assisted in the preparation of this Client Alert.



[1] American Recovery and Reinvestment Act of 2009, Publ. L. No. 111-5 (2009).

[2] In a recent DOJ statement, Attorney General Eric Holder discussed the Department of Health and Human Services (HHS) request for a $60.2 million increase in the HHS budget, “specifically for DOJ components involved in the investigation and litigation of health care fraud cases. This increase will further the efforts of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative…” available at, (February 1, 2010).

[3] DOJ Press Release, available at (February 1, 2010).

[4] American Recovery and Reinvestment Act of 2009, Publ. L. No. 111-5 (2009), at §1553.

[5] American Recovery and Reinvestment Act of 2009, Publ. L. No. 111-5 (2009), at § 1553(c)(1)(A)(ii).


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FDA and NIH Announce New Funding Opportunities and Collaboration Designed to Help FDA Fast-track Innovations to the Public

On February 24, 2010, the U.S. Food and Drug Administration (FDA) and the National Institutes of Health (NIH) announced a collaborative “initiative designed to accelerate the process from scientific breakthrough to the availability of new, innovative medical therapies for patients.”[i] In the short-term, this initiative has created funding opportunities to third parties for research designed to provide “new methods, models or technologies that will inform the scientific and regulatory community about better approaches to evaluating safety and efficacy in medical product[s].”[ii] The goal of this joint initiative is to provide improved regulatory pathways that will deliver new medical products faster and safer. Prospective applicants must submit final applications by April 27, 2010.

What is the new initiative?

The two integral pieces of the initiative that will help the Agencies achieve their goals are the formation of the Joint Leadership Council and of the Funding Opportunity Announcement (FOA) entitled, “Advancing Regulatory Science through Novel Research and Science-Based Technologies.” The Joint Leadership Council will be comprised of 14 members, including the NIH director, the FDA commissioner and six members each from the NIH and the FDA, selected from the Agencies’ Directors and Senior Staff. The Leadership Council will “ensure that regulatory considerations form an integral component of biomedical research planning, and that the latest science is integrated into the regulatory review process.”[iii]

In addition to the creation of the Joint Leadership Council, the FDA and the NIH are contributing funds for third parties to “study the applicability of novel technologies and approaches towards the development and regulatory review of medical products”[iv]through the FOA. Prospective applicants are encouraged to submit a letter of intent by March 27, 2010,[v] and must submit final applications by April 27, 2010.[vi] Eligible prospective applicants include for-profit and not-for-profit organizations, public and private institutes of higher education, and federal, state and local governments.

As part of reaching the goal, the FDA seeks to fill in knowledge gaps with respect to regulation of innovative medical products. Dr. Margaret Hamburg, FDA Commissioner, understands that, while bench scientists develop new approaches to diseases and clinicians may be able to show that they work, “[FDA] regulatory scientists must have the knowledge and tools to help translate discovery, innovation and promise into real world products for those who need them.”[vii] Dr. Hamburg also recognizes that the FDA does not have these tools in place with respect to new innovative fields such as personalized medicine.[viii] Without a clear regulatory pathway in place, entities are less likely to make investments in these fields.[ix] Dr. Hamburg is confident that the coordination and collaboration with NIH will enhance both Agencies’ efforts towards “improving health, reducing disease and saving lives.”[x]

What are the short-term impacts of this collaboration?

Initially, one of the biggest opportunities created by this new initiative is the funding opportunity for third parties designed to provide “new methods, models or technologies that will inform the scientific and regulatory community about better approaches to evaluating safety and efficacy in medical product[s].”[xi] Entities that are capable of this research not only have an opportunity for funding but also have the opportunity to play an integral role in shaping the development of these new FDA regulatory paradigms.

In addition to the funding opportunity, the FDA and the NIH announced they will be holding public meetings in the Spring, the purpose of which will be to solicit input on how the Agencies can better work together. This public hearing should provide opportunities for entities to potentially submit written testimony as part of the docket or give oral input at the hearing itself. Those entities that anticipate participating in the regulatory pathways established by the FDA to regulate these new innovations should consider participating in these meetings, as early input will likely play a large role in how the FDA establishes these new regulatory pathways.

What are the possible long-term impacts of this collaboration?

This collaboration is designed to provide improved regulatory pathways that will deliver new medical products faster and more safely by helping the FDA develop a consistent, integrated and comprehensive approach to the evaluation and regulation of innovative therapies, including personalized medicine. Over the long-term, this comprehensive approach is likely to impact the size and scope of clinical trials, speed of regulatory review, product labeling and product reimbursement.

This collaboration may reduce the size and costs of clinical trials, by providing the FDA the scientific knowledge necessary to allow it to validate new surrogate endpoints. Currently, the FDA faces challenges in regulating clinical trials for treatments of rare diseases because of limited sample sizes. This is also true with clinical trials for personalized medicine. This collaboration will hopefully provide the FDA with sufficient knowledge to allow the FDA to analyze and feel comfortable with the results of smaller sample size clinical trials. This may allow entities to increase funding orphan drug discovery and personalized medicine with less risk of not finding sufficient numbers of individuals to participate in clinical trials. The decreased size and length of clinical trials will likely result in less data supplied to the FDA for review and will likely reduce approval timelines.

Currently, a beneficial treatment may be withdrawn from the market or denied access altogether if it poses even a relatively minimal risk of causing a serious adverse event. Dr. Hamburg recognizes, however, that if there is a reliable way to identify at-risk patients and exclude them from the treatment population, complete product withdrawal from the market may not be necessary, and it is possible that some of these beneficial treatments could continue to potentially save lives. This new collaboration may provide the FDA with the scientific knowledge necessary to identify at-risk patients and allow these beneficial products to remain on, or have access to, the market so long as the label carries an indication preventing at-risk patients from being exposed to the treatment. It also may potentially open up new reimbursement routes for new and existing products.

The knowledge gained through this collaboration also may impact reimbursement for innovative treatments in several ways. First, this knowledge may provide pathways to approval for new innovative treatment areas. At the same time, product labeling is known to impact reimbursement decisions, and any labeling changes may affect how and if an entity’s product is reimbursed by payers. For instance, if the label contains a warning that either certain individuals are known to be at-risk for serious adverse events if exposed to a treatment or that the treatment is known not to be beneficial to a certain segment of the population, these treatments may not be reimbursed if provided to these excluded populations. Additionally, new doors to reimbursement may open for those entities that can develop such testing protocols and capabilities, since testing would likely be necessary to determine if a patient is part of the excluded population.

The goal of this collaboration between the FDA and the NIH is to develop improved regulatory pathways at the FDA that will deliver new medical products faster and more safely by developing a framework for evaluating and regulating the determinations discussed above. While these new regulatory pathways may impose additional hurdles that entities must overcome before an FDA-regulated product is placed on the market, they may provide entities with new pathways for products that would otherwise be denied access to the marketplace because of the risks associated with the products. This will hopefully allow more products to move faster from microscope to marketplace.

* * *

This Client Alert was authored by Lynn Shapiro Snyder, Dan Gottlieb and Lee Rosebush. For additional information about the issues discussed in this Client Alert, please contact one of the authors or contributors or the EpsteinBeckerGreen attorney who regularly handles your legal matters.

The EpsteinBeckerGreen Client Alert is published by EBG’s Health Care and Life Sciences practice to inform health care organizations of all types about significant new legal developments.

Lynn Shapiro Snyder, Esq.


If you would like to be added to our mailing list or need to update your contact information, please contact, Kristi Swanson, or 202/861-4186.


[i] News Release, U.S. Food and Drug Administration and National Institute of Health, NIH and FDA Announce Collaborative Initiative to Fast-track Innovations to the Public (Feb. 24, 2010),

[ii] Id.

[iv] Request for Applications, Department of Health and Human Services, RFA-RM-10-006, Advancing Regulatory Science through Novel Research and Science-based Technologies, (Feb. 24, 2010).

[v] “Although a letter of intent is not required, is not binding, and does not enter into the review of a subsequent application, the information that it contains allows IC staff to estimate the potential review workload and plan the review.” Id.

[vi] Id.

[vii] Dr. Margaret Hamburg, Commissioner, U.S. Food and Drug Administration, Remarks at Announcement of FDA/NIH Collaboration (Feb. 24, 2010).

[viii] “The term ‘personalized medicine’ can mean many different things, . . . [f]or the FDA, however, the term has a very distinct meaning: it is the application of genomics in the development of medical products that are safer and more effective for the public.” Dr. Margaret Hamburg, Commissioner, U.S. Food and Drug Administration, Remarks at AAAS – The Future of Personalized Medicine (Oct. 26, 2009).

[ix] Id.

[x] Dr. Margaret Hamburg, Commissioner, U.S. Food and Drug Administration, Remarks at Announcement of FDA/NIH Collaboration (Feb. 24, 2010).

[xi] Dr. Margaret Hamburg, Commissioner, U.S. Food and Drug Administration, Remarks at AAAS – The Future of Personalized Medicine (Oct. 26, 2009).

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BC Hydro Selects 19 Projects in First Stage of Clean Power Call

470 days after it received proposals from 43 proponents for 68 clean energy projects, BC Hydro announced today the results of its 2008 Clean Power Call.

In the first stage of awards, BC Hydro selected 19 projects for electricity purchase agreements (EPA’s) comprising 2,450 GWh/year being less than half of the 5,000 GWh/year acquisition target it had requested from developers in the 2008 Clean Power Call. Length of the contracts and financial terms were not disclosed.

Of the 19 projects selected for EPA today, run-of-river and wind projects almost evenly split the generation capacity awarded. This is noteworthy because currently in BC there is only one operating wind park, while there are over 35 run-of-river projects generating to the BC grid. Perhaps BC Hydro may be seeking more wind energy as quality run-of-river projects become more difficult to find.

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Breaking News: Clean Power Call Awards

Just announced by BC Hydro, 19 projects have been selected for an award of an electricity purchase agreement under BC Hydro’s Clean Power Call.

More to come.

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The Women Business Leaders’ Summit

I’d like to bring to your attention an upcoming program and a fundraising event that will be hosted by the Women Business Leaders of the U.S. Health Care Industry Foundation (WBL), a great women’s organization. The WBL was established to help senior executive women in the health care industry improve their businesses and continue to grow professionally. One of my colleagues at EpsteinBeckerGreen, Lynn Shapiro Snyder, is WBL’s founder and president.

On March 17 – 19, 2010, in Dallas, Texas, WBL will host the 2010 WBL Summit. You can learn more about this program at The Summit is WBL’s annual meeting and the only industry-wide meeting for senior executive women and women board members from the health care industry. Registration is currently closed, but there is a waiting list. 

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Department of Labor Supplements 403(b) Annuity Plan Guidance for Tax-Exempt Entities: Where Does Your Plan Stand?

The Department of Labor (the “DOL”) recently clarified that tax-exempt entities (such as non-public schools or charitable hospitals) offering 403(b) annuity programs subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)must file an Internal Revenue Service Form 5500 Annual Report (“Form 5500”) for the 2009 plan year and thereafter. The new guidance, Field Assistance Bulletin (FAB) No. 2010-01 (February 17, 2010), also details which employee annuity contracts must be reported on the Form 5500 and what types of annuity contracts are grandfathered from the reporting requirements.

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195.1 UPDATE: New York Issues Guidelines, Instructions and Additional Model Notices of Pay Rates and Pay Days

The New York State Department of Labor (“DOL”) has recently made available important new information for employers regarding their obligations under Section 195.1 of the Labor Law including notice of pay rates, pay dates and other information.

As we previously reported (see our Client Alerts of December 11, and October 30, 2009), pursuant to Section 195.1 of the Labor Law (the “Statute”), as of October 26, 2009, employers must provide newly hired New York employees with written notice of their: (1) pay rate; (2) overtime pay rate (if they qualify for overtime pay); and (3) regular paydays.

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UPDATE – COBRA Subsidy: New Extension Through March 31, 2010

As we reported in our Client Alert of December 24, 2009 (“UPDATE: COBRA Subsidy: What it Means for Employers Now“), President Obama signed into law the Department of Defense Appropriations Act, 2010 (the “Defense Appropriations Act”), which, among other things, extended and expanded certain provisions of the American Recovery and Reinvestment Act of 2009 (“ARRA”) pertaining to premium assistance for benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). The Defense Appropriations Act extended the COBRA premium subsidy program for assistance-eligible individuals who became eligible for COBRA from the period that began September 1, 2008, and ended on December 31, 2009, to the period that ended on February 28, 2010.

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Special Alert: ICE Expands Worksite Enforcement Activities in the Southeast

On Tuesday, March 2, 2010, the U.S. Department of Homeland Security (“DHS”) announced that it was expanding its worksite enforcement strategy in the Southeastern United States. As part of this strategy, the U.S. Immigration and Customs Enforcement (“ICE”), the agency within DHS directly responsible for worksite enforcement, indicated that it is issuing Notices of Inspections (“NOIs”) to 180 businesses in Tennessee, Alabama, Arkansas, Louisiana and Mississippi. These NOIs alert the businesses that ICE will be inspecting their Form I-9s and seeking to review voluminous other business records, including a list of current and terminated employees with hire and termination dates; the names, social security numbers and dates of birth of all active employees; quarterly wage and hour reports and/or payroll data on all employees covering the period of inspection; quarterly tax statements; all correspondence with the Social Security Administration (including “No-Match” letters); and more! All of this is an effort by ICE to determine whether the businesses are complying with federal employment eligibility verification laws and regulations.

This DHS announcement is the latest in a series of expanding worksite enforcement efforts by the Obama administration. Instead of raids, the Obama administration has focused its efforts on auditing and investigating employers to determine if they are satisfying the Form I-9 requirements and are knowingly or unwittingly employing illegal workers. Hector Chichoni, the Chair of EBG’s Southeastern Immigration Practice, notes: “this action by ICE underscores what the Immigration Law Group at EBG has been advising clients since the Obama administration took office. Businesses need comprehensive employment verification and related compliance plans in place because the civil and potentially criminal consequences of this enforcement strategy can be severe. Businesses that ignore this important aspect of their operations can face substantial fines that make compliance now not only good corporate citizenship, but also good risk management.”

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The Changing Numbers of Women on Wall Street, in the Workforce, and in Boardrooms

The New York Times recently published a few intriguing articles about women that I wanted to share with you.

Women are working in the financial industry in fewer numbers these days, despite more than 20 years of increased hiring and promoting, according to the article “Where Are the Women on Wall Street?” What is responsible for this decline? As The Times notes, fewer female graduates are seeking careers in the financial industry and women are abandoning the industry faster than men. And when women are laid off from a financial job, it’s harder for them to return to the industry because they face an environment that’s more hostile to women than men. While this is disappointing news, The Times adds, on a positive note, that women continue to maintain “a strong presence in some areas in finance, including wealth management.”

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