Alissa Smith

On Monday, March 23, 2020, the Center for Medicare and Medicaid Services (“CMS”) released Frequently Asked Questions on Medicare Provider Enrollment Relief related to COVID-19 (“FAQs”), available here. The recent Public Health Emergency declaration by the Secretary of the Department of Health and Human Services provided a broad 1135 waiver on enrollment screening requirements, application fees, criminal background checks, site visits, and certain licensure requirements. The FAQs provided guidance to providers on how CMS is exercising its authority under the 1135 waiver and on how to navigate enrollment during this emergency period. Expedited Enrollment; Revalidation Included in the FAQs were toll-free hotlines available to provide expedited enrollment. The applicable Medicare Administrative Contractor has the authority to screen and enroll physician and non-physician practitioners in Medicare on a temporary basis telephonically, and, if approved, to provide follow-up documentation of such approval. The effective date of the physician or non-physician practitioner’s billing privileges may be as early as March 1, 2020. Upon the lifting of the Public Health Emergency declaration, those who received temporary billing privileges through the expedited process will be asked to resubmit through the appropriate CMS-855 application. Note that this expedited telephonic enrollment process is only for physician and non-physician practitioners; all other providers and suppliers, including DMEPOS suppliers, must enroll and submit changes of information via the traditional CMS-855 application. Those applications will be expedited if received after March 1, 2020 with processing times of 7 business days for web applications and 14 business days for paper applications. Any applications received prior to March 1, 2020 are being processed in accordance with existing timelines; web applications processed within 45 days and paper applications processed within 60 days. CMS is temporarily ceasing revalidation efforts for all Medicare providers or suppliers. Upon the lifting of the Public Health Emergency, CMS will resume revalidation activities. CMS also is currently postponing DME accreditation and reaccreditation timetables and deadlines. A DME supplier should still comply with accreditation requirements; however, formal accreditation from an accrediting organization will be postponed. CMS still plans to monitor billing activity during the emergency period. Licensure The FAQs clarified that, although the 1135 waiver allowed CMS to waive, on an individual basis, the Medicare requirement that a physician or non-physician practitioner must be licensed in the state in which he or she is practicing, the waiver is not available unless all of the following four conditions are met: 1) the physician or non-physician practitioner must be enrolled in Medicare; 2) the physician or non-physician practitioner must possess a valid license to practice in the state which relates to his or her Medicare enrollment; 3) the physician or non-physician practitioner is furnishing services – whether in-person or via telehealth – in a state in which the emergency is occurring in order to contribute to relief efforts in his or her professional capacity; and 4) the physician or non-physician practitioner is not affirmatively excluded from practice in the state or any other state that is part of the 1135 emergency area. CMS clarified that the 1135 waiver does not have the effect of waiving state or local licensure requirements or any requirement specified by a state or a local government as a condition for waiving its licensure requirements. Those separate state requirements would continue to apply unless waived by the state. If you have any questions about this alert please contact the author or your regular Dorsey attorney.

Since the COVID-19 outbreak, many health care providers have had a myriad of HIPAA questions, including questions about whether they can share some types of information and, if so, the type of information they can share with first responders who may have been exposed. Today, the Office for Civil Rights (OCR) published guidance outlining the already-existing HIPAA provisions that permit health care providers to share the name or other identifying information of an individual who has been infected with or exposed to the virus, with paramedics, other first responders, law enforcement and public health authorities, available here. The guidance addresses some of the most relevant disclosures that are allowed under HIPAA without the individual’s authorization: when needed for treatment, when required by law to notify a public health authority when necessary to prevent or lessen a serious and imminent threat to the health and safety of a person of the public, and when responding to a request by a correctional institution or law enforcement official that has custody of an inmate or other individual. As a reminder, except for disclosures that are required by law or disclosures for treatment purposes, health care providers are required to make reasonable efforts to limit the information to that which is “minimum necessary” to accomplish the purpose of the disclosure. The OCR also provided a couple of helpful examples that will be relevant to health care providers in the coming days.  Here is one of them: “Example: A covered entity, such as a hospital, may provide a list of the names and addresses of all individuals it knows to have tested positive, or received treatment, for COVID-19 to an EMS dispatch for use on a per-call basis. The EMS dispatch (even if it is a covered entity) would be allowed to use information on the list to inform EMS personnel who are responding to any particular emergency call so that they can take extra precautions or use personal protective equipment (PPE). Discussion: Under this example, a covered entity should not post the contents of such a list publicly, such as on a website or through distribution to the media. A covered entity under this example also should not distribute compiled lists of individuals to EMS personnel, and instead should disclose only an individual’s information on a per-call basis. Sharing the lists or disclosing the contents publicly would not ordinarily constitute the minimum necessary to accomplish the purpose of the disclosure (i.e., protecting the health and safety of the first responders from infectious disease for each particular call).” Additional articles about the application of HIPAA during the COVID-19 outbreak, and other legal resources applicable to the COVID-19 outbreak are available here and here.  Please contact the author or your regular Dorsey attorney with any questions about this guidance.  

On March 22, 2020, the Centers for Medicare & Medicaid Services (CMS) announced in a press release that it is granting exceptions from reporting requirements and extensions for upcoming data submission and measure reporting deadlines for Medicare quality reporting programs.  The exceptions and extensions are intended to reduce data collection and reporting burdens for entities that are responding to COVID-19 so that they can continue to focus on caring for patients.  CMS states that this is “unprecedented relief for the clinicians, providers, and facilities participating in Medicare quality reporting programs including the 1.2 million clinicians in the Quality Payment Program and on the front lines of America’s fight against the 2019 Novel Coronavirus (COVID-19).” The CMS programs impacted by this “extreme and uncontrollable circumstances” policy exceptions and extensions include, among others, the Quality Payment Program–Merit-based Incentive Payment System (MIPS), Medicare Shared Savings Program Accountable Care Organizations (ACOs), and various hospital quality reporting programs (e.g., Hospital-Acquired Condition Reduction Program).  CMS provided a table in the press release indicating how both 2019 and 2020 data submissions are impacted. For programs that have data submission deadlines in April and May 2020, this submission will be optional.  In addition, no data reflecting services provided from January 1 through June 30, 2020 will be used in CMS’s calculations for value-based purchasing programs and Medicare quality reporting.  CMS stated as follows: “CMS recognizes that quality measure data collection and reporting for services furnished during this time period may not be reflective of their true level of performance on measures such as cost, readmissions and patient experience during this time of emergency and seeks to hold organizations harmless for not submitting data during this period.” For other Dorsey publications on Medicare’s Quality Payment Program, see here and here.

In light of the novel coronavirus pandemic, health care practitioners should be aware of relaxed guidelines for prescribing controlled substance. This blog post describes when practitioners can prescribe controlled substances via telemedicine and exceptions available to opioid treatment programs. Telemedicine Prescribing Typically, an in-person medical evaluation must be conducted before a prescription for a controlled substance is issued through telemedicine or other internet means. However, when the Secretary of Health and Human Services has declared a public health emergency, as he recently did, prescribers may utilize an exception to the in-person evaluation requirement. For as long as the Secretary’s designation of a public health emergency remains in effect, DEA-registered practitioners may issue prescriptions for controlled substances to patients for whom they have not conducted an in-person medical evaluation, provided all of the following conditions are met: The prescription is issued for a legitimate medical purpose by a practitioner acting in the usual course of their professional practice; The telemedicine communication is conducted using an audio-visual, real-time, two-way interactive communication system; and The practitioner is acting in accordance with applicable Federal and State law. As long as the practitioner satisfies all of these requirements, the prescription may be issued using any method of prescribing currently set forth in DEA regulations. Thus, the practitioner may issue a prescription either electronically (for schedules II-V), by calling in an emergency schedule II prescription to a pharmacy, or by calling in a schedule III-V prescription to the pharmacy. Note that regardless of whether there is a public health emergency, a prescribing practitioner that has previously conducted an in-person medical evaluation of a patient may issue a prescription for a controlled substance after communicating with the patient via telemedicine. The prescription must still be issued for a legitimate medical purpose and comply with applicable Federal and State law. More information about the DEA-response to the coronavirus may be found here. Medications for Patients with Opioid Use Disorders Additionally, the Substance Abuse and Mental Health Services Administration (“SAMHSA”) has also issued guidance regarding medications for patients with opioid use disorders in treatment programs. If a state has declared a state of emergency, the state may request blanket exceptions for all stable patients in an Opioid Treatment Program (OTP) to receive 28 days of take-home doses of the patient’s medication for opioid use disorder. The state may request up to 14 days of take-home medication for those patients who are less stable, but who the OTP believes can safely handle this level of take-home medication. In states that have not declared states of emergency, an OTP can provide a blanket exemption request for its clinic per the guidance above (i.e., up to 28 days for stable patients and up to 15 days for less stable patients). These requests do not have to be submitted on a per-patient basis. Programs and states should use appropriate clinical judgment and existing procedures to identify stable patients. SAMHSA notes that as an increased medication supply will likely accompany these requests, OTPs and states must ensure that there is enough medication ordered and on hand to meet patient needs. We are continuing to monitor the federal response to the coronavirus pandemic and will continue to post updates. If you have any further questions, please contact the authors of this post or your regular Dorsey attorney.

This post provides an update on a number of HIPAA waivers that have just been made available to health care providers: (1) Waivers for hospitals in the initial 72 hours of enacting a disaster protocol; and (2) Waivers for all health care providers to allow them to use “everyday communications technologies, such as FaceTime or Skype, during the COVID-19 nationwide public health emergency” for the provision of patient care services.  Each waiver is addressed more fully, below: Waivers for Hospitals in the Initial 72 Hours of Enacting a Disaster Protocol First, the Secretary of the Department of Health and Human Services (HHS) has issued limited HIPAA waivers to hospitals.  The waivers are retroactive to March 15, 2020.  See the HHS HIPAA waiver document here.  We addressed the possibility of these waivers in our earlier post, available here, along with a summary of some of the main HIPAA laws already in place which may be helpful to covered entities and business associates during this time of national and public health emergency. The HIPAA waiver document starts by reminding covered entities and their business associates that, in general, the HIPAA rules are not suspended during this time of a national and public health emergency.  In particular, addressing a topic of much discussion among providers, the guidance includes a reminder that the HIPAA security safeguards rules (mandating reasonable administrative, technical and physical safeguards) apply to uses and disclosures of electronic protected health information as always.  This statement is a reminder to health care providers of their obligations to use appropriate safeguards when using or disclosing protected health information (but, see Part 2 of this blog post, below, which describes a new waiver allowing providers to use everyday communications technologies for patient care.) The HIPAA waiver will only apply to hospitals: (1) in the emergency area identified in the public health emergency declaration (the declaration applies nationwide, see the declaration here); (2) that have instituted a disaster protocol; and (3) for up to 72 hours from the time the hospital implements its disaster protocol. After the 72 hours elapses, the hospital is required to return to full HIPAA compliance, even for patients who are still under care at the time.  Also, if the national emergency or the public health emergency is terminated, the hospital is required to return to full HIPAA compliance, even if the 72 hours has not elapsed. The waivers permit U.S. hospitals that have instituted their disaster protocol to have the following HIPAA requirements waived during the initial 72 hours of the disaster protocol: • the requirements to obtain a patient's agreement to speak with family members or friends involved in the patient's care. See 45 CFR 164.510(b). • the requirement to honor a request to opt out of the facility directory. See 45 CFR 164.510(a). • the requirement to distribute a notice of privacy practices. See 45 CFR 164.520. • the patient's right to request privacy restrictions. See 45 CFR 164.522(a). • the patient's right to request confidential communications. See 45 CFR 164.522(b). Waivers for All Health Care Providers to Allow the use of Everyday Communications Technologies for Patient Care Second, the HHS Office for Civil Rights (OCR) announced that it will “exercise enforcement discretion and waive penalties for HIPAA violations against health care providers that serve patients in good faith through everyday communications technologies, such as FaceTime or Skype, during the COVID-19 nationwide public health emergency”.  See the announcement from OCR here.  A few days later, OCR issued FAQs regarding telehealth and OCRs waiver of penalties for the use of everyday communications technologies, available here. This second announcement is particularly refreshing for health care providers who have been anxiously seeking easier methods, such as the use of personal devices and specific technologies, to interact via audio and/or video technologies with their patients and colleagues. Specifically, OCR states: “A covered health care provider that wants to use audio or video communication technology to provide telehealth to patients during the COVID-19 nationwide public health emergency can use any non-public facing remote communication product that is available to communicate with patients….This exercise of discretion applies to telehealth provided for any reason, regardless of whether the telehealth service is related to the diagnosis and treatment of health conditions related to COVID-19.” OCR provides the following examples of technology that will be allowed: “…a video chat application connecting the provider’s or patient’s phone or desktop computer in order to assess a greater number of patients while limiting the risk of infection of other persons who would be exposed from an in-person consultation.” “…popular applications that allow for video chats, including Apple FaceTime, Facebook Messenger video chat, Google Hangouts video, or Skype…” The OCR makes clear that this technology is also allowed to assess or treat any other medical condition, even if not related to COVID-19.   Further, the OCR also states in the notice that it will not impose penalties against health care providers that do not have a business associate agreement in place with such technology vendors. The OCR provides the following examples of technology that will not be allowed because they are public facing: Facebook Live Twitch TikTok similar video communication applications are public facing Finally, the OCR acknowledges that some health care providers may still wish to use technology vendors that are “HIPAA compliant” and with whom the health care provider has entered into a business associate agreement related to the vendor’s video communications products. The OCR provides a list of some technology vendors that represent that they provide HIPAA-compliant video communication products and will enter into a business associate agreement (although the OCR states that it does not endorse any particular technology and it has not reviewed the business associate agreements of these vendors): Skype for Business Updox VSee Zoom for Healthcare Doxy.me Google G Suite Hangouts Meet However, a few words of caution: The OCR encourages providers to notify their patients that these third-party applications potentially introduce privacy risks. Providers should also take as many security precautions as possible to protect patient information such as enabling “all available encryption and privacy modes when using such applications,” and having these conversations in private spaces to avoid others who are not involved in the patient’s care overhearing the communication. Further, even if a provider is using “everyday communications technologies”, providers should take care to record the interactions in the patient’s medical record to ensure that patients’ records are complete and accurate. We are continuing to monitor this ever evolving area of the law and will continue to post updates.  Please call the authors of this post or your regular Dorsey attorney if you have any questions.    

As the 2019 Novel Coronavirus (COVID-19) outbreak continues to unfold governments, economies, businesses, and countries are being adversely affected. Many companies are therefore also facing significant and urgent business and legal challenges so we have created a resource center to provide information that may be helpful in decision making. Click here to access articles, webinars and client alerts Dorsey has posted.  This website will be updated often to provide the latest resources for our clients.

                Will HIPAA obligations be relaxed or waived in the wake of the coronavirus outbreak in the United States?  They could be.  This blog post contains information that is helpful to understand in preparation for such possibility. The Secretary of the Department of Health and Human Services (the “Secretary”) has the authority to declare a Public Health Emergency in situations such as a pandemic. A Public Health Emergency declaration allows the Secretary to take certain actions in response to the emergency, including waiving certain HIPAA Privacy Rule requirements. The Secretary recently made this declaration, and covered entities and their business associates should be aware of their HIPAA Privacy obligations and potential relief from these obligations. When would covered entities and their business associates know of a HIPAA Privacy Rule waiver? First, the President must declare an emergency or disaster pursuant to the National Emergencies Act or the Robert T. Stafford Disaster Relief and Emergency Assistance Act. The President made this declaration on March 13, 2020. Additionally, the Secretary must declare a Public Health Emergency (“PHE”) pursuant to the Public Health Service Act. You can read more about this declaration here. Finally, at least two days before waiving any HIPAA requirements, the Secretary must provide a certification and advance written notice to Congress about the Secretary’s intent to waive HIPAA requirements. 42 U.S.C. § 1220b-5. The DHS website would likely post this notice or the information contained within the notice, or otherwise make it publicly available. What will be the scope of a waiver? The Secretary’s notice to Congress must include a description of: the specific provisions that will be waived or modified; the health care providers to whom the waiver or modification will apply; the geographic area in which the waiver or modification will apply; and the period of time for which the waiver or modification will be in effect. 42 U.S.C. § 1220b-5. If a waiver is issued, Dorsey will provide more guidance about its scope and application. What HIPAA Privacy provisions could be waived? The Secretary may waive sanctions and penalties against covered entities that do not comply with certain provisions of the HIPAA Privacy Rule, including: The requirements to obtain a patient’s agreement to speak with family members or friends involved in the patient’s care; The requirement to honor a request to opt out of the facility directory; The requirement to distribute a notice of privacy practices; The patient’s right to request privacy restrictions; The patient’s right to request confidential communications The Secretary also has authority to modify (but not waive) deadlines and timetables for the performance of required activities, such as reporting requirements. 42 U.S.C. § 1220b-5(b)(5). Are there any existing HIPAA Privacy Rule exceptions that are relevant during a pandemic? Yes. The HIPAA Privacy Rule currently includes exceptions for when protected health information may be shared even if no PHE has been declared. Covered entities may disclose protected health information without individual authorization under certain circumstances: To a public health authority for the purpose of preventing or controlling disease; At the direction of a public health authority, to a foreign government agency; and To persons at risk of spreading a disease if other law, such as state law, authorizes the covered entity to do so. 45 C.F.R. §§ 164.501, 164.512(b)(1). Protected health information may also be shared under certain circumstances: To family friends, and others involved in an individual’s care and for notification; To prevent a serious and imminent threat to the health and safety of a person or to the public; and In limited circumstances, to others not involved in the care of the patient. 45 C.F.R. §§ 164.510, 164.512, 164.508.   Please see the February 2020 HIPAA Privacy and Novel Coronavirus bulletin from the DHHS Office for Civil Rights for more details on these current HIPAA provisions and when they apply. What do covered entities and their business associates need to do in preparation for a waiver? Covered entities and their business associates do not have advanced requirements in order to be eligible for a waiver. If a PHE is declared and the Secretary issues a waiver, that announcement will provide details about modifications to or waivers from specific HIPAA rules, as well as information about to whom the waivers or modifications apply.  Once those details are released, covered entities will need to evaluate the applicability of the waivers to their operations, and if they are applicable, how they will be implemented. Additionally, the DHHS Emergency Preparedness Decision-Tool may be helpful in determining what protected health information can be released for planning or response activities in emergency situations. The DHHS February 2020 bulletin also offers helpful guidance about the existing HIPAA Privacy Rule requirements and exceptions which may already be useful to help address uses and disclosures in the context of this public health outbreak. Until any waivers are issued, covered entities and business associates should continue to comply with all HIPAA Privacy Rule obligations. We will continue to closely monitor the federal response to the coronavirus pandemic. If you have further questions or need advice on how a Public Health Emergency affects your HIPAA Privacy obligations, please contact the authors or your regular Dorsey attorney.  

The Centers for Medicare & Medicaid Services (“CMS”) recently posted two annual updates related to the physician self-referral law (“Stark Law” or “Stark”) on its Stark website: (1) CPI-U updates related to the nonmonetary compensation exception and medical staff incidental benefits exception; and (2) CPT/HCPCS codes used to identify certain categories of Stark designated health services (or “DHS”).  These updates are important for stakeholders to be aware of as they seek to ensure continued compliance with Stark Law requirements. CPI-U Updates As per usual, the CPI-U Updates page of the CMS Stark website, found here, was updated before the end of the year to reflect the new compensation limits (based on inflation) for the nonmonetary compensation exception (at 42 C.F.R. § 411.357(k)) and medical staff incidental benefits exception (at 42 C.F.R. § 411.357(m)).  For calendar year 2020, the non-monetary compensation limit is $423 (up from $416 for calendar year 2019) and medical staff incidental benefits must be less than $36 per occurrence (up from $35 in calendar year 2019). DHS Code List Updates As we explained in our blog post here, in the calendar year 2020 Medicare physician fee schedule final rule (“PFS”), CMS finalized changes to the advisory opinion process under the Stark Law, and also included the annual update to the list of CPT/HCPCS codes used to identify certain categories of DHS (the “Code List”).  As we also explained, the Stark Law regulations at 42 C.F.R. § 411.351 specify that the following four categories of DHS are defined by reference to the Code List: (1) clinical laboratory services; (2) physical therapy, occupational therapy, and outpatient speech-language pathology services; (3) radiology and certain other imaging services; and (4) radiation therapy services and supplies.  The Code List is updated annually to reflect changes in the most recent CPT and HCPCS Level II publications. Further, items and services that may qualify for either of two Stark Law exceptions—the exception for preventive screening tests, immunizations and vaccines at 42 C.F.R. § 411.355(h) and the exception for EPO and other dialysis-related drugs at 42 C.F.R. § 411.355(g)—are identified by reference to the Code List.  The Code List included the annual updates to the codes eligible for the preventive screening tests, immunizations and vaccines exception.  However, as in previous years, the Code List does not include any codes eligible for the EPO and other dialysis-related drugs exception (for reasons explained by CMS in the rule).  The PFS rule includes tables showing the additions and deletions to the Code List. As per usual, the complete Code List was posted before the end of the year to the CMS Stark website dedicated to the Code List, found here.  The new list is effective January 1, 2020.

The United States government has an arsenal of agencies and civil and criminal statutes at its disposal to choose from in investigating and combating healthcare fraud.  A recent federal indictment discussed below exemplifies just how multifaceted government investigations and prosecutions can be.  And organizations need to be prepared to respond to such investigations. Last week, the Department of Justice (DOJ) charged fifteen residents of southern Florida in a kickback and bribery scheme involving two VA Medical Centers (West Palm Beach and Miami).  According to DOJ, ten of the defendants worked in the VA medical centers’ logistics departments and had distinct roles in the scheme to defraud.  DOJ also alleged some of the VA-employee defendants would place fake or inflated orders with supply vendors.  Other VA-employee defendants would then allegedly approve the fake orders and still other VA-employee defendants would allegedly falsely enter the supplies as having been received into the VA computer system.  Once paid by the government, the defendant supply vendors allegedly would send a portion of the ill-gotten proceeds to the VA-employee defendants as  kickbacks.  Four individual supply vendors were charged in the scheme.  And although not directly related to the kickback scheme, another individual supply vendor defendant was charged for making false statements in connection with VA application for companies seeking designation as a “Service Disabled Veteran Owned Small Business” (SDVOSB). The charges against the fifteen individuals and supply vendors illustrate not only how seriously DOJ takes allegations of fraud in the healthcare and government-contracting arena, but also some of the statutory tools Congress has given DOJ to fight such fraud in the healthcare system.  Federal statutes specifically criminalize healthcare fraud and conspiracy to commit healthcare fraud, which generally consists of knowingly and willfully executing (or conspiring to execute) a scheme to “defraud any health care benefit program” or to obtain “any of the money or property owned by, or under the custody or control of, any health care benefit program” by false or fraudulent pretenses.  18 U.S.C. §§ 1347, 1349.  The VA is a “health care benefit program,” 18 U.S.C. § 24(b), and the Anti-Kickback Statute provides stiff penalties, including fines and prison time, for fraud involving “federal health care programs” like the VA, see 42 U.S.C. § 1320a-7b.  Civil fines under the Anti-Kickback Statute also can be imposed per violation, potentially exposing organizations to millions of dollars in liability.  Also the government could have invoked—and may well still invoke—the False Claims Act, 31 U.S.C. § 3729, and its remedy provisions, including treble damages and statutory penalties for each claim submitted by the vendors. Those working in or with the VA system (or healthcare or the U.S. government in general) should take particular care to deter and detect fraud and bribery in their organizations.  In this case, for example, ten employees within the Florida VA medical centers alone are alleged to have participated in the scheme.  Such widespread misconduct may have been prevented—or detected sooner—with adequate policies and reporting procedures, better employee training, or regular and systematic audits.  Regular audits, for example, comparing supply inventory as recorded in VA systems with the actual supply inventory received might have deterred or detected the false purchase orders.  Organizations should regularly review their policies and procedures, as well as internal compliance with those policies and procedures, with legal counsel.  Likewise, annual employee training and certification also would serve to educate employees about the applicable laws, rules and regulations and changes to them, how to spot red flags, the obligation to report and the mechanism for reporting suspected activity and the serious consequences for failure to comply.  Organizations should also review with counsel whether their current practices do or can be adapted to meet one of the many “safe harbors” provided for under the Anti-Kickback Statute regulations. Additionally, the charges for making false statements related to the SDVOSB application are yet another example of the breadth of DOJ investigations and enforcement tools.  Federal law broadly criminalizes making certain misrepresentations or omissions “in any matter within the jurisdiction of the executive, legislative, or judicial branch,” see 18 U.S.C. § 1001, which includes government-contracting applications submitted to executive branch agencies like the VA.  So even where a government contractor may not have participated in the criminal conduct being directly investigated (which, here, was the alleged kickback scheme), the scope of DOJ’s investigation can creep into other areas (such as representations on government-contracting applications) which place that government contractor in serious legal jeopardy.  Government contractors should therefore seek legal counsel before and while participating in any DOJ investigations.  Government contractors should also, as a preventative measure, seek legal counsel related to the representations they make on government applications so that they do not make misrepresentations in the first place. Staying compliant with the laws, rules and regulations governing healthcare providers, vendors, and suppliers requires diligence and vigilance.  In this ever changing and complex landscape companies and their employees must be pro-active in their efforts to combat fraud and to respond to governmental inquiries and investigations.

In the calendar year 2020 Medicare physician fee schedule final rule (“PFS”), which was published in the Federal Register on November 15, 2019 (available here), CMS finalized changes to the advisory opinion process under the federal physician self-referral law (“Stark Law” or “Stark”).  CMS also published its annual update to CPT/HCPCS codes used to identify certain categories of Stark designated health services (or “DHS”).  These regulatory changes and annual code update both go into effect on January 1, 2020. Finalized Changes to Stark Advisory Opinion Regulations Under the CMS advisory opinion process, the regulations for which are found at 42 C.F.R. §§ 411.370–389, parties can seek an advisory opinion from CMS as to whether a referral for DHS (other than clinical laboratory services) is prohibited under the Stark Law.  CMS determines in the opinion whether an arrangement constitutes a “financial relationship” that would implicate the Stark Law’s referral prohibition and whether the arrangement or the referred service qualifies for a Stark Law exception.  CMS issued a Request for Information (“RFI”) in June 2018 as part of the “Regulatory Sprint to Coordinated Care” about ways CMS could modify the Stark Law regulations in order to reduce barriers to patient care coordination and value-based arrangements and to reduce the regulatory burden of complying with the Stark Law generally, which we wrote about here.  CMS did not specifically solicit comments regarding the Stark advisory opinion process in the RFI, but CMS received a number of comments about ways that the Stark advisory opinion process could be improved.  CMS explains in preamble to the PFS that it “undertook a fresh review” of the advisory opinion process in light of the comments it received to “identify limitations and restrictions that may be unnecessarily serving as an obstacle to a more robust advisory opinion process.” CMS also recently issued sweeping proposed Stark Law regulatory changes as part of the Regulatory Sprint to Coordinated Care on topics related to the RFI, which we wrote about in a white paper available here.  While the changes to the advisory opinion regulations do not directly relate to the shift to a value-based health care delivery system, CMS acknowledges in preamble to the PFS that “a faster and more robust advisory opinion process facilitates the shift to value-based care arrangements by providing more guidance for parties trying to understand how the physician self-referral law applies in an evolving and innovative marketplace. This will help to reduce provider burden by providing insight into what does and does not comply with the law, which encourages innovation.” Since the initial advisory opinion regulations were issued in 1998, CMS has only issued 16 advisory opinions, which are available here.  (CMS also issued 15 advisory opinions from 2004-2005 during the 18-month moratorium on physician ownership and investment interests in specialty hospitals that was in effect at that time, which are available here.)  In contrast, the Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”), which has a separate advisory opinion process for the federal anti-kickback statute (“AKS”) and certain other laws, issued 14 advisory opinions in calendar year 2018 alone (available here).  In preamble to the PFS, CMS recognizes the importance of an accessible advisory opinion process and acknowledges that the current advisory opinion process has not been widely used.  An accessible advisory opinion process is particularly important in the context of the Stark Law, since it is a strict liability statute, and there is a great need for certainty because, as CMS acknowledges, “parties that act in good faith may nonetheless face significant financial exposure if they misunderstand or misapply the law’s exceptions.” We anticipate that the changes to the advisory opinion process may indeed help to make the process more meaningful and accessible to entities that are seeking to understand if their arrangement complies with the Stark Law, particularly due to CMS’s broadening of how advisory opinions can be relied upon (as described below).  If you are interested in submitting an advisory opinion request, or for advice on whether and how you can rely on a published advisory opinion in assessing an arrangement for compliance with the Stark Law, please contact the authors or your regular Dorsey attorney. The most notable changes to the advisory opinion regulations in the PFS are the following: Reliance on an Advisory Opinion: Under existing Stark regulations, only the individual or entity that requested the advisory opinion may rely on the opinion. In the PFS, CMS finalizes revisions to regulations to specify the following: An advisory opinion is binding on the Secretary of HHS, and a favorable advisory opinion means that sanctions will not be imposed under the Stark Law with respect to individuals/entities that are parties to the arrangement upon which the opinion was issued (as well as the individuals/entities that requested the opinion). The Secretary of HHS will not pursue sanctions under the Stark Law “against any party to an arrangement that CMS determines is indistinguishable in all its material aspects from an arrangement with respect to which CMS issued a favorable advisory opinion.” Parties can submit an advisory opinion request to determine whether CMS would view their arrangement as “indistinguishable in all material aspects” from another arrangement that has received a favorable opinion, which will be issued by CMS on an expedited basis (as explained below). Individuals/entities can rely on advisory opinions “as non-binding guidance that illustrates the application of the physician self-referral law and regulations to the specific facts and circumstances described in the advisory opinion.” CMS acknowledges that stakeholders already use advisory opinions to inform their decision-making, and this change is intended to make clear that “such reliance is permissible and reasonable.” Timeline for Issuing an Advisory Opinion: Under existing regulations, CMS currently has a 90-day timeframe to issue an advisory opinion. CMS finalizes its proposed changes to the regulatory text to shorten this to 60 “working days” (where “working day” excludes weekends and holidays) after the request has been formally accepted.  CMS maintains the discretion it has in existing regulations to extend this time period when a request involves “complex legal issues of first impression or highly complicated fact patterns” and to suspend the time period in certain circumstances. CMS finalizes revisions to regulations to provide for expedited review of advisory opinion requests that relate to whether an arrangement is “indistinguishable in all material aspects” from an arrangement that was the subject of a favorable advisory opinion. The expedited review period will be 30 working days. Fees for the Cost of Advisory Opinions: CMS finalizes revisions to regulations to revise the fee structure for advisory opinions. Specifically, the $250 initial fee is removed and a $220 hourly rate is implemented. In the PFS, CMS also finalizes its proposed changes to the advisory opinion regulations in the following areas (among others): Matters Subject to Advisory Opinions: CMS finalizes revisions to regulations to allow CMS to consider advisory opinion requests that “relate to” existing or planned arrangements, rather than requests that “involve” them, which is intended to capture the scope of appropriate advisory opinion requests. CMS explains that it remains its position that advisory opinion requests cannot be regarding only “hypothetical facts or general questions of interpretation,” but must be about a specific referral, physician, financial relationship and facts/circumstances. CMS does acknowledge, however, that there is some confusion over what is a planned arrangement versus a hypothetical arrangement, so is removing this language from the advisory opinion regulations.  It also revised the regulatory text to reflect its view that a request for an advisory opinion would not be accepted if the claim could not be billed to Medicare for some reason unrelated to the Stark Law. CMS finalizes revisions to regulations to allow CMS more flexibility related to advisory opinion requests that involve conduct that is “substantially similar to conduct that is under investigation or is the subject of a law enforcement proceeding.” Certification Requirement: CMS finalizes revisions to regulations to allow for any authorized officer of the corporation to sign the certification statement, in addition to the Chief Executive Officer. Rescission: CMS finalizes revisions to regulations related to when CMS may rescind an advisory opinion, which is when CMS determines that there is good cause to do so. “Good cause” exists when “(i) there is a material change in the law that affects the conclusions reached in an opinion; or (ii) a party that has received a negative advisory opinion seeks reconsideration based on new facts or law.”  CMS declines to adopt a minimum wind-down period in regulatory text for arrangements that are the subject of a rescinded advisory opinion, and states that it will work with parties affected by a rescinded opinion to determine a reasonable wind down period.  CMS also finalizes regulatory changes to provide for an advance notice to the requestor and the public of a rescinded opinion. 2020 DHS Code List and CPI-U Updates The PFS also includes the annual update to the list of CPT/HCPCS codes used to identify certain categories of DHS (the “Code List”).  As we explained in prior posts (such as this one), the Stark Law regulations at 42 C.F.R. § 411.351 specify that the following four categories of DHS are defined by reference to the Code List: (1) clinical laboratory services; (2) physical therapy, occupational therapy, and outpatient speech-language pathology services; (3) radiology and certain other imaging services; and (4) radiation therapy services and supplies.  The Code List is updated annually to reflect changes in the most recent CPT and HCPCS Level II publications. Further, items and services that may qualify for either of two Stark Law exceptions—the exception for preventive screening tests, immunizations and vaccines at 42 C.F.R. § 411.355(h) and the exception for EPO and other dialysis-related drugs at 42 C.F.R. § 411.355(g)—are identified by reference to the Code List.  The Code List included the annual updates to the codes eligible for the preventive screening tests, immunizations and vaccines exception.  However, as in previous years, the Code List does not include any codes eligible for the EPO and other dialysis-related drugs exception (for reasons explained by CMS in the rule).  The PFS rule includes tables showing the additions and deletions to the Code List.  We expect that, as per usual, the complete list will be posted before the end of the year to the CMS Stark website dedicated to the Code List, found here. We also expect that the CPI-U Updates page of the CMS Stark website, found here, will be updated before the end of the year to reflect the new compensation limits for the nonmonetary compensation exception (at 42 C.F.R. § 411.357(k)) and medical staff incidental benefits exception (at 42 C.F.R. § 411.357(m)), which are both updated annually for inflation.

This post is an update from our earlier blog post, available here, on the bellwether federal opioids trial in the Northern District of Ohio.  Just hours prior to the start of the trial in a consolidated case involving two plaintiff counties in Ohio, all of the remaining defendants in the case, except Walgreens, reached a settlement.  In the settlement, distributors, McKesson, Cardinal Health and AmerisourceBergen (distributors of approximately 90% of all prescription medications) will pay $215M to Cuyahoga and Summit Counties in Ohio.  A manufacturer, Teva, will pay $20M in cash over three years and will donate $25M worth of Suboxone, an addiction treatment medication.  Several manufacturers who were originally named defendants in these two consolidated cases previously settled out of the cases.  Judge Polster, the federal judge who has overseen the multi-district litigation (“MDL”), announced that Walgreens would face a separate trial focusing on its role as a dispenser.  There are more than 2,000 cases filed in the MDL by states, counties, cities and tribes which Judge Polster has been overseeing for more than two years.  The remaining cases involve manufacturers, distributors and large pharmacy chains.  Lawyers involved in the cases have expressed hope that the recent settlement could encourage other cases in the MDL to settle as well, although one of the most significant hurdles has been a dispute about how any settlement money would be distributed among the plaintiffs, as well as who would control the use of the settlement funds going forward.

Today, the Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services (HHS) Office of Inspector General (OIG) each released their long-anticipated proposed rules to revise the federal self-referral law (or “Stark Law”) regulations, the safe harbors under the federal anti-kickback statute (AKS), and the civil monetary penalty law (CMP) for beneficiary inducements.  The proposed rules are part of HHS’s “Regulatory Sprint to Coordinated Care,” which seeks to remove regulatory obstacles to care coordination and a value-based healthcare delivery system. The HHS press release regarding the proposed rules is available here,  and includes links to each of the CMS and OIG proposed rules.  For our prior posts on the Regulatory Sprint to Coordinated Care, see here and here. Relatedly, the Substance Abuse and Mental Health Services Administration (SAMHSA) published proposed rules to revise privacy rules for substance use disorder records on August 26, and CMS published proposed rules to revise the Stark Law advisory opinion regulations on August 14 (as part of the Medicare Physician Fee Schedule proposed rule). We are reviewing the proposed rules and will post an in-depth analysis shortly.

As reported here in February, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) released two new significant proposed regulations that would have had a transformative effect on the drug discount and rebate arrangements that are commonplace between pharmaceutical manufacturers and Medicare Part D Plans and Medicaid Managed Care Organizations (and the pharmacy benefit managers (PBMs) acting on their behalf). The Administration’s goal with these proposed regulations was to reduce prescription drug prices.  However, in July, the Administration abandoned these proposed regulations (as shown on the Office of Management and Budget website) out of concern that they would actually have the opposite effect and result in increased drug prices.  President Trump reportedly became concerned after the proposals received significant support from the pharmaceutical companies. The proposals would have eliminated the current federal anti-kickback statute (AKS) safe harbor protection relied upon by manufacturers and PBMs for the rebates paid by manufacturers to PBMs for certain drugs.  In its place, the OIG proposed a much more narrow safe harbor that would have only applied if the reduced price from the manufacturer was fixed in advance and disclosed to the plan, the full value of the price reduction was disclosed to the pharmacy through a chargeback to ensure that the total payment to the pharmacy for the drug was no less than what the health plan (or PBM on its behalf) paid to the manufacturer for the drug, and the reduction in the drug’s price was completely applied to the price charged to the patient at the point of sale. At the same time, the OIG also proposed a new PBM service fee AKS safe harbor that would have protected payments by manufacturers to PBMs for certain services provided by PBMs, but with strict requirements for the manufacturer and PBM to have a written agreement for the services which set the compensation for the services in advance at a rate that is consistent with fair market value and not based on the volume or value of any referrals or other business generated between the parties or the health plan.  The proposed service fee safe harbor would have also required the PBM to annually disclose such arrangements, services and compensation to the health plans and to the Secretary of HHS upon request. The Administration has been vocal about its goal of reducing drug prices for patients.  So, we expect alternative action in the future which could take the form of legislation rather than the rule-making process. We are continuing to closely monitor changes in the area.

The Eliminating Kickbacks in Recovery Act of 2018 (EKRA) became law on October 24, 2018, and is codified at 18 U.S.C. § 220.  As part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act, EKRA was enacted in response to a concern that the federal Anti-Kickback Statute (AKS) was not broad enough to cover certain abusive payment arrangements related to opioid addiction treatment centers, since the AKS only applies to federal health care programs.  EKRA has considerable similarities to the AKS, but is notably distinct from the AKS in that it applies to all payors rather than just federal health care programs and has an exception for employment compensation that is much narrower than the AKS’s employment safe harbor.  Further, EKRA relates to arrangements with recovery homes, clinical treatment facilities, and laboratories (the “Subject Entities”).  With respect to laboratories, even though EKRA was enacted in response to the opioid crisis, it applies to all laboratories, not just laboratories that perform testing related to substance abuse (e.g., toxicology screening). We set forth below an overview of EKRA, exceptions to the law’s prohibitions, and recommendations to ensure compliance. Overview EKRA subjects to criminal penalties anyone who, with respect to services covered by any health care benefit program (whether federal or private), knowingly and willfully: solicits or receives any remuneration in return for referring a patient or patronage to a Subject Entity; or pays or offers any remuneration: to induce a referral of an individual to a Subject Entity; or in exchange for an individual using the services of that Subject Entity. Penalties for each occurrence of violating the law are a fine of not more than $200,000 (which is double the possible fine per violation of the AKS), imprisonment for not more than 10 years, or both. EKRA defines the Subject Entities as follows: Recovery home: “a shared living environment that is, or purports to be, free from alcohol and illicit drug use and centered on peer support and connection to services that promote sustained recovery from substance use disorders.” Clinical treatment facility: “a medical setting, other than a hospital, that provides detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use, pursuant to licensure or certification under State law.” Laboratories: defined by reference to CLIA, which means that all laboratories are subject to EKRA. EKRA does not apply to conduct that is prohibited by the AKS, and EKRA does not “occupy the field” in which any state law may be more stringent related to the same subject matter. Exceptions Similar to AKS statutory exceptions and regulatory safe harbors, EKRA provides a number of exceptions to its prohibitions, including exceptions for payments made under employment arrangements, personal services and management contracts, waivers or discounts of any coinsurance or copayment, and certain other exceptions that meet specified parameters (some of which are similar to and some of which are different from the parameters under the parallel AKS exceptions/safe harbors).  EKRA also has an exception for remuneration made pursuant to certain alternative payment models, a parallel of which is not present in AKS exceptions/safe harbors. Of note, the EKRA exception for payments made by an employer is much narrower than the AKS safe harbor for employment.  Specifically, while the AKS safe harbor permits any payments to an employee as long as there is a bona fide employment relationship, the EKRA exception requires that the payment not vary based on the number of individuals referred, tests or procedures performed, or amounts billed to or received from the health care benefit program from the individuals referred.  This means that employment arrangements that would not be prohibited under the AKS, such as those with sales and marketing personnel that include commission-based compensation, appear to be prohibited under EKRA and thus need to be carefully evaluated for compliance with this new law.  (The EKRA employment exception applies to payments made by an employer both to employees and independent contractors (rather than just to employees), even though EKRA has a separate exception for personal services and management contracts.) EKRA provides that the Attorney General, in consultation with the Secretary of Health and Human Services, may promulgate regulations to clarify the exceptions described in the statute. Recommendations for Complying with EKRA The Subject Entities need to: Ensure existing and future compensation arrangements fit within EKRA exceptions, particularly for employment compensation due to the narrower parameters of the EKRA employment exception as compared to the AKS employment safe harbor, and to the extent certain of such arrangements would not otherwise be analyzed for compliance with the AKS because they do not involve payment under any federal health care program. Update policies and procedures related to financial arrangements with referral sources and related to patient copay and coinsurance waivers to address compliance with EKRA. Further, entities that are not themselves a Subject Entity but that do business with a Subject Entity should evaluate their relationships with Subject Entities to ensure that such relationships are in compliance with EKRA, since the law applies to parties on both sides of the prohibited arrangement (i.e., the law prohibits both the payment or offering of referral/inducement fees, but also the soliciting or receiving of such remuneration).  Policies and procedures of non-Subject Entities who have such business relationships should also be updated to address EKRA compliance. We will continue to closely monitor the state of EKRA for guidance, revisions to the law and enforcement. Further, it is important to also understand that several states, such as Florida, Utah and California, have passed their own state level “patient brokering” laws which prohibit similar conduct and arrangements as addressed by EKRA.  These laws can also be implicated and we are monitoring their development as well.   Summer Associate Monica Delgado provided substantial assistance researching and drafting this blog post.

In a much anticipated decision, a federal judge ruled this week that the Trump Administration’s rule requiring drug manufacturers to list drug prices in television advertisements exceeds the agency’s authority. Back in May 2018, the Trump administration spoke on drug pricing and published its “Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs”. One of the specific strategies outlined in the President’s speech at the time included requiring drug manufacturers to state the drug list price in television advertisements (read our previous article on this topic here). Since the President’s speech in 2018, the U.S. Department of Health and Human Services (“HHS”) published a final rule that required drug manufacturers to disclose, in any television advertisement, the list price of a thirty day supply (or a typical course of treatment) of prescription drugs and biological products (excluding prescription drugs or biological products that have a list price of less than $35 per month for a thirty day supply or typical course of treatment). See 84 Fed. Reg. 20,732 (May 10, 2019) (“Final Rule”). Commenters to the Final Rule raised concern that the proposal was “beyond the authority of CMS to promulgate these regulations under a reasonable interpretation of sections 1102 and 1871 of the Social Security Act.” 84 Fed. Reg. 20,735-36 (May 10, 2019). HHS stated that it disagreed with the commenters because these two provisions “confer broad discretion upon the Secretary to determine the regulations that are necessary to the efficient administration of the functions with which he or she is charged under the Social Security Act (in the case of section 1102), and the administration of Medicare (in the case of section 1871”. Shortly thereafter, a lawsuit was brought by three pharmaceutical companies and a marketing association. In the lawsuit, the industry not only opposed CMS’ authority to promulgate the Final Rule, but also argued that it violated the First Amendment, as the disclosure of the list price was compelled speech that did not pass the intermediate scrutiny standard outlined in various U.S. Supreme Court Cases. See Merck & Co, Inc v. United States Department of Health and Human Services, Case No. 19-cv-01738 (AMP) (U.S. Dist. Columbia, July 8, 2019) (available here). In its decision published on July 8, 2019, U.S. District Judge Amit Mehta ruled that the Final Rule exceeds the rulemaking authority Congress granted HHS under the Social Security Act. Id. at 12. The Court found that “the basic power that Congress gave to the Secretary was to establish the rules and regulations for ‘running’ or ‘managing’ the federal public health insurance programs through CMS [, but that] HHS seeks to do more than that here. It has adopted a rule that regulates the conduct of market actors that are not direct participants in the Medicare or Medicaid program.” Id. at 13. Given that the Court found HHS’ rulemaking authority was exceeded, it did not decide the Plaintiff’s First Amendment challenge. Id. at 2. The New York Times reported that Caitlin Oakley, a spokeswomen for HHS said that “the administration was disappointed and consulting with the Justice Department on what to do next.” Katie Thomas and Katie Rogers, Judge Blocks Trump Rule Requiring Drug Companies to List Prices in TV Ads, N.Y. Times, July 8, 2019, available at https://www.nytimes.com/2019/07/08/health/drug-prices-tv-ads-trump.html. Given the Trump Administration’s continued focus and action on drug pricing, including news last week that the Administration was preparing an executive order that would declare a “favored nations clause” for drug prices, it is safe to expect many more legal challenges and appeals with respect to these issues in the near future, although the long-term impact to the industry is still questionable. Stephanie Armour, Trump Plans Order to Tie Drug Prices to Other Nations’ Cost, Wall St. J., July 5, 2019, available at https://www.wsj.com/articles/trump-plans-order-to-tie-drug-prices-to-other-nations-costs-11562348629.

For years, CMS has informally applied restrictions for hospitals which share space, equipment, staff or services in the same physical location (i.e., “co-locate”) with other hospitals or health care entities.  Although these sub-regulatory interpretations by CMS were not formal guidance, the penalties were so severe that many hospitals unwound the co-location or shared services arrangements they had in place with physician groups or other health care providers.  The American Hospital Association and others have urged CMS to develop and publish its co-location policy in order to provide clarity for hospitals- in particular out of concern for increasing access to care and improving care coordination in rural parts of the country. On May 3, 2019, CMS finally issued draft guidance to State Survey Agency Directors to use when evaluating hospital co-location arrangements.  CMS is seeking comments from stakeholders on the draft guidance by no later than July 2, 2019. In the draft guidance, CMS emphasizes that co-location of public areas and pathways is permitted as long as each entity demonstrates separate, independent compliance with the Medicare Conditions of Participation.  For a hospital, this means that the hospital must have distinct spaces (including clinical spaces) and maintain control over those spaces at all times.  The parties to the co-location arrangement can share public lobbies, waiting rooms, reception areas, restrooms, staff lounges, elevators, main entrances to a building, and main corridors through non-clinical spaces.  CMS has, however, outlined restrictions regarding the sharing of physical space, contractual arrangements with entities that are co-located with a hospital, the sharing of staffing and staff contracts, and the provision of emergency services in spaces that are co-located with hospitals. We are monitoring the developments of this draft guidance closely and will provide updates as they are published from CMS. If you have any questions about how the draft co-location guidance could impact your organization, please contact the author or your regular Dorsey & Whitney attorney.  

On April 22, 2019, the Centers for Medicare and Medicaid Services (CMS) announced two sweeping new payment innovation models under the Primary Cares Initiatives. The models will seek to incentivize primary care and other providers to take on greater responsibility and risk for the lives of covered beneficiaries. Both new models are scheduled to be effective for a first performance year of 2020. Read on for key details of the models, projected impact on the Medicare patient population, and our key takeaways for providers. Primary Care First Model provides simplified payments with performance-based adjustments The first model is Primary Care First (PCF), and include two options: PCF – General. Participating practices will assume financial risk for aligned beneficiaries and, in exchange, the practices will have reduced administrative burdens and will be eligible for performance-based payments or downside risk. PCF - High Needs Populations. Participating practices will assume financial responsibility for high-need, seriously ill beneficiaries who lack a primary care provider or effective care coordination, and, in exchange, the practices will have higher payment amounts as well as eligibility for performance-based payments or downside risk. PCF – General will provide payment to practices through a simplified payment structure that will provide a population-based payment along with a flat primary care visit fee and a performance-based adjustment providing an upside of up to 50% of revenue as well as a small downside (10% of revenue) incentive to reduce costs and improve quality. The performance-based adjustment will be assessed and paid on a quarterly basis. PCF – High Needs Population will set higher payment amounts to reflect the high-need, high-risk nature of the population as well as a yet-to-be-specified increase or decrease in payment based on quality measures. PCF is open to a range of eligible applicants, including primary care practitioners certified in internal medicine, general medicine, geriatric medicine, family medicine, and hospice and palliative care medicine. Applications for both PCF options will open soon- in Spring 2019, and the model will launch in 26 regions in the U.S. beginning in 2020 and will continue for five years. Direct Contracting Model permits providers to take on greater shared savings/shared losses up to full risk The second model is Direct Contracting (DC), and includes three options: DC – Professional. Providers will bear risk for 50% of shared savings/shared losses on the total cost of care (all Part A and B services) for aligned beneficiaries. Participants will receive Primary Care Capitation, a capitated, risk-adjusted monthly payment for enhanced primary care services equal to seven percent of the total cost of care for enhanced primary care services. DC – Global. Participating entities will bear risk for 100% of shared savings/shared losses on the total cost of care (all Part A and B services) for aligned beneficiaries. Participants may receive Primary Care Capitation as described above or may choose to receive Total Care Capitation, a capitated, risk-adjusted monthly payment for all services provided by participants and preferred providers with whom the participant has an agreement. DC – Geographic. Participating entities will bear risk for 100% of shared savings/shared losses on the total cost of care (all Part A and B services) for aligned beneficiaries in a target region. Participants will be selected as part of a competitive application process and commit to providing CMS a specified discount amount off of the total cost of care for the defined target region. This option will offer a Total Care Capitation payment as well, where CMS will continue to pay claims for services furnished by providers outside of the participants, including outside the target regions. Alternatively, participants can assume full financial risk while having CMS continue to make fee-for-service claims payments to all providers in the target region. The DC model is open to a broad range of entities, including health plans, health care technology companies, ACOs, and others operating under a common governance structure. The DC model will start in January 2020 with an initial alignment year for organizations that want to align beneficiaries to meet the minimum beneficiary requirements. Performance periods will begin in 2021 and continue for five years. CMS has issued a request for information (RFI seeking public comment on the DC-Geographic model, but nonetheless plans to launch the model in 2021. CMS anticipates shifting a quarter of beneficiaries out of fee-for-service (FFS) under the new models CMS anticipates that together, PCF and DC will: Shift over 25% of all Medicare FFS beneficiaries out of FFS and into value-based care arrangements; Offer new participation and payment options and opportunities for 25% of primary care practitioners and other providers; and Create new coordinated care opportunities for a large portion of the 11-12 million dual eligible beneficiaries in the U.S., specifically those in Medicaid managed care and Medicare FFS. Key Takeaways As we wait for additional details from CMS about the structure and payment mechanisms under both PCF and DC models, the following are a few key takeaways to keep in mind: CMS is committed to voluntary risk-based payment models. After experimenting with mandatory risk-based payment under the Comprehensive Care for Joint Replacement (CJR) bundled payment model and the proposed, but ultimately cancelled, Episode Payment Models (EPMs) for cardiac and orthopedic bundles, CMS has moved away (for now) from mandatory risk for providers. However, it appears that voluntary risk-based programs are here to stay. As these voluntary payment models are introduced, participants have opportunities to receive substantial gains (the full risk models of DC – Global and DC-Geographic, for example) if they have the appetite to bear the concurrent substantial downside risk. CMS’s pace indicates more reform likely to come. The Primary Cares Initiative announcement comes on the heels of the Pathways to Success model, an overhaul of the ACO program which was finalized in December 2018, and the BPCI Advanced bundled payment program, which launched in October 2018. In short, CMS is evaluating its existing models, creating new models, and the pace of change is faster than it has been since the slate of mandatory bundled payment programs were announced in 2016 through 2017. Going forward, the industry should expect this pace of new and revised payment models to continue, not lessen. In fact, Adam Boehler, the director of Centers for Medicare and Medicaid Innovation (CMMI), the part of Medicare that develops and administers payment reform programs, gave a speech in early April 2019 that raised the prospect of a new bundled payment program focused on post-acute care providers, which would be a first of its kind and one that those in the post-acute industry are anxiously awaiting. Physicians are increasingly the “owners” of the transition to value. For many, there’s long been a debate about who should “own” the transition away from fee-for-service toward value-based care. While CMS certainly has targeted acute-care providers for this ownership under ACOs and bundled payment models, physicians have of course been a crucial participant in those programs. Notably, the Primary Care Initiatives place the physician front and center of owning responsibility for the cost and quality of their patients’ care – an acknowledgement from CMS that primary care providers and close patient interaction are linchpins for sustained success in transitioning toward better outcomes for the health of a population. The focus on chronic and serious illness highlights a persistent problem for Medicare in controlling spending. As the population ages, success in controlling spending overall may ultimately come down to targeted efforts to better support and manage the chronically and seriously ill patient populations. While just 17% of Medicare patients live with six or more chronic conditions, they account for half of all spending on Medicare beneficiaries with chronic disease. Moreover, a full quarter of all Medicare spending is spent on Medicare beneficiaries in their last year of life. Including hospice and palliative care physicians in the PCF model, and having an entire model option dedicated to the seriously ill patient population, are clear signs from Medicare that they want to focus on programs and models that may move the dial on this patient population whose health care is notoriously difficult to manage. To learn more about this model, or to discuss how it may impact your organization, please contact the authors directly at barlow.kristen@dorsey.com or smith.alissa@dorsey.com or your regular attorney at Dorsey &Whitney.

Today, the Federal Government announced enforcement actions against 60 defendants in eleven federal districts, including 31 doctors, seven pharmacists, eight nurse practitioners, and seven other licensed medical professional for allegedly prescribing and distribution opioids and other dangerous narcotics and for health care fraud schemes. (DOJ Press Release, April 17, 2019). The charges involve over 350,000 controlled substances prescriptions and over 32 million pills. The unsealed indictments against the defendants can be found here. The enforcement action was led by the Appalachian Regional Prescription Opioid (ARPO) Strike Force. The ARPO Strike Force was formed in December and includes a team of federal agents and prosecutors to combat the opioid epidemic in the worst hit area of the country. The Strike Force analyzed a variety of databases to identify suspicious prescribing activity; investigators then used confidential and undercover agents to document medical professionals’ prescribing and dispensing of opioids in exchange for sex and cash. Sari Horwitz & Scott Higham, Doctors in seven states charged with prescribing pain killers for cash, sex, Wall St. J. (Apr. 17, 2019, 1:36 PM), https://www.washingtonpost.com/world/national-security/doctors-in-five-states-charged-with-prescribing-pain-killers-for-cash-sex/2019/04/17/7670d20e-607e-11e9-9ff2-abc984dc9eec_story.html?utm_term=.7ae448f3b507. In one case, a doctor allegedly prescribed combinations of opioids and benzodiazepine, sometimes in exchange for sexual favors; in total, the doctor is alleged to have prescribed approximately 500,000 hydrocodone pills, 300,000 oxycodone pills, 1,500 fentanyl patches and more than 600,000 benzodiazepine pills. In another case, a pharmacist was charged with allegedly dispensing large amounts of opioids outside the usual scope of professional practice and for no legitimate medical purpose. A dentist was also charged for alleged conduct that included writing prescriptions for opioids that had no legitimate medical purpose, removing teeth unnecessarily, scheduling unnecessary follow-up appointments and incorrect billing practices. While there has been an intense focus through litigation across the country on the role of manufacturers and distributors in the opioid crisis, recent initiatives have focused on prescribers and dispensers. Since June 2018, over 650 individuals have been excluded from participation in Medicare, Medicaid and all other Federal health care programs for conduct related to opioid diversion and abuse. For law-abiding prescribers and dispensers, it may be easy to dismiss today’s headline news as “not applicable”. However, all prescribers and dispensers should take notice of the increased number of investigations against their fellow licensees. The increased scrutiny of providers’ opioid prescribing and dispensing across the country could mean that even innocent providers are caught up in an investigation. Federal and state resources are being devoted in record numbers to investigations of prescribers and dispensers. There are regional DEA and DOJ task forces in place, dedicated funding streams for U.S. Attorneys, focused attention by state Medicaid agencies and Medicaid Fraud Control Units, and enforcement actions by state Boards of Medicine and Pharmacy. Cases against prescribers and dispensers are more likely today than in the past to include both civil and criminal penalties related to opioid prescribing and dispensing. As evidenced by today’s announcement, the government has become sophisticated in the use of data mining to identify outliers who will be the next targets of government investigations. Outliers in the number and dosages of prescriptions, the numbers of pain patients, the combinations of drugs prescribed, and failure to check and report to state prescription drug monitoring programs or report significant loss or theft to the DEA, can all trigger an investigation. In order to reduce risk of becoming the target of an investigation, prescribers and dispensers of opioids should ensure that they stay abreast of all State specific guidelines and standards of care for prescribing and dispensing opioids; review CMS guidance on opioid prescribing; review CDC Guidelines for prescribing opioids for chronic pain; and utilize their state’s prescription drug monitoring programs. Prescribers and dispensers should also focus on appropriate recordkeeping and documentation and inventory counts to reduce theft and unexplained inventory shortages. Dispensers should also ensure they know and verify the prescribers of prescriptions and document how any red flags in opioid prescriptions are resolved.   If you have any questions about these topics, please contact the authors or your regular attorney at Dorsey & Whitney.

The Centers for Medicare & Medicaid Services (CMS) is “actively working” on updates to regulations under the federal physician self-referral law (or “Stark Law”), according to CMS Administrator Seema Verma during a March 4, 2019 speech. Verma stated that the updated regulations will be issued later this year, and “will represent the most significant changes to the Stark law since its inception.” Verma explained in her remarks that the Stark Law, when enacted in 1989, made sense in a fee-for-service context, but as health care transitions to a value-based system where providers take on risk and payment is for outcomes rather than individual services, “we don’t have nearly as much need to interfere with who’s getting paid for what service.” According to Verma, CMS hopes that Stark Law regulatory changes “will help spur better care coordination and help support our work to remove barriers to innovation while continuing to provide appropriate safeguards for our programs.” Verma stated that the updated regulations will include “clarifying the regulatory definitions of volume or value, commercial reasonableness and fair market value; addressing issues such as lack of signature, incorrect dates or other areas of technical noncompliance; and updating the regulation to address a world in which there are cybersecurity and electronic health records requirements.” These Stark Law regulatory reforms are part of the “Regulatory Sprint to Coordinated Care” launched by the Department of Health and Human Services (HHS). Under this initiative, various HHS agencies have issued requests for information (RFIs) to solicit feedback from stakeholders on removing regulatory obstacles to care coordination. CMS published an RFI on June 25, 2018 soliciting comments regarding Stark Law reforms (as we described in our post here), which received 392 comments before the close of the comment period. We anticipate that CMS will summarize and respond to many of the comments that it received in preamble to the proposed Stark Law regulations to be issued later this year, as well as incorporate suggestions from stakeholders in the proposed regulations themselves. Also as part of the Regulatory Sprint, the HHS Office of Inspector General (OIG) published an RFI on August 27, 2018 soliciting comments on reforms to the anti-kickback statute and beneficiary inducements civil monetary penalty (as we described in our post here), which received 359 comments before the close of the comment period. Additionally, the HHS Office for Civil Rights (OCR) published an RFI on December 14, 2018 soliciting comments on reforms to the Health Insurance Portability and Accountability Act (HIPAA) privacy and security regulations, on which the comment period closed last month. The fourth and final area of focus of the Regulatory Sprint (according to an HHS press release) is 42 CFR Part 2, which relates to the confidentiality of substance use disorder patient records. An RFI under the Regulatory Sprint for this regulation has not been published by the Substance Abuse and Mental Health Services Administration (SAMHSA, which is the agency that administers this regulation). We will provide information about regulatory reform developments under these other areas of the Regulatory Sprint as they become available.

The Office of Inspector General of the Department of Health and Human Services (“OIG”) released a proposed rule to eliminate safe harbor protection under the anti-kickback statute for drug price reductions that pharmaceutical manufacturers pay to Medicare and Medicaid plan sponsors and their pharmacy benefit managers (“PBMs”). The OIG proposed replacing the current safe harbor protection for drug price discounts and rebates with a new safe harbor to protect only those drug price reductions that are set in advance and are applied fully to the price of the product charged to the Medicare or Medicaid beneficiary at the point of sale. In addition, the OIG proposed a new safe harbor to protect compensation from pharmaceutical manufacturers to PBMs for services provided to the manufacturer, but only if those payments are fixed, fair market value payments not tied to volume or value, and the PBM discloses such payments to its health plan customers. The OIG’s proposals could have a significant impact on the drug discount and rebate arrangements that are commonly in place between manufacturers and Medicare Part D plans/Medicaid managed care organizations (and PBMs acting on behalf of these plans). The OIG’s proposals would also impact Medicare and Medicaid beneficiaries who would be entitled to receive any such discounts directly at the point of sale. The proposed rule release can be found here and is expected to be published in the Federal Register on February 6. The proposed effective date of the new rules is January 1, 2020, with an earlier effective date of 60 days after the final rule is published, for the new point of sale safe harbor.           I.        Discount Safe Harbor – Changes to Focus on Point-of-Sale Reductions in Drug Prices   The federal anti-kickback statute (Social Security Act § 1128B(b)) makes it a criminal offense for anyone knowingly and willfully to pay, solicit, or receive anything of value to induce referrals of items or services that are reimbursable under any federal health care program. Violation of the statute is a felony, and can carry civil fines, imprisonment, exclusion from federal health care programs, and be the basis for liability under the False Claims Act. An existing safe harbor protects from anti-kickback statute liability discounts and rebates on drug prices that pharmaceutical manufacturers pay to health plans or their PBMs. The OIG’s proposal would revise the discount safe harbor to exclude from protection any reduction in price or other compensation in any form paid from a pharmaceutical manufacturer to a Medicare Part D or Medicaid managed care organization or their PBM in connection with the sale or purchase of a prescription drug. The proposal reflects OIG’s concern that the current manner in which drug price discounts and rebates are structured does not result in lower drug costs to federal programs and federal program beneficiaries, and in fact may be a cause of rising drug costs, and may be contrary to the purposes of the anti-kickback statute. In its place, the OIG proposes to add a new safe harbor focused narrowly on point-of-sale reductions in prescription drug prices. That safe harbor would protect reductions in the price charged by a manufacturer for drug products that are payable by a Medicare Part D or Medicaid managed care organization or their PBM, but only if that price reduction meets three conditions (the “Point of Sale Safe Harbor”): First, the reduced price must be set in advance. OIG intends this to mean that the terms of the price reduction are fixed and disclosed in writing to the plan sponsor by the time of the initial purchase. Second, the sale may not involve a rebate unless the full value of the price reduction is provided to the dispensing pharmacy through chargebacks. This means that when a pharmacy dispenses a drug to a beneficiary, the total payment to the pharmacy (including the beneficiary co-payment, payment from the health plan, and any chargeback payment from the manufacturer) must be no less than the drug price agreed between the manufacturer and the health plan sponsor or their PBM. Lastly, the reduction in price must be completely applied to the price charged to the beneficiary at the time of sale. This means that the drug price to which the beneficiary’s cost-sharing obligations apply at the point of sale must be the same price (taking into account all discounts) that the manufacturer charges to the plan sponsor or their PBM. The OIG also noted that the discount safe harbor would continue to not apply if a manufacturer offered a price reduction to payors other than Medicare and Medicaid payors (i.e., situations in which parties “carve out” referrals of federal health care program beneficiaries or business from otherwise “questionable” financial arrangements). The OIG is especially concerned with these “carve out” arrangements if the offer of a discount on products would serve as an inducement for the purchase of products that are reimbursable by federal healthcare programs (e.g., offering a discount to a private health plan that is conditioned, even implicitly, on a product’s favorable formulary placement in the health payor’s Part D plans).            II.        New PBM Service Fee Safe Harbor   In addition, the OIG proposed a new safe harbor to protect compensation from pharmaceutical manufacturers to PBMs for services rendered to the manufacturers that relate to PBMs’ arrangements to provide PBM services to health plans (the “PBM Service Fee Safe Harbor”). The OIG did propose three specific conditions that must be met in order for compensation to be protected under the PBM Services Fee Safe Harbor. The first proposed condition of the safe harbor would require the PBM and the pharmaceutical manufacturer to have a written agreement that covers all of the services the PBM provides to the manufacturer in connection with the PBM’s arrangements with health plans for the term of the agreement, and specifies each of the services to be provided by the PBM and the compensation for such services. Notably, the OIG declined to propose a specific definition for PBM services but did provide a list of examples of services that it generally considers to be PBM services, including: contracting with a network of pharmacies; establishing payment levels for network pharmacies; negotiating rebate arrangements; developing and managing formularies, preferred drug lists, and prior authorization programs; performing drug utilization review; and operating disease management programs. The second proposed condition requires that compensation paid to the PBM must: (i) be consistent with fair market value in an arm’s-length transaction; (ii) be a fixed payment, not based on a percentage of sales; and (iii) not be determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties, or between the manufacturer and the PBM’s health plans, for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs. Finally, the Department proposes that the PBM disclose in writing to each health plan with which it contracts at least annually, and to the Secretary upon request, the services it rendered to each pharmaceutical manufacturer that are related to the PBM’s arrangements with that health plan and the associated costs for such services. Other than the proposed revisions to the discount safe harbor, and the new PBM Service Fee Safe Harbor, the OIG did not propose to modify any other existing safe harbors which PBMs may use to protect payments from manufacturers. The OIG specifically noted the possibility that certain types of remuneration that manufacturers might pay to PBMs could continue to be protected under another existing safe harbor. For example, PBMs could presumably continue to rely on the Group Purchasing Organization (GPO) safe harbor to protect certain administrative fees paid by drug manufacturers to PBMs for GPO services, even if those fees are based on the total prescription volumes of health plans on behalf of which the PBM contracts with the manufacturers.          III.        Conclusion   The OIG proposal reflects a clear intent to substantially alter many of the current drug discount and services compensation practices among pharmaceutical manufacturers and Part D/Medicaid MCO payers and their PBMs. The proposal also reflects the OIG’s skepticism that current drug discount and compensation practices among manufacturers and PBMs are sufficiently transparent to health plans to ensure that all appropriate cost reductions and value is passed through to health plans and reflected in lower health plans costs and lower premiums for beneficiaries. The proposal to exclude drug price reductions to Part D and Medicaid MCO health plan sponsors and PBMs is proposed to be effective on January 1, 2020. The OIG is also proposing that the new Point-of-Sale Safe Harbor will take effect in a shorter time frame of sixty (60) days after the rule is finalized. Comments to the proposed rule may be submitted 60 days after publication in the Federal Register. There are a number of steps that parties to the type of arrangements covered by the proposed rule should take, including reviewing their current discount and rebate agreements to determine whether there will need to be amendments to these contracts in order to comply with the proposed rule, if it is finalized. Parties will also need to evaluate what compliance measures are needed in order to operationalize the changes in these arrangements to ensure compliance with the new safe harbor requirements. Finally, in light of the attention OIG is giving to these type of arrangements, now would be an opportune time to review arrangements for compliance with the current safe harbor restrictions, such as the carve out restriction described above. If you have further questions about this proposed rule, please contact the authors or any other health care transaction and regulatory attorneys at Dorsey & Whitney.

The Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) has identified the anti-kickback statute (AKS) and beneficiary inducements civil monetary penalty (CMP) as potential barriers to arrangements that could promote better patient care coordination and value-based arrangements.  On August 27, 2018, the OIG published a Request for Information (RFI) seeking input from industry stakeholders on how the agency could modify existing or add new safe harbors to the AKS and exceptions to the beneficiary inducements CMP definition of “remuneration” in order to “foster arrangements that would promote care coordination and advance the delivery of value-based care, while also protecting against harms caused by fraud and abuse.”     The RFI describes how transforming the healthcare system into one that better pays for value is a key priority for HHS, and that HHS has launched what it calls a “Regulatory Sprint to Coordinated Care” to accelerate this transformation, with a focus of removing “unnecessary obstacles” to coordinated care. This OIG RFI is part of HHS’s Regulatory Sprint. As we described in our blog post here, the Centers for Medicare & Medicaid Services (CMS) also recently published an RFI related to reforms to the federal physician self-referral law (or “Stark Law”) as part of HHS’s Regulatory Sprint. Comments are due from stakeholders to the OIG RFI by 5 PM on October 26, 2018. Specifically, OIG is seeking input on the following topics: Promoting Care Coordination and Value-Based CareThe OIG would like information about potential arrangements that the healthcare industry is interested in pursuing, which may implicate the AKS and CMP, such as care coordination arrangements, value-based arrangements, alternative payment models, arrangements involving innovative technology and other novel financial arrangements.  The OIG requests a detailed explanation of the proposed structure and terms of the arrangements, and a description of how the arrangement promotes care coordination or value-based care.  The description should also include an explanation of how the proposed arrangement prevents potential harms such as increased costs, inappropriate utilization, poor quality of care and distorted decision-making.  For each detailed description, the OIG requests that stakeholders describe the new or modified AKS safe harbors or exceptions to the beneficiary inducements CMP definition of “remuneration” that may be necessary in order to protect the described arrangement.  The OIG is also seeking input on several key definitions that are used in the regulatory provisions related to health care delivery reform, payment reform and the AKS, such as the definition of coordinated care, care coordinator and care coordination services. Beneficiary Engagement, including Beneficiary Incentives and Beneficiary Cost-Sharing Obligations  The OIG is seeking feedback on the types of incentives that providers, suppliers and others want to provide to beneficiaries.  For each incentive, the OIG wants to know how providing the incentive would contribute to or improve quality of care, care coordination and patient engagement (including adherence programs).  The OIG published several specific questions in the RFI such as whether beneficiary incentives connected to medication adherence and medication management should be treated differently than other types of beneficiary incentives, and if so, how and why.  Further, the OIG is seeking input regarding what disclosures the offer or should be required to make to beneficiaries regarding an incentive, such as the source of the incentive, as well as input regarding the risks and benefits related to certain types of incentives such as cash equivalents, gift cards, in-kind items and services, and non-monetary remuneration.  Additionally, the OIG is also seeking input on whether the “nominal value” threshold under the CMP should be increased from $15 per item and $75 in the aggregate per patient on an annual basis, whether a similar nominal value “policy” should be applied to the AKS, and if so, how such policy would contribute to care coordination or value-based care.  The OIG is also requesting information about how reducing or eliminating patient cost-sharing obligations might improve care delivery and promote quality of care. Other Related Topics of Interest  The OIG is seeking feedback on a number of related topics of interest. These include: (a) current fraud and abuse waivers developed for purposes of carrying out the Medicare Shared Savings Program; (b) donated or subsidized cybersecurity-related items and services; and (c) new exceptions under the Bipartisan Budget Act of 2018 related to (i) incentive payments under the ACO Beneficiary Incentive Program and (ii) telehealth technologies. The Intersection of the Stark Law and the AKSFinally, the OIG would like feedback regarding circumstances in which Stark Law exceptions and AKS safe harbors should align for purposes of the goals of the RFI and circumstances in which Stark Law exceptions related to care coordination/value-based care should not have a corresponding AKS safe harbor. The OIG noted that, where relevant, it intends to review comments submitted in response to the CMS RFI related to the Stark Law (described above), but that it urges commenters to resubmit any relevant comments to the OIG RFI to ensure that they are considered by the OIG, given the volume of questions included in the CMS RFI and the separate authorities of the OIG and CMS.   Please contact the authors or your regular attorney at Dorsey & Whitney if you want more information about the RFI process or desire to submit comments to the RFI by the October 26, 2018 deadline.  

On May 11, 2018, President Trump gave his long-awaited speech on his administration’s plan to lower prescription drug prices. In addition, the administration published its Blueprint to Lower Drug Prices and Reduce Out-of-Pocket costs. The blueprint can be found here.  The blueprint focuses on four areas for reform including strategies to: (1) improve competition; (2) increase negotiation power; (3) provide incentives for lower list prices; and (4) lowering out-of-pocket costs. Some specific strategies outlined in President’s speech and in the blueprint include: Measures to promote innovation and competition for biologics; Assessing the varying drug prices paid by foreign countries versus the United States; Encouraging sharing of samples needed for generic drug development; Creating additional efforts to promote the use of biosimilars; Reforming Medicare Part D to give plan sponsors more power when negotiating with manufacturers; Allowing additional substitution in Medicare Part D to address price increases for single-source generics; Considering requiring manufacturers to include list prices in advertisements; Considering whether to restrict the use of rebates, including reconsidering the Anti-Kickback safe harbor for drug rebates; Considering fiduciary status for Pharmacy Benefit Managers; Reforms to the 340B Drug Discount Program; Considering changes to regulations regarding drug copay discount cards; and Prohibiting Part D contracts from preventing pharmacists’ from telling patients when they could pay less out-of-packet by not using their insurance. President Trump emphasized in his address that he expects many of these changes to occur quickly, and comments are being sought on the policies outlined in the Blueprint. It is unclear how quickly, and how many, of the proposals will actually be adopted and implemented.  We are continuing to monitor these trends and any resulting changes for our clients in the pharmacy market, and we will provide updates as we have them.

  Last week, with bipartisan support, both the Iowa House and Senate passed, unanimously, HF 2377   (“An Act Relating to the Regulation of Certain Substances, Including the Regulation of the Practice of Pharmacy, Providing Penalties, and Including Effective Date Provisions”). The bill is expected to be signed into law by the Governor in the coming days. Like many other states throughout the country, Iowa has taken steps to increase the State’s regulation of opioid prescriptions in the wake of a national opioid epidemic. The new law will impact the operations of prescribers and pharmacies.  New requirements state that most prescribing practitioners must register with the State’s prescription drug monitoring program (PMP) and check the PMP database prior to prescribing an opioid.  The current law encourages, but does not require, practitioners to check the PMP database prior to writing a prescription for an opioid. The new law will also require pharmacies and prescribers that furnish, dispense, or supply controlled substances identified in Iowa Code 124.544(1)(g) to submit information to the PMP regarding the prescription within one business day of dispensing the controlled substance.  Current law at Iowa Admin. r. 657-37.3(3) exempts prescribers who administer or dispensed a controlled substances for purposes of outpatient care from this reporting requirement. Additionally, beginning January 1, 2020, unless an exemption applies, every prescription issued for a controlled substance must be transmitted to a pharmacy electronically. The bill also establishes continuing education requirements for licensed individuals prescribing opioids. Prescribers should be aware that, similar to legislation passed in other states, beginning February 1, 2019, the Iowa Board of Pharmacy will provide annual reports to prescribers which are aimed at showing prescribers how they compare to their peers.  Each year, prescribing practitioners will receive a summary of the prescriber’s history of prescribing controlled substances and a comparison to others in the same profession or specialty. Additionally, the Iowa Board of Pharmacy will provide specific notifications to prescribing practitioners and pharmacists regarding patients that may be doctor or pharmacy shopping or be at risk of abusing or misusing controlled substances. The bill also includes a “Good Samaritan Law” that provides immunity from prosecution under laws such as drug possession, for persons who call 911 to seek help for a drug overdose.  The immunity is not available for drug dealers or repeat offenders.  Practitioners and pharmacies should prepare now by implementing immediate changes to their policies and procedures in order to comply with the new requirements under HF 2377.  Changes would include requirements for prescribers to enroll in the PMP database, report to the PMP database within 1 business day of dispensing a controlled substance, and check the PMP database prior to writing a prescription for a controlled substance.  Software security changes may also need to be implemented by January 1, 2020 in order to accommodate the new electronic prescribing requirements for controlled substances.     

All eyes are on the federal government as top officials have recently signaled upcoming actions which could impact the prices of prescription drugs. In the past two weeks, leaders from both the FDA and HHS have made statements signaling that the agencies are focused on reducing prescription drug prices. In remarks at the Food and Drug Law Institute conference held on May 3, 2018, U.S. Food and Drug Administration Chief Scott Gottlieb suggested that by reexamining the current safe harbor under the anti-kickback statute for drug rebates, list prices for drugs would be closer to negotiated prices and competition may increase. Mr. Gottlieb stated that, while “[t]here’s a range of reasons why drug prices are too high” one reason “that’s driving higher and higher list prices, is the system of rebates between payers and manufacturers. And so what if we took on this system directly, by having the federal government reexamine the current safe harbor for drug rebates under the Anti-Kickback Statute?” (The transcript of Mr. Gottlieb’s remarks can be found here). Mr. Gottlieb appears to be siding with critics of drug rebates who have argued that the practice leads to higher prices for patients because the rebates do not make their way down to patients, and instead, patients pay list prices for the drugs as they meet their out-of-pocket obligations. Mr. Gottlieb also mentioned some additional upcoming actions to reduce drug prices, including a Biosimilars Action Plan that is similar to the FDA’s Drug Competition Act Plan (DCAP); additional policies under DCAP to promote generic competition; a comprehensive framework for the regulation of gene therapy; and prioritizing the review of low competition products for generic product applications. Additionally, Mr. Gottlieb alluded to changes that may be introduced by Secretary of Health and Human Services, Alex Azar, including policies that “will dismantle many of the provisions that shield parts of the drug industry from more vigorous competition” and “a series of changes to the pricing mechanism in [Medicare] Part D.” Days later, on May 9, Alex Azar told members of the American Hospital Association that “HHS is focused on solving a number of the problems that plague drug markets. These include the high list prices set by manufacturers; seniors and government programs overpaying for drugs due to the lack of the latest negotiating tools; rising out-of-pocket costs for consumers; and foreign governments free-riding off of American investments in innovation.” Mr. Azar’s full speech can be watched here. President Trump is schedule to deliver a speech on Friday, May 11, 2018 addressing the steps that the administration plans to take to address drug pricing in the United States. Mr. Azar noted that President Trump wants to go “much, much further” in addressing drug prices than the proposals initially set forth in the President’s 2019 Budget. We will continue to closely monitor these activities which may have a significant impact on all involved in the prescription drug market.

    When the U.S. Department of Health and Human Services (“HHS”) announced a new Conscience and Religious Freedom Division in the HHS Office for Civil Rights (“OCR”), it framed a problem and a solution. The press release stated that “fundamental and unalienable rights of conscience and religious freedom” are not being fully enforced on a federal level, and that as part of President Trump’s promise to uphold such rights a new division in OCR will be tasked with vigorous and effective enforcement.[1] What was less immediately clear in the announcement was how the new division of OCR will improve enforcement of conscience and religious freedom rights. Here we provide an overview of the history and cites to various laws in the conscience and religious freedom space that OCR may use for enforcement, as well as a summary of the recent proposed regulations that OCR issued on this topic on January 26, 2018 Religious Discrimination Against Federal Healthcare Beneficiaries The new OCR division cites several laws prohibiting discrimination against recipients of HHS assistance on the basis of religion. OCR enforces the following: Section 508 of the Social Security Act, for the Maternal and Child Health Services Block Grant Section 533 of the Public Health Services Act, for the Projects for Assistance in Transition from Homelessness Section 1908 of the Public Health Service Act, for the Preventive Health and Health Services Block Grants Section 1947 of the Public Health Service Act, for the Community Mental Health Services Block Grant and the Substance Abuse Prevention and Treatment Block Grants The Family Violence Prevention and Services Act, for programs, services and activities under the Act The Communications Act of 1934, for federally-funded public telecommunication entities[2] Existing Conscience Laws Since the 1970s, several statutes have been enacted that protect the rights of providers, entities and beneficiaries of federal health care programs to object in a variety of ways to certain health care services. OCR reviews complaints under these laws and can take action to enforce them. In its recently proposed rule, OCR details several laws it intends to enforce.[3] Some of the earliest conscience protections, which are called the “Church Amendments”, prohibit a person from being required to perform abortions or sterilizations if contrary to his or her religious or moral beliefs. Entities are provided similar protection. Discrimination in employment of physicians and other personnel, and in residency and internship programs based on a person’s religious or moral beliefs regarding abortion and sterilization is also prohibited. The Church Amendments apply to grants, contracts, loans and loan guarantees under the Public Health Service Act and in some instances, under the Developmental Disabilities Assistance and Bill of Rights Act.[4] The Coats-Snowe Amendment extends abortion-related nondiscrimination provisions to federal, state and local governments receiving federal financial assistance. It protects conscience rights of entities, which includes physicians, physician trainees and residents.[5] The Weldon Amendment attached to an HHS appropriation bill similarly prohibits funds going to any government, agency or program that requires individuals or entities to provide, pay for, cover, or refer for abortions.[6] The Consolidated Appropriations Act of 2017 expands Weldon Amendment protections to the Medicare Advantage program.[7] The Affordable Care Act includes a variety of conscience protections related to assisted suicide, abortion, and the individual mandate to carry insurance.[8] Revised Conscience Rule In January 2018, OCR announced a proposed rule to strengthen conscience-based protections for individuals and entities with objections to certain activities based on religious belief and moral convictions.[9] The proposed rule is not entirely new, however. It would make significant changes to 45 CFR part 88 (entitled: “ENSURING THAT DEPARTMENT OF HEALTH AND HUMAN SERVICES FUNDS DO NOT SUPPORT COERCIVE OR DISCIMINATORY POLICIES OR PRACTICES IN VIOLATION OF FEDERAL LAW”), which stems originally from a 2008 Bush-era rule.[10] The Bush-era rule was itself revised substantially in 2011 during the Obama administration.[11] OCR now proposes to return much of 45 CFR part 88 to its 2008 Bush-era form, adding a requirement that certain recipients of HHS funds certify they comply with conscience protection laws and notify individuals of their rights thereunder.[12] The proposed rule details OCR’s enhanced investigative and enforcement abilities and expands its enforcement authority to more conscience-protection laws than the 2008 or 2011 iterations.[13] The rulemaking states that OCR will “handle complaints [both formal and not], perform compliance reviews, investigate, and seek appropriate action,” including terminating funding and requiring repayment.[14] OCR states that a more centralized approach to enforcement of conscience protections is necessary in part due to rapidly rising complaints. OCR notes that ten conscience-related complaints were filed from implementation of 45 CFR part 88 in 2008 until the November 2016 presidential election.[15] However, since President Trump’s election, thirty-four complaints have been filed.[16] We will continue to monitor the development of this rule as it proceeds through the rulemaking process.   [1] https://www.hhs.gov/about/news/2018/01/18/hhs-ocr-announces-new-conscience-and-religious-freedom-division.html [2] https://www.hhs.gov/conscience/religious-freedom/index.html [3] 83 Fed. Reg. 3880. [4] Id. at 3882. [5] Id. at 3882-83. [6] Id. at 3883. [7] Id. [8] Id. [9] https://www.hhs.gov/about/news/2018/01/19/hhs-takes-major-actions-protect-conscience-rights-and-life.html [10] 83 Fed. Reg. at 3885. [11] Id. [12] Id. at 3891. [13] Id. [14] Id. at 3899. [15] Id. at 3886. [16] Id.  

If the government does not take action and continues to pay for Medicare/Medicaid claims after it learns of non-compliance related to the claims, is the non-compliance material to the government’s decision to pay? This is a question being answered in the negative by courts across the country, who have concluded that the government (or a qui tam relator) is not able to proceed under a False Claims Act (FCA) “implied certification” theory if evidence shows that the government did not take action and continued to pay claims after learning of non-compliance with laws associated with those claims. A Florida Federal Court in United States ex. rel. Ruckh v. Salus Rehabilitation, LLC et. al (Case No. 8:11-cv-1303-T-23TBM), is one of the latest to address this issue and find no FCA violation. Background In 2016, the United States Supreme Court addressed the issue of whether a claim submission without disclosure of a statute or regulation infraction could potentially trigger a FCA violation in Universal Health Services, Inc. v. United States ex rel. Escobar, spawning a new line of cases that have interpreted the new standards the Court set forth for implied certification FCA cases. Prior to the Escobar decision, the circuit courts across the U.S. were split on the issue. In these so-called “implied certification” cases, the government alleged that the party submitting a claim to the government impliedly certified that the services were provided in compliance with laws. In Escobar, the Supreme Court analyzed the reach of the FCA in situations in which a party was alleged to have made a misrepresentation in a payment claim to the federal government because the services provided were, in fact, not in compliance with the law. The Court recognized the implied certification theory, but held, among other things, that under the theory, FCA liability depends on whether the defendant violated a requirement that it knew was material to the government’s decision to pay. In providing guidance on how to determine “materiality”, the Court noted that, “[t]he materiality standard is demanding. The False Claims Act is not ‘an all-purpose antifraud statute’ or a vehicle for punishing garden-variety breaches of contract or regulatory violations.” The Court went on to note: “[I]f the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material” and “if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.” Analysis In light of the guidance in Escobar, many courts in analyzing “implied certification” allegations under the FCA, have given significant consideration to evidence about how the government acted following a defendant’s non-compliance disclosure. Courts will make a fact-intensive inquiry into the post-disclosure conduct of the government in order to determine whether a given violation is material to the governments’ payment decision on the related claims. If the government refused to make further payment or took other action against the provider after learning of the non-compliance, that refusal may help the government or a relator to establish that compliance with the particular law at issue was material to the government’s decision to pay. However, if the government continues to pay the claims, and takes no other action, it has proven difficult for the government or a relator to succeed. A recent example of the uphill battle Escobar is presenting for relators and the government in these “implied certification” FCA cases is the Salus case. On January 11, 2018, a federal court in Florida followed a line of post-Escobar cases, denying an implied certification theory case under the FCA based on evidence that the government continued to pay claims related to the subject matter of the relator’s complaint, even after the government learned about the non-compliance. In Salus, a nurse relator alleged FCA violations against the owners and operators of 53 specialized nursing facilities based on the nursing facility’s alleged failure to maintain a comprehensive care plan for residents required under Medicaid, as well as defects in paperwork required to support claims to the Medicare program, such as unsigned or undated documents. The judge in Salus vacated a $350 million verdict against Salus Rehabilitation, which had been entered less than a year earlier (on March 1, 2017), because the evidence in the case showed that the government knew about the non-compliance, and did nothing about it. In overturning the prior verdict against the nursing homes, the court stated, “[n]ot only did the relator fail to prove that the governments regarded the disputed practices as material and would have refused to pay, but the relator failed to prove that the defendants submitted claims for payment despite the defendants’ knowing that the governments would refuse to pay the claims if either or both governments had known about the disputed practices. In fact, both governments were—and are—aware of the defendants’ disputed practices, aware of this action, aware of the allegations, aware of the evidence, and aware of the judgements for the relator—but neither government has ceased to pay or even threatened to stop paying the defendants for the services provided to patients throughout Florida continuously since long before this action began in 2011.” The judge noted that the government had never made any complaint or imposed any administrative sanction on the practices alleged by the relator. The judge further wrote, “federal and state governments regard the disputed practices with leniency or tolerance or indifference, or perhaps with resignation to the colossal difficultly of precise, pervasive, ponderous and permanent record-keeping in the pertinent clinical environment.” The Salus decision is another win for health care providers who have long lived in fear of the enormous penalties under the FCA whenever non-compliance is discovered with the highly complex, technical and ever-changing health care regulations. While each case applying the materiality standard must be analyzed on its particular facts and circumstances at issue, the post-Escobar cases analyzing the materiality standard have provided a welcomed, more consistent approach that providers can look to when defending these cases.

Perhaps lost amid the healthcare news coverage of competing proposals regarding “Medicare for All” and the repeal of Obamacare, the Centers for Medicare & Medicaid Services (“CMS”) last month announced the expansion of its Targeted Probe and Educate (“TPE”) claims review program to the entire country by the end of the year. CMS’s announcement can be found here.   The expansion of the TPE program is welcomed by the provider community, many members of which view this as an opportunity for proactive education and corrective action with CMS, as opposed to the punitive approach taken under other Medicare programs that evaluate claims retrospectively and put the provider at risk of fines and other penalties if a mistake is discovered.  During the recent pilot phase of the TPE program in four Medicare Administrative Contractor (“MAC”) jurisdictions, CMS found decreases both in the number of claim errors after providers/suppliers received education and in the number of appealed claims decisions, which demonstrate that the program works to increase claims accuracy.   MACs, on behalf of CMS, review clinical documentation related to claims to prevent improper Medicare payments. Historically, when conducting an audit, MACs have reviewed all providers/suppliers billing a particular service. However, the approach under TPE will be different in that it will focus on only a subset of providers/suppliers. Specifically, MACs focus on those providers/suppliers identified through data analysis as having (a) the highest claim error rates or (b) billing practices that differ greatly from their peers with respect to those items/services (i) that pose the greatest financial risk to Medicare and/or (ii) that have a high national error rate.   Another difference from prior audit programs is that providers/suppliers identified for the TPE program have a more manageable, limited number of claims (e.g., 20-40) reviewed, compared to the burdensome number of claims that have been audited in other Medicare programs.  Following the claims review, CMS will provide individual education to address any errors found. This review and education process continues for up to three rounds. A helpful CMS flowchart outlining this process can be found here.   Providers/suppliers that demonstrate sufficient improvement may be excused from the TPE process following any round. On the other hand, providers/suppliers with persistent high error rates after three rounds of the TPE process may face consequences such as prepay review, extrapolation, RAC audits, or other actions.