Health Law Informer

Word spread quickly Monday (December 20, 2016) about CMS’ issuance of final regulations (to be published in the Federal Register on January 3, 2017) rolling out new mandatory bundled payments models for Acute Miocardial Infarction (AMI), Coronary Artery Bypass Graft (CABG), Surgical Hip and Fracture Treatment (SHFFT), a Cardiac Rehabilitation (CR) incentive model and Track 1+ Accountable Care Organizations. Speculation that President-elect Donald Trump’s nominee for HHS secretary, Rep. Tom Price, would move to roll the regulations back spread just as quickly.

The new regulations mandate bundled payment models (covering the period from admission to ninety days post-discharge) for AMI and CABG in 98 geographies covering 1,120 hospitals; for SHFFT in the 67 geographies where the Comprehensive Joint Replacement (CJR) has already been mandated covering 850 hospitals and for CR in 90 geographies covering 1,320 hospitals. CMS’ chart of geographies covered by each program is set forth here. The AMI, CABG and SHFFT programs give participant clinicians the opportunity to be excluded from Medicare and CHIP Reauthorization Act of 2015’s (MACRA) Medicare Incentive Payment System (MIPS) and to qualify under MACRA’s Advanced Alternative Payment Model (AAPM). Continue reading…

On November 30, 2016, the House overwhelmingly passed (392-26) the 21st Century Cures Act (“Bill”). The Bill moves on to the Senate next week and it is projected to pass in the Senate as well. Notably, the Bill seeks to improve upon the federal regulatory structure regarding Federal Drug Administration (FDA) approval and expediting the development of new drugs. Under the Bill, FDA funding would increase by $500 million. The Bill also provides for the authorization of new National Institutes of Health research grant funding, in the billions, including funding for Vice President Biden’s “moonshot” to cure cancer. Importantly, a proposed provision regarding reporting under the Sunshine Act was removed from the Bill. Specifically, the proposed provision would have exempted from the reporting requirements of the Physician Payment Sunshine Act payments from drug and device manufacturers to physicians for speaking at continuing medical education events and for contributing to medical textbooks, or medical journals.

Last week, the Third Circuit Court of Appeals held that the merger between Penn State Hershey Medical Center and PinnacleHealth System, the two largest hospitals in Harrisburg, Pennsylvania, may not move forward at this time. The Court of Appeals overturned the District Court’s (Middle District of PA) denial of the FTC’s and the Commonwealth of Pennsylvania’s request for a preliminary injunction, directing the District Court to enter a preliminary injunction blocking the merger “pending the outcome of the FTC’s administrative adjudication.”

In reaching its decision, the Court of Appeals held that the critical determination of the relevant market for a proper antitrust analysis should be defined primarily “through the lens of the insurers” and that it “was error for the District court to completely disregard the role insurers play in the healthcare market.” The Court of Appeals ruled that the relevant market was the four- county Harrisburg area. It found that the market was highly concentrated and that the combined hospitals would control 76% percent of the market. As a result the plaintiffs were found to have established a prima facie case that the merger “is presumptively anticompetitive.”

In rebuttal, the hospitals alleged, among other things, that, the merger would result in efficiencies leading to capital savings and enhance the hospitals’ efforts to engage in risk-based contracting, but the Court of Appeals found that these arguments failed to demonstrate tangible, verifiable benefits to consumers, and only constituted “speculative assurances.” It remains to be seen whether the hospitals will continue their pursuit of merger through the FTC’s administrative review process or abandon it.

This decision, like others involving hospitals that have preceded it, underscores the unique nature of the markets in which hospitals and other healthcare providers operate. These markets are not primarily defined by the direct impact of market consolidation upon the behavior of the ultimate consumers, the patients. Instead, the markets are defined by the patients’ purchasing surrogates, their health insurers.

For more information about this decision, contact Chris Raphaely, Nicole Martin or a member of Cozen O’Connor’s Health Law team

On August 18, 2016, the Secretary of Pennsylvania’s Department of Health (“DOH”), Dr. Karen Murphy, announced that the DOH has posted draft temporary regulations (“Regulations”) focusing on the 25 medical marijuana grower/processor permits that will become available under Pennsylvania’s Medical Marijuana Act (“Act”) that was passed last April.

The Regulations state the general application requirements for medical marijuana organizations, which requirements include detailed information about principals and financial backers of such organizations. Medical marijuana organizations include not just grower/processors, but also clinical registrants and dispensaries. The application requirements also contain a clear commitment to foster diversity. The Regulations establish procedures for promoting and ensuring that medical organizations foster diversity through participation of diverse groups in all aspects of the medical organization’s operations. This includes but is not limited to requiring each organization to have a diversity plan. Diverse groups are defined under the Regulations as “disadvantaged business[es], minority-owned business[es], women-owned business[es], service-disabled veteran-owned small business[es] or veteran-owned small business[es] that ha[ve] been certified by a third-party certifying organization.”

The Regulations also contain specific requirements for grower/processor permits. Application forms for permits will be posted on the DOH website in the future. Among the requirements is that a grower/processor notify DOH within six months of being issued an initial permit that it is ready, willing and able to begin production.

The Regulations prohibit executive level employees of the Commonwealth and their immediate family members from being employed by or holding an interest in medical marijuana organizations while employed by the Commonwealth and for one year thereafter.

The Regulations are not final and are open for public comment until August 26, 2016.

Although Pennsylvania joins 23 other states and the District of Columbia to legalize medical marijuana, marijuana is still classified as a Schedule I controlled substance by the U.S. Drug Enforcement Agency, and as such it remains a crime under federal law to grow, sell and/or use marijuana. Any content contained herein is not intended to provide legal advice in connection with the violation of any state or federal law.  Although the Act provides for the legalization of medical marijuana in the Commonwealth of Pennsylvania, one should obtain legal advice with respect to any such compliance issues.

Stay tuned for details regarding an upcoming Cozen O’Connor webinar on these Regulations.

For more information about the Regulations or the Act, contact Chris Raphaely, J. Nicole Martin or another member of Cozen O’Connor’s Cannabis Industry Team.

On April 17, 2016, Governor Wolf signed Act 16 of 2016, making Pennsylvania the 24^th state (plus the District of Columbia) to legalize marijuana for medical use. The full text of the act is available here.

Physicians, not surprisingly, will play a vital role in making medical marijuana available to Pennsylvanians, while ensuring patient safety in the process.  This is what they should know about Act 16: Continue reading…

On Tuesday, December 8 Cozen O’Connor’s Health Care practice and industry team hosted the Health Law Year in Review, an annual discussion of hot topics facing those in the health care industry.

Presentation topics included:

• Update from Washington, DC – Havi Glaser discussed the Affordable Care Act five years in and provided updates. She also gave a forecast of what is likely to happen in 2016 and discussed pharmaceutical pricing.
• The Move to Pay for Value Reimbursement – Chris Raphaely discussed changes to how we pay for health care services and pay providers. He also discussed new initiatives, including ACOs, risk arrangements, readmission penalties, care management fees, capitation, bundled payments, quality incentives and patient experience.
• Employment Update – Debra Friedman looked back at hot employment issues from 2015 and forward to issues that may come up in 2016, including wellness programs and wage and hour developments impacting health care providers.
• Are You Protecting Your Intellectual Property? – Kyle Vos Strache looked at the different types of intellectual property and how each can increase a company’s value and mitigate risk.
• Hot Tax Topics – Richard Silpe talked about the 2018 Cadillac Tax, final regulations under IRC Section 501(r) and the tax implications of the case involving Morristown Memorial Hospital determining whether the hospital was non-profit or for-profit.
• Trends in Concierge Medicine and Alternative Payment Methods – Marc Auerbach discussed the three models of concierge medicine, traditional, hybrid and direct primary care medical home, and the benefits of choosing each.
• Antitrust Developments in Health Care – Jonathan Grossman led a discussion on the recently announced mergers of Aetna/Humana and Anthem/Cigna. He also discussed the Supreme Court’s limit of state action immunity in NC Dental and the continuing aggressive federal and state antitrust enforcement.
• Cybersecurity and Health Care – Ryan Blaney and Gregory Fliszar discussed cybersecurity risks and best practices and the steps to take for compliance.
• M&A Update – Anna McDonough and Trey Crabb (Ziegler Investment Banking) talked about recent trends in health care transactions.

For more information about any of the topics listed above, or copies of the presentations, please click the speaker’s name to be directed to their biography. Please click here to be added to our health care alert list to read about new developments and to receive invitations to upcoming seminars and webinars.

Earlier this month, the Deputy Attorney General of the Department of Justice (“DOJ”) released a memorandum (“Guidance”) setting forth six key steps to which DOJ attorneys should adhere in the investigation of corporate misconduct. At the same time, the Guidance underscores the importance of having corporate compliance policies and procedures that stress individual accountability and provides critical information for any organization that finds itself under investigation by the DOJ.

The overarching theme of the Guidance is that every act of a corporation or other organization is carried out by one or more individuals and that by focusing on individual conduct and holding specific individuals accountable for corporate misconduct when it is found to have occurred, the DOJ will investigate and combat corporate wrongdoing more effectively.  The six key steps contained in the Guidance are as follows:

• “to qualify for any cooperation credit, corporations must provide to the [DOJ] all relevant facts relating to the individuals responsible for the misconduct;

• criminal and civil corporate investigations should focus on individuals from the inception of the investigation;

• criminal and civil attorneys handling corporate investigations should be in routine communication with one another;

• absent extraordinary circumstances or approved departmental policy, the [DOJ] will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;

• [DOJ] attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and

• civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.”

The Guidance will apply to matters that are pending as of September 9, 2015 as well as all future DOJ investigations of corporate wrongdoing.

For more information on this Guidance, contact Chris Raphaely, Nicole Martin, or any member of Cozen O’Connor’s Healthcare law team.

Updated requirements for hospitals to maintain their tax-exempt status under Section 501(r) of the Internal Revenue Code are nothing new. They were enacted as part of the Affordable Care Act in 2010. However, at the end of 2014, the IRS issued a final rule (“Final Rule”) interpreting, clarifying and updating these requirements. As we’ve seen before with other enforcement agencies, after passing final regulations, it is expected that the IRS will devote more attention to enforcement and be more exacting when it measures compliance.

Hospitals will be subject to the Final Rule beginning with tax years starting after December 29, 2015. Prior to such time “reasonable, good faith interpretations” of the 501(r) requirements will suffice, but thereafter strict compliance with the specific terms of the Final Rule, which contain several changes from the proposed rule, will be required. Consequently, now is an opportune time for hospitals to take what is likely to be at least a second look at 501(r) compliance in the last four or five years.

Briefly, the significant changes under the Final Rule involve the following:

• Translation requirements for financial assistance policies (FAPs), as well as the FAP applications and FAP summaries;

• Rules regarding application of the requirements to partnership that operate hospitals;

• FAP eligibility determinations;

• Notices regarding potential extraordinary collection actions;

• Contractual provisions for transactions involving the sale or third-party collection of hospital receivables; and

• Changes to methodologies used to determine “amounts generally billed”, which are the 501(r) imposed limits on the amounts individuals qualifying for financial assistance can be billed for emergency care or other medically necessary care.

For more information on these important requirements, contact Chris Raphaely, Nicole Martin, or any member of Cozen O’Connor’s Healthcare law team.

On August 3, 2015, a federal judge in the Southern District of New York ruled that the United States’ and state of New York’s complaints in intervention can move forward against a group of hospitals, under the federal False Claims Act (“FCA”) and New York’s FCA corollary. The hospitals allegedly failed to report and return Medicaid overpayments that were brought to their general attention over two years before all of the relevant repayments were made.

The judge’s opinion denying the defendants’ motions to dismiss in Kane v. Health First, et al. and U.S. v. Continuum Health Partners Inc. et. al., should be of particular note to providers because it contains extensive discussion and guidance as to how at least one federal judge interprets the Affordable Care Act’s (“ACA”) “60 day rule.” Specifically, the ACA’s rule requires any provider who receives an overpayment from Medicare or Medicaid to repay such overpayment within 60 days of the “date on which the overpayment was identified.” Further, retention of such an overpayment beyond the sixty-day period can result in liability under the FCA.

Continue reading…

On Thursday, June 25, the Supreme Court of the United States issued its much anticipated ruling in King v. Burwell, the second major Court challenge to a core element of the Affordable Care Act (“ACA”).  The Court, by a 6-3 margin, issued a victory for the ACA.

King v. Burwell was not a challenge to the ACA per se.  Rather, the plaintiffs challenged an Internal Revenue Service (“IRS”) rule which permits the provision of subsidies for the purchase of health insurance to lower-income residents of states that use Healthcare.gov, the exchange operated by the federal government.  Essentially, the plaintiffs, and three Justices in a vigorous dissent penned by Justice Scalia, argued that the plain language of the statute limited the subsidies to residents of states that operate their own exchanges.  This would have eliminated subsidies in at least 36 states, and would have had innumerable indirect effects on other provisions of ACA (including eliminating the penalties for violations of the employer mandate in those states).

Although the decision will be of great interest politically and to administrative and constitutional law scholars, it does nothing to change the implementation of the ACA.  The exchange system that is currently in place will move forward unless it is changed legislatively or by executive action. This was welcomed by businesses in the two sectors most directly affected by the ruling, insurance and health care providers, and was reflected  in  sharp one day gains of stock prices for the large insurance companies and for-profit hospital chains.

Another aspect of the ACA that will now definitely move forward as a result of the decision is the scheduled implementation of the employer mandate on January 1, 2016.  Accordingly, affected entities (employers of 50 or more full time equivalents) should continue, and in some cases quickly step up, their compliance efforts by reviewing their employment and benefits policies to make certain that they do not run afoul of the employer mandate once it becomes fully effective.