On the Horizon … A Possible “Permanent” Cure to Medicare’s “Doc Fix”

Posted by Health Law Informer Author on March 27, 2015
Affordable Care Act, Medicare / No Comments

11In a historic bipartisan moment, the U.S. House of Representatives passed a nearly 300-page bill that is intended to “repeal the Medicare sustainable growth rate [“SGR”] and strengthen Medicare access by improving physician payments and making other improvements.” The legislation, titled the Medicare Access and CHIP Reauthorization Act of 2015, which is referred to as the Medicare “doc fix”, is the result of ongoing bipartisan efforts to resolve an unpopular physician reimbursement system that if not overridden each year would cut Medicare doctor’s pay by a notable percentage. The annual reimbursement cut would occur as required under the federal Balanced Budget Act of 1997 (the “BBA”), if not for the annual fixes set into motion by Congress. In a March 25, 2015 letter from the Congressional Budget Office (“CBO”) to House Speaker Boehner, the CBO explained that the BBA established the SGR formula “to ensure that real—that is, adjusted for inflation—spending per [Medicare] beneficiary for physicians’ services would grow on average at a rate of increase in gross domestic protect per capita minus the expected rate of increase in productivity for the economy as a whole.”

According to news outlets and press conferences, President Obama is ready to sign the bill once the Senate passes it. In the CBO’s letter to House Speaker Boehner, it estimated that this bill will increase:

  • The federal budget deficits by $141 billion;
  • Direct spending by approximately $145 billon; and
  • Revenues by approximately $4 billion.

Under the Bill, Medicare’s payment rates for services on the physician fee schedule would increase by 0.5 percent a year for services furnished through 2019.  From 2019 through 2025 payments will remain the same but Medicare doctors will be eligible for merit-based bonus payments consistent with Medicare initiatives such as care models that shift away from fee for services.

Many expected the Bill to pass the Senate on Friday, March 27th but the Bill was not put up for a vote and Senate Minority Leader Harry Reid and Majority Leader Mitch McConnell said the bill will not get a vote until mid-April when the Senate returns from its recess.  CMS has provided notice that they will be able to hold payment for 14 calendar days to avoid a rate cut.

For further information contact Cozen O’Connor’s health care team.  We will continue to monitor and provide updates.

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Going Paperless: FDA Releases Draft Guidelines to Digitize Clinical Trials

Posted by Health Law Informer Author on March 12, 2015
Affordable Care Act, CMS, Medicare, Uncategorized / No Comments

 

FDA ShutterstockThe FDA released draft guidelines (“Guidelines”) on Monday, March 9, 2015 establishing recommendations on the use of e-media and processes to obtain informed consent for clinical investigations (trials) of medical products including human drug and biological products, medical devices and combinations. The Guidelines provide useful insight for how the FDA recommends clinical investigators, sponsors and institutional review boards (“IRB”) should use e-informed consent for a clinical trial.

The FDA defines e-informed consent as “using electronic systems and processes that may employ multiple electronic media (e.g., text, graphics, audio, video, podcasts and interactive Web sites, biological recognition devices, and card readers) to convey information related to the study and to obtain and document informed consent.” The FDA reminds clinical investigators and sponsors that informed consent is more than just a subject’s signature.  Informed consent – whether completed electronically or in paper form – includes providing prospective clinical trial participants with enough information regarding the research to enable them to make an informed decision regarding whether to participate in the study. The subjects must have “adequate information” about the research.  Clinical investigators and sponsors may use video conferencing (i.e. Skype) to answer a subject’s questions about the clinical trial.

The Guidelines also include a question and answer section containing 14 inquires such as:

  • How information in an e-informed consent should be presented to subjects;
  • How/where e-informed consent processes should be conducted; and
  • How/when questions from subjects should be answered.

Similar to CMS and states recognizing the authenticity of e-signatures, this guidance demonstrates the FDA’s desire to digitize health care and respond to the increased patient access to clinical trials in states passing “right-to-try” bills.  Right-to-try bills generally permit doctors and terminally ill patients to negotiate directly with drug companies to obtain experimental drugs that have passed Phase-I trials. Stay tuned for a forthcoming Health Law Informer blog announcing the FDA’s release of the e-informed consent final guidelines, which clinical investigators, sponsors and IRBs will want to consider implementing.

For further information contact the Cozen O’Connor’s health care team or the authors Ryan P. Blaney (Washington, DC) and J. Nicole Martin (Philadelphia, PA).

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Practice Leasing: An Alternative Worth Considering

Posted by Chris Raphaely on March 11, 2015
Practice Leasing / No Comments

As hospitals look to forge alignments with medical staff physicians and many “independent” physicians consider whether they want to become employees of a hospital or health system or remain independent operators of their own practice, a practice lease arrangement may provide a very attractive alternative. Under the typical lease arrangement the institution leases the practice, including the practices operations, premises, physicians and other professional staff.

In this arrangement the institution does not acquire nor does it employ the physicians, but it does gain many, if not all, of the material benefits of a practice  acquisition and physician employment during the term of the lease. The arrangement also gives the physician(s) in the practice the opportunity to evaluate what it might be like to work with the institution in an employment arrangement without selling his/her practice and making the full commitment to employment. If either party prefers not to continue the lease arrangement beyond the lease term, the unwind is typically much easier than a typical employment or acquisition transaction.

The lease arrangement can also be used to successfully navigate through valuation issues that can arise with the acquisition of a practice that has historically generated significant ancillary revenue from services like infusion therapy or imaging services. Cozen O’Connor attorneys have experience establishing lease arrangements and stand ready to assist providers who might  consider this alternative to physician acquisition and employment.

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Co-Chair of Cozen O’Connor’s Health Care Practice Discusses the Affordable Care Act in the New York Times

Posted by Chris Raphaely on March 10, 2015
Affordable Care Act, Medicaid / No Comments

Mark H. Gallant, co-chair of Cozen O’Connor’s Health Care practice group and a nationally respected health care lawyer, was quoted in a recent New York Times article discussing the Supreme Court arguments in the case, King v. Burwell. At issue in the case is the right to federal subsidies for the purchase of health insurance by individuals who reside in states that have chosen to have the federal government run their health insurance exchange.  If decided for the plaintiffs, the case could have a drastic effect on the future of the controversial Affordable Care Act.

Mark has been a go-to contact for the press on these type of issues for many years, recently providing insight into another Supreme Court case regarding the rights of providers to sue states over Medicaid payment rates in Bloomberg Business News. With the Affordable Care Act’s mandate to expand health care coverage and states still facing significant budgetary constraints, various media outlets will no doubt be seeking out Mark’s insights as the issues surrounding the payment for expanded health care coverage play out.

Some Supreme Court Justices Cite 2012 Argument Against Health Care Law as Defense for It Now – New York Times – March 8, 2015

Why the Supreme Court’s Medicaid Decision Matters – Bloomberg Business – January 20, 2015

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Owners of Tax Exempt Properties in Philadelphia Required to Certify Tax Exemption Status

Posted by Health Law Informer Author on February 25, 2015
Exempt, Hospital, Non-profit / No Comments

hospital picNon-profit hospitals, and other owners of tax exempt properties in Philadelphia, must certify as to their eligibility for continued property tax exemption with Philadelphia’s Office of Property Assessment (OPA) by March 31, 2015.  Click here to view a Tax Alert on this issue.  With its deep experience in state and local tax issues, Cozen O’Connor is ready to help affected organizations navigate the complexities of the certification process.

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Cybersecurity Attack on Anthem, Inc. Highlights the Cybersecurity Risks for All Companies Handling Electronic Medical Records

Posted by Health Law Informer Author on February 09, 2015
cyberattacks, cybercriminals, cybersecurity, FBI, Healthcare, HIPAA, HITECH / No Comments

Health care providers, insurers and all who handle information on their behalf were put on notice last week that cybersecurity must be a high priority for their organizations. Anthem, Inc. (“Anthem”), the nation’s second largest health insurer, revealed on February 4, 2015 that its information technology (“IT”) system was victimized by a “very sophisticated” cyberattack that exposed the birthdates, social security numbers, street and email addresses and employee data (including income information) of approximately 80 million customers and employees. Anthem noted that the hackers apparently did not get any health information or credit card numbers in the attack, but that the hack did yield medical information numbers. Anthem discovered the breach on its own on January 29th and contacted the FBI, which has started an investigation into the matter.

Large hospitals and health insurers are not the only ones at risk. As the Anthem attack illustrates, health information is a high priority target for cybercriminals. Currently a complete health record may be worth at least ten times more than credit card information on the black market as health records often include a treasure trove of personal information that can be used for identity theft and to file false health insurance claims. Further, the cybersecurity protections currently in place in the health care industry tend to lag behind those in the banking and financial sector, which makes the information vulnerable to cyberattacks by criminals who view the information as “low hanging fruit.”

Failure to have robust cybersecurity programs in place can have a devastating effect on any organization that experiences a data breach. Anthem has already been hit with putative class action lawsuits in Alabama, California, Georgia and Indiana alleging that Anthem did not have adequate security procedures in place to protect its customers and it is likely that more suits will follow. In addition to the FBI’s investigation into attack, Attorney Generals in New York, Connecticut and Massachusetts have indicated that they will be reaching out to Anthem for more information about the attack, the company’s security measures and how it plans to prevent future attacks.

The Anthem breach was the largest in the health care industry so far and may be a harbinger of things to come. The FBI and other security experts have been warning that the health care industry is a key target for cybercriminals, and a single security incident resulting in a data breach can have significant and immediate consequences that include government investigations, class action lawsuits, and a hit to the organization’s reputation. To manage this risk, we encourage all companies handling health information to create, review and update their data security policies and procedures to ensure that they are doing enough to adequately protect the health information maintained on their IT systems and elsewhere in their organization.

To learn more about strategies you can use to manage your exposure, join me at the upcoming panel discussion on “Cybersecurity and Healthcare: The Key to Limiting Your Risk is being Informed” at the Greater Philadelphia Alliance of Capital and Technologies seminar on Thursday, February 26, 2015 in West Conshohocken, Pennsylvania. Click here to register.

If you cannot make the event or would like to discuss your cybersecurity needs with me directly, please contact me, Greg Fliszar, at gfliszar@cozen.com.

ProMedica and the AHA Seek Guidance from SCOTUS on Hospital Consolidations and Mergers

Posted by Health Law Informer Author on February 05, 2015
ACA, Federal Trade Commission, FTC, Supreme Court / No Comments

FTCStatueThe New Year started out with a bang in the healthcare antitrust circles with ProMedica Health Systems Inc.’s (“ProMedica”) well-publicized petition to the US Supreme Court and the American Hospital Association’s (AHA) amicus brief in support of ProMedica.  ProMedica hopes that the Supreme Court will hear the case and overturn a Sixth Circuit ruling requiring ProMedica to divest St. Luke’s Hospital, a non-profit hospital in Toledo, Ohio.  As evidence of the complexity and the lengthy litigation challenges between ProMedica and the Federal Trade Commission (“FTC”) this merger occurred almost five years ago in 2010.  The FTC and the Ohio Attorney General had sued to dissolve the deal because they considered it anti-competitive; arguing that ProMedica would control 60% of the hospitals in the greater Toledo area. The FTC ordered ProMedica to divest St. Luke’s (21 HLR 467, 3/29/12).  The Sixth Circuit agreed with the FTC on the grounds that the merger would likely result in higher prices for payors and consumers and lead to unintended precedent for future hospital mergers.

ProMedica’s petition argues that this case is “a rare and uniquely apt vehicle for consideration of the [merger law] issues based on a fully-developed record.”  Hospital merger cases rarely are litigated through appeal and this case is an opportunity for the Supreme Court to clarify fundamental aspects of merger law nearly 40 years after the United States v. General Dynamics Corp., 415 U.S. 486 (1974) decision.  ProMedica argues that over the last 40 years confusion has developed over the FTC’s unilateral-effects theory and consolidation pressures have increased with the passage of the Affordable Care Act and other federal regulations.

ProMedica’s petition focuses on three merger law questions that the lower courts are divided on as the primary reasons why the Supreme Court should hear the case:

  1. How the FTC defines relevant market product for a merger analysis and whether the FTC can base it on supply-side considerations. ProMedica argued that the FTC should have either analyzed hospital services market by market because one kind of surgery is not a substitute for another or the FTC should have considered all four levels of hospital services as a package-deal market.
  2. Where the FTC relies exclusively on a unilateral-effects theory in challenging a merger may a court adopt a strong presumption of anti-competitive harm based solely on market-share statistics?
  3. Can the FTC rely on market-share statistics to preclude consideration of the merger target’s financial weakness to rebut a presumption of harm based on market-share statistics in unilateral-effects cases?

The unilateral effects analysis is the degree to which the merging hospitals are substitutes for each other.  The higher the substitutability between two merging hospitals, the greater the competition among them and the greater the power.  Here, ProMedica argues that Mercy Hospital, not St. Luke’s, is the closest substitute in the Toledo area.

ProMedica received support from the American Hospital Association (“AHA”) on the third issue, the “weakened competitor” doctrine.  On January 21, 2015, AHA filed an amicus brief asking the US Supreme Court to review the Sixth Circuit decision and the lower court’s characterization that the “weakened competitor” argument is a “Hail Mary” that deserves credence only in rare situations.  AHA argues that the Sixth Circuit’s erosion of the “weakened competitor” doctrine leaves the “viability of many small and stand-alone hospitals in jeopardy.”  AHA also argues that there are conflicting interpretations by the lower courts on how to read the General Dynamics decision.  Clarity is needed from the Supreme Court especially in the context of health care mergers.  Hospitals should not have to wait until they are on the edge of bankruptcy to merge.  AHA believes that the Sixth Circuit errored when it did not apply the General Dynamics weakened competitor analysis to the ProMedica acquisition.

The case is ProMedica Health System Inc. v. Federal Trade Commission, case number 14-762, in the Supreme Court of the United States.  The FTC has until March 2, 2015 to file a response.  It is unknown when the Supreme Court will decide about hearing the case.

For further information contact Ryan P. Blaney, Washington, DC, at rblaney@cozen.com.

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HHS Ups The Ante: Announces Percentages And Time Frames On Goals For Medicare Pay-For-Value Efforts

Posted by Chris Raphaely on January 27, 2015
Accountable Care Organizations, Affordable Care Act, CMS, HHS, Medicaid, Medicare / No Comments

On January 26, 2015, the Secretary of the United States Department of Health and Human Services (“HHS”), Sylvia Mathews Burwell, announced two important goals for the Department:

  1. Increase the percentage of Medicare provider payments that are made through alternative payment models based on how well the providers care for patients, rather than the amount of care provided. The percentage goals for these alternative payment models are 30% by 2016 and 50% by 2018.
  2. Tie virtually all Medicare fee-for-service payments (85% in 2016 and 90% in 2018) to quality and value.

This announcement puts hard numbers on the goal to move away from traditional fee-for-service Medicare payments that has been stated generally since at least 2010 when the Affordable Care Act was enacted. By clearly delineating specific figures for alternative payment models, such as accountable care organizations and bundled payment arrangements, from those figures for payment methods, HHS has made it clear that providers should be thinking not just about different forms of payment but different forms of organizations and relationships with other providers. Alternative payment models generally require coordination among different types of providers who may not otherwise be related to each other.

While the announced goals focus on the Medicare fee-for-service system, it is clear that HHS intends the impact of these goals to be far broader. Ms. Burwell also announced the creation of a Health Care Payment Learning and Action Network to facilitate a public-private sector partnership to “continue to build on our work with state Medicaid agencies, private payers, employers, consumers and other partners,” while welcoming the fact that “our partners in the private sector have the opportunity to be even more aggressive” in establishing alternative payment models and pay-for-value compensation systems. On the same day as Ms. Burwell’s announcement, the Centers for Medicare and Medicaid Services released a fact sheet stating that it is taking action with a goal to spend “our health dollars” more wisely, citing the importance of the goal for patients, families, providers, tax payers, employers, states and insurance companies, and making it clear that HHS and CMS fully intend to have their efforts to transform health care delivery and payment systems to reverberate well beyond the Medicare program.

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Decision Alert: US Supreme Court Potentially Shifts the Balance in Healthcare Employee Benefits Litigation

Posted by Health Law Informer Author on January 26, 2015
Supreme Court / No Comments

US Supreme Court SealJustice Clarence Thomas and a unanimous US Supreme Court decided to vacate a Sixth Circuit decision and hold that the federal courts cannot assume from silence in a union’s collective bargain agreement that retiree group health insurance benefits continue indefinitely.  The Supreme Court found that collective bargain agreements should be treated the same as other contracts when the principles are consistent with federal labor policy.

The Court rejected the UAW-Yard Man decision and accompanying long standing principle called the Yard-Man Rule which provided that in the absence of clear contractual language a collective bargain agreement vested retirees with lifetime benefits. The Supreme Court’s M&G Polymers v. Tackett USA decision is attached here.

Check back for more in-depth analysis and coverage on this decision and its impact on employee benefits litigation or feel free to contact Cozen O’Connor’s Health Law and Employee Benefits Teams.

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Time to Get Rid of Those Post-it Notes with All Your Passwords!!!

Posted by Health Law Informer Author on January 22, 2015
Encryption / No Comments

This month, Governor Chris Christie signed into law a New Jersey bill requiring health insurance carriers (e.g., insurance companies, health service corporations, hospital service corporations, medical service corporations, HMOs that issue health benefits plans in New Jersey) to encrypt or otherwise secure  computerized records of personal information (e.g., SSN, address, identifiable health information, driver’s license number) (“Bill”). The Bill provides an alternative to encryption if the carrier uses, a “method or technology rendering the information unreadable, undecipherable, or otherwise unusable by an unauthorized person.” However, password protection for computer programs, which is commonly used in the industry, is inadequate under the Bill if “the program only prevents general unauthorized access to the personal information, but does not render the information itself unreadable, undecipherable, or otherwise unusable by an unauthorized person operating, altering, deleting, or bypassing the password protection computer program.”

The Bill does not address the ramifications for insurance carriers that fail to adhere to its requirements. However, in a statement by the Bill’s sponsors, the lawmakers explained that health insurance carriers that violate the Bill would be subject to penalties under the New Jersey consumer fraud statute, such as a monetary penalty up to $10,000 for an initial offense, and no more than $20,000 for each subsequent offense(s). Lawmakers further explained that “a violation can result in cease and desist orders issued by the Attorney General and the awarding of treble damages and costs to the injured party.”

Interestingly, this Bill only applies to health insurance carriers and not to healthcare providers, such as hospitals or physician group practices. However, it is anticipated that New Jersey will follow the industry enforcement trend that although encryption is not technically required under HIPAA it is considered a “reasonable” technical safeguard and therefore becoming an industry standard best practice. The timing of the Bill is also interesting as President Obama and the Federal Government discuss potential Federal legislation on cybersecurity, student privacy, and a national breach standard.  Tune back in to the Health Law Informer for future blogs on these issues.

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