Randall Hanson

California has long maintained one of the country’s more developed prohibitions on the Corporate Practice of Medicine (“CPOM”) and the Corporate Practice of Dentistry (“CPOD”). Recent activity from California Attorney General Rob Bonta suggests that these doctrines are increasingly used as enforcement tools in arrangements involving management services organizations (“MSOs”), dental service organizations (“DSOs”), professional corporations (“PCs”), and other health care businesses in California. In the span of roughly three months, Attorney General Bonta took three notable actions in this area: he filed an amicus brief in Art Center Holdings, Inc. v. WCE CA Art, LLC; announced a settlement with Aspen Dental Management, Inc. involving California’s ban on the CPOD; and announced a “first-of-its-kind” settlement with Carbon Health Technologies, Inc., affiliated medical groups, and Carbon’s co-founder and former CEO, Eren Bali, involving California’s CPOM doctrine. This blog post provides a general overview of these recent California developments and what they may signal for regulated professional organizations operating in California. Art Center: The Attorney General Targets Captive PC Replacement Rights The Attorney General’s Art Center amicus brief is a forceful restatement of California’s CPOM doctrine as applied to “friendly PC” or “captive PC” structures. The brief identifies the relationship that “poses the greatest risk” as one in which an MSO has the sole authority to select a so-called “friendly” physician to serve as the PC’s nominal owner, while the MSO retains contractual tools that allow it to control the friendly physician-owner and, by extension, the PC. The brief focuses on a common set of provisions often described as continuity agreements, succession agreements, assignable options, or stock transfer agreements. Under the arrangements described by the Attorney General, the physician-owner could not sell the physician’s interest in the PC without first obtaining the MSO’s approval. The MSO also retained the unilateral right to terminate its contract with the physician-owner. If the contract were terminated, the physician-owner’s ownership interest would transfer to another licensed physician selected by the MSO. According to the Attorney General, these provisions run the risk of giving the MSO “near complete control” over the PC. The Attorney General’s core argument is that agreements giving a nonprofessional corporation the right to replace a PC’s physician-owner with a physician of its choosing violate California’s CPOM prohibition by giving the corporation undue control over a medical practice. The brief reasons that the ability to replace the physician-owner gives the nonprofessional corporation direct control over physician hiring and firing, and indirect control over all other aspects of the practice. That concern is heightened where the physician-owner has no corresponding right to replace the MSO without losing ownership of the PC. Importantly, the brief does not state that every MSO-PC relationship is per se unlawful. It expressly notes that not all MSO-PC relationships give the MSO an impermissible degree of control and that, absent the problematic contractual terms at issue in this specific case, the legality of an MSO-PC relationship requires a totality-of-the-circumstances analysis. But the brief leaves little doubt that contractual rights allowing an MSO to replace a physician-owner are, in the Attorney General’s view, among the highest-risk features in a California MSO-PC structure. Aspen Dental: Corporate Practice of Dentistry Enforcement On May 7, 2026, the California Attorney General announced a settlement with Aspen Dental Management, Inc. for alleged violations of California’s ban on the CPOD and alleged false and misleading advertising. The settlement, which remained subject to court approval at the time of announcement, included $2 million in penalties and $300,000 in restitution funds for certain patients. The Attorney General alleged that Aspen Dental, a private equity-owned DSO, exceeded its role as a provider of business management and administrative services by interfering with and unlawfully directing the practice, ownership, and management of dentistry in California. The Attorney General’s press release also noted that Aspen Dental entered California in 2019 and opened 19 offices in the state, and alleged that Aspen selected, purchased, staffed, and advertised offices without clearly identifying independent dentist-owners. The Aspen settlement is not Aspen Dental’s first corporate practice-related enforcement matter. In 2015, the New York Attorney General announced a settlement requiring Aspen Dental Management to overhaul its New York business practices so that it would not dictate care provided by dentists and hygienists, split patient fees with clinics, or hold itself out to consumers as a provider of dental services. The California Aspen Dental settlement includes a broad set of injunctive terms. Among other things, Aspen Dental agreed to restrictions including: Not replacing any practice owner with another dentist of its choosing. Not requiring practice owners to effectively give up ownership of any dental practices if they decide to terminate their contractual relationship with Aspen Dental. Not owning the property for any practice. Not practicing dentistry, including but not limited to owning or managing any dental office. Not basing service fees on revenue, sales, or profits. Not suggesting, directing, or encouraging any licensed clinician, other than a practice owner, to sell or increase revenue for any service or product. Not compensating any of its employees based on the sales or revenue of practices. Not paying any practice employees incentives based on practice sales, revenue, or profit, including the sale of a particular service or product. Discontinuing the use of and not enforcing any existing contractual provision that restricts where any licensed clinician may practice or be employed. Providing a written fee schedule for products and laboratory services. Registering with the Dental Board of California as a Dental Group Advertising and Referral Service. Clearly and conspicuously identifying the practice owner’s name when creating, publishing, or disseminating advertisements. Carbon Health: CPOM Enforcement Applied to the Friendly PC Model On June 26, 2026, Attorney General Bonta announced a “first-of-its-kind” settlement with Carbon Health Technologies, Inc., affiliated medical groups, and Carbon’s co-founder and former CEO, Eren Bali. The settlement, which remains subject to court approval, resolved allegations that Carbon Health violated California’s prohibition on the CPOM, used unlawful consumer contracts, engaged in false advertising, and improperly billed patients and insurers. According to the Attorney General, Carbon Health used a “friendly PC” model in which Carbon Health Technologies, a MSO, controlled clinic operations by contract. The challenged contracts allegedly allowed the MSO to replace the physician-owner with a physician of its choosing, while preventing the physician-owner from replacing the management company without risking loss of ownership. The Attorney General also alleged that the structure allowed unlicensed officers to direct staffing, advertising, and insurance negotiations. The proposed Carbon judgment would permanently enjoin the defendants from engaging in CPOM, including through: A management services agreement granting the MSO complete authority over advertising, payor negotiations, selection of medical equipment, and the hiring, firing, and compensation of licensed medical professionals; Granting an MSO any ownership interest in a professional corporation, including through an assignable option agreement giving the MSO the right to acquire such ownership interests for its own account; and A revolving credit agreement requiring affiliated professional corporations to seek financing exclusively from the MSO at an above-market rate, subject to certain conventional lender restrictions. The judgment also addresses significant billing and consumer-protection issues, including automatic payment disclosures, overcharges to patients with health maintenance organization coverage, collection of amounts not owed, incorrect billing codes, and misrepresentations about clinics’ in-network status. The proposed judgment imposes a $4.4 million civil penalty claim against the Carbon Health entities in their bankruptcy cases and a separate $100,000 civil penalty against Mr. Bali. The proposed judgment does not state that every succession or continuity arrangement is unlawful by itself. Rather, it focuses on the specific combination of ownership, option, financing, and operational-control rights described above. The Big Picture California’s recent activity fits within a broader state-level trend toward increased scrutiny of private investment and lay-entity influence in clinical care, including recent developments in Oregon and Vermont. California’s approach is notable because the Attorney General is using existing professional practice and consumer protection authorities to challenge MSO-PC arrangements, rather than relying only on newly enacted legislation. The takeaway is not that MSOs, DSOs, or private capital are categorically prohibited in California. Rather, California operators should assess whether their arrangements preserve genuine professional ownership and clinical independence, particularly where contract terms allow the management entity to influence who owns the practice, how the practice exits the relationship, or how clinical and patient-facing decisions are made. Please contact the authors or your primary Dorsey attorney with any questions about how these developments could affect your current business model or any contemplated transactions. Summer Associate Shen Wang provided substantial assistance with the drafting of this blog post/article.

On June 15, 2026, Vermont Governor Phil Scott signed H.583 (“Act 133”) into law, making Vermont the most recent state to reinforce their Corporate Practice of Medicine doctrine by restricting private equity and hedge fund influence over clinical decision-making. The legislation follows a flurry of interest from states inspired by similar legislative action in both Oregon and California. This blog post provides a general overview of Vermont’s new restrictions and places them in the context of the broader national trend toward scrutiny of private investment in health care. Act 133 has three operative sections: § 9772 codifies Vermont’s common-law prohibition on corporate involvement in clinical decision-making as it relates to private equity and hedge fund investments; § 9773 requires disclosure of private equity and hedge fund ownership and control interests in certain health care entities; and § 9774 provides for public transparency and sharing of such ownership information. Restrictions on Private Equity Influence Over Clinical Decision-Making Section 9772 is the substantive heart of Act 133. It establishes that clinical decision-making and other core functions affecting patient care must remain under the control of licensed health care professionals, effectively codifying, at least in part, Vermont’s Corporate Practice of Medicine doctrine. This section specifically prohibits private equity groups or hedge funds from: interfering with providers’ clinical judgment, including by determining appropriate diagnostic tests, referrals to other providers, patient treatment options, work schedules, and patient loads; and exercising control over, or being delegated the power to set: (i) clinical standards or policies; (ii) access to and control of patient medical records; (iii) hiring or firing of medical professionals based on clinical competency or proficiency; (iv) parameters for contracting with third-party payers or other providers; (v) prices or rates for a provider’s services; (vi) coding and billing decisions; and (vii) selection or approval of medical equipment and supplies. Section 9772 does not prohibit private equity firms and hedge funds from investing in health care entities. Nor does it ban unlicensed individuals or entities from providing non‑clinical management, administrative, or business services, so long as a licensed health care professional retains ultimate responsibility for or approval of any decisions affecting patient care. Finally, § 9772 creates a private right of action for health care providers to seek equitable relief, actual damages, costs, and attorney’s fees against a private equity group or hedge fund (or entity controlled directly, in whole or part, by one). New Ownership and Control Disclosure Requirements Section 9773 establishes a mandatory disclosure and data sharing regime to ensure transparency around private equity and hedge fund involvement in health care. It requires defined health care entities and management services organizations (“MSO”), which are owned at least in part by private equity groups or hedge funds (“Applicable  Entities”), to report specific ownership and control information (enumerated below) to Vermont’s state health regulatory board, the Green Mountain Care Board (the “State Board”). Certain entities are exempted, including nursing homes, health care staffing companies, organizations whose services are delivered exclusively through telehealth, and federally qualified health centers. Notably, health care entities and MSOs with no private equity or hedge fund ownership or investment must still attest to no such ownership or investment. Under this section, Applicable Entities must report to the State Board: the name, business address, and business identification numbers for each person that has an ownership, investment, or controlling interest, has a significant equity investment, or is an MSO of a health care entity; a current organizational chart showing the business structure of the health care entity or MSO, including affiliates and subsidiaries; and the health care entity’s or MSO’s most recent fiscal year’s profit and loss statement and balance sheet. Additionally, the State Board must work with the Agency of Human Services and relevant stakeholders to develop data reporting processes pursuant to these requirements. Information shared pursuant to this section shall be public information and not considered confidential, proprietary, or a trade secret, except for specified personal identifying information and certain confidential financial information. Lastly, § 9773 institutes financial penalties of up to $10,000 per year for failing to report required information and up to $25,000 for each material misrepresentation reported. Public Reporting and Transparency Requirements Section 9774 promotes transparency by requiring the State Board to report all ownership and control disclosures made under § 9773. It authorizes interagency sharing of that information for oversight and enforcement and provides that, except for specified personal identifiers, the information is public. Lastly, the section permits the State Board to share reported information with the Attorney General, Secretary of State, and other state agencies and officials to prevent duplicative reporting requirements and facilitate oversight and enforcement pursuant to Vermont law. The Big Picture Act 133 is one example of the larger national trend toward increased scrutiny of health care ownership and control. While Vermont’s new law appears to specifically focus on control over clinical decision-making by private equity and hedge funds, numerous other states, including Oregon, Massachusetts, Indiana, New Mexico, and Washington, passed broader ownership transparency-related laws in 2025 and 2026 (with other additional states at least considering such bills). Collectively, these measures reflect a broad national movement toward increased scrutiny of lay-investor influence in the health care sector. Please contact the authors or your regular Dorsey attorney with any questions about how these restrictions could affect your current business model or any contemplated transactions.    

Oregon’s sweeping new corporate practice of medicine (“CPOM”) law, Senate Bill 951 (“SB 951”), has already faced its first major courtroom test. As discussed in our prior post, SB 951 significantly expands Oregon’s restrictions on healthcare management services organization (“MSO”) structures and so-called “friendly PC” models. Among other things, SB 951 limits overlapping MSO/PC ownership, control, or employment and traditional friendly PC governance arrangements between MSOs and physician practices, restricts operational control by non-clinicians, and creates private enforcement rights allowing physicians to challenge allegedly unlawful arrangements. Most provisions applicable to new friendly PC arrangements took effect on January 1, 2026, while certain existing Oregon organizations have until 2029 to comply. This new legal framework is now at the center of Eugene Emergency Physicians, P.C. v. PeaceHealth. The dispute arose after PeaceHealth announced in March 2026 that it would not renew its long-standing emergency department staffing arrangement with Eugene Emergency Physicians (“EEP”), a local physician-owned group. Instead would transition services to ApolloMD, a national emergency medicine management company. EEP filed suit shortly thereafter against PeaceHealth, ApolloMD, ApolloMD Business Services, and Lane Emergency Physicians LLC (the friendly medical practice managed by ApolloMD in Oregon), seeking a preliminary injunction blocking the transition. According to the complaint and preliminary injunction filings, EEP alleged that the proposed structure utilized by ApolloMD violates SB 951 and Oregon’s CPOM doctrine by authorizing impermissible corporate control over a professional medical practice through a friendly PC arrangement. The litigation quickly attracted significant attention in Oregon and nationally, in part because it appears to be the first private enforcement action brought under SB 951, which itself is arguably the strictest CPOM law in the country. During preliminary injunction proceedings held in early May 2026, the federal court expressed skepticism regarding aspects of the defendants’ testimony and operational structure, with the presiding judge stating that certain ApolloMD officials had been “dishonest under oath.” Reportedly, the court called into question ApolloMD’s reference to a “playbook” they had for emergency room staffing, suggesting that ApolloMD was practically functioning as the clinical staffing shot-caller and Lane Emergency Physicians was only established to shield liability. Before the court issued a ruling on the injunction request, however, the parties privately reached a settlement. PeaceHealth subsequently announced plans to renew its relationship with EEP rather than proceed with the ApolloMD transition. Although the case did not produce a merits ruling interpreting SB 951, the litigation underscores several key points for healthcare investors, MSOs, hospitals, and physician groups operating in Oregon: Oregon stakeholders appear willing to aggressively test and enforce SB 951; Traditional friendly PC structures may face increased scrutiny under Oregon law; and Courts and regulators are likely to focus on operational realities, not merely formal ownership documents, when evaluating CPOM compliance. Healthcare organizations with Oregon operations should continue reviewing governance arrangements, management agreements, compensation structures, and operational control provisions in light of SB 951’s broad restrictions and evolving enforcement landscape. Please contact the authors or your regular Dorsey attorney with any questions about how these restrictions could affect your current business model or any contemplated transactions.  

On June 9, 2025, Oregon Governor, Tina Kotek, signed SB 951[1] into law, making Oregon’s “corporate practice of medicine” doctrine one of the country’s most restrictive. SB 951 places numerous restrictions on the relationships between management services organizations and clinician practices, which will impact many of the written arrangements and techniques that management services organizations and clinician practices currently use. SB 951 also places new and/or clarified restrictions on professional medical corporation structuring and the use of certain restrictive covenants in contracts among health industry parties. This blog post provides a general overview of these new restrictions. Key Definitions Here are key definitions that help clarify the scope of SB 951: “Management services organization” or “MSO” is defined as an entity that provides management services to a professional medical entity in return for monetary compensation under a written agreement. “Management services” is broadly defined and includes payroll, human resources, employment screening, employee relations, and other administrative or business services. “Medical licensee” or “licensee” is defined as an individual who is licensed in Oregon to practice medicine or naturopathic medicine or as a nurse practitioner or physician assistant. “Professional medical entity” is defined as an Oregon professional corporation organized for the purpose of practicing medicine, practicing naturopathic medicine, or allowing physicians, nurse practitioners and physician assistants to jointly render healthcare services, or a limited liability company, partnership limited liability partnership or partnership organized for a medical purpose that is authorized to transact business in Oregon.[2] Restrictions on MSOs MSOs, including their shareholders, directors, members, managers, officers and employees (collectively, “agents”), may not, with certain exceptions: own or control a majority of; be a director, officer, employee or independent contractor of, or receive compensation from the MSO to manage; or exercise a proxy, right or power to vote the shares of; a professional medical entity with which it has a management services agreement (“MSA”). Additionally, MSOs and their agents may not, with certain exceptions: control or enter into agreements to, or otherwise permit a non-licensee to, control or restrict the sale or transfer of a professional medical entity’s ownership interests or assets; issue, or cause a professional medical entity to issue, ownership interests in the professional medical entity or a subsidiary or affiliate of the professional medical entity; pay dividends from a professional medical entity’s ownership interests; acquire, or finance the acquisition of, a majority of a professional medical entity’s ownership interests; or exercise de facto control over a professional medical entity’s administrative, business or clinical operations in a manner that affects the professional medical entity’s clinical decision making or the nature and quality of its medical care, which includes, but is not limited to, hiring or setting compensation for licensees, setting clinical or billing and collection policies, and negotiating agreements with third-party payors and other third parties that are not employees of the professional medical entity. So, what can an MSO still do? SB 951 clarifies that the restrictions still permit an MSO to: enter into agreements to control or restrict the transfer or sale of a professional medical entity’s ownership interests or assets for cause, including, but not limited to, an owner’s loss of their professional license, exclusion from a federal health care program, breach of the MSA or death; provide management services as long as the MSO is not exercising de facto control over a professional medical entity’s operations in a manner that affects the professional medical entity’s clinical decision making or the nature and quality of its medical care; purchase, lease or take assignment of a right to possess a professional medical entity’s assets in an arms’-length transaction with a willing seller, lessor or assignor; provide support and consultation on any business operations matters, such as accounting, facilities management and compliance with applicable laws; advise a professional medical entity’s participation in payor arrangements, value-based arrangements or vendor agreements; collect quality metrics as required by law or one of the professional medical entity’s agreements; and set criteria for reimbursement under an agreement between a professional medical entity and a payor. Any MSA provision that violates any of the above restrictions is void and unenforceable. Additionally, professional medical entities and licensees have a private right of action against MSOs and the MSO’s agents, and damages may include actual damages, an injunction or other equitable relief, punitive damages and attorneys’ fees. Existing MSOs and professional medical entities conducting business in Oregon have until January 1, 2029 to comply with these restrictions. However, new MSOs and professional medical entities planning to conduct business in Oregon, including those involved in a sale or transfer of ownership, must comply with these restrictions by January 1, 2026. Restrictions on Professional Medical Corporations SB 951 also imposes restrictions on professional medical corporations (“PCs”), with certain exceptions. PCs’ articles, bylaws and other organizational arrangements may not allow for the removal of any director or officer without a majority vote of licensee-shareholders or licensee-directors, except for cause. Additionally, PCs may only replenish or transfer control over their operations through a valid shareholder agreement that is solely among and for the benefit of a majority of shareholders who are physicians licensed in Oregon. These restrictions apply to any agreements that are entered into or renewed on or after June 9, 2025. Non-Competition, Non-Disclosure and Non-Disparagement Agreements Lastly, non-competition agreements with professional licensees that restrict the practice of medicine or nursing as well as non-disclosure and non-disparagement agreements between an MSO, hospital or hospital-affiliated clinic and an employed licensee are void and unenforceable, with certain exceptions. These restrictions also apply to any agreements that are entered into or renewed on or after June 9, 2025. The Big Picture Notably, as of 2022, OHA requires notice of and reviews material health care transactions. This, along with the passage of SB 951, indicates Oregon’s strong focus on its regulation and oversight of the “corporate practice of medicine.” And Oregon is not alone. These are recent developments in a long history of state concerns with the separation of corporations and unlicensed individuals and healthcare professional’s medical decision making and patients’ care (i.e., the corporate practice of medicine) and, more recently, private equity involvement in health care. SB 951 materially reinforces and expands Oregon’s “corporate practice of medicine” doctrine and impacts not only MSAs but other MSO-practice relationships, MSO and PC governance and agreements with restrictive covenants. SB 951 raises difficult issues such as the permitted scope of an MSO’s authority if the requirement is to avoid control that affects the professional medical entity’s clinical decision making or the nature and quality of medical care. Given the wide-reaching implications of this new law and to ensure compliance with SB 951 by the applicable compliance dates, existing MSOs and clinician practices conducting business in Oregon will need to review and likely revise their current business models, practices, and written agreements as necessary, and new MSOs and clinician practices planning to conduct business in Oregon will need to closely review their proposed business models and practices. Please contact the authors or your regular Dorsey attorney with any questions about how these restrictions could affect your current business model or any contemplated transactions. [1] https://olis.oregonlegislature.gov/liz/2025R1/Downloads/MeasureDocument/SB951/Enrolled. [2] While this law does not currently apply to other healthcare providers. Oregon House Majority Leader, Ben Bowman, predicts that future legislative sessions will likely address the expansion of this law to other healthcare providers, such as hospitals and dentists.

On January 8, 2025, the governor of Massachusetts signed into law H.5159, An Act enhancing the market review process (the “Act”). Among various other healthcare market oversight enhancements, the Act expands the authority of the Massachusetts Attorney General, Center for Health Information and Analysis (“CHIA”), and Health Policy Commission (“HPC”) to review and gather data regarding private equity investment into healthcare providers and healthcare management companies. This law will be effective on April 8, 2025 (90 days following the governor’s signature). For more than a decade, Massachusetts has required certain healthcare providers and provider organizations to submit notifications to applicable commonwealth regulators 60 days in advance of material change transactions. These material change notices (“MCN”) trigger a 30-day preliminary market review, the result of which may be a more extensive cost and market impact review (“CMIR”). Under the Act, this notification requirement and review process has been expanded to include material change transactions involving “significant equity investors”. The following definitions are critical in understanding the scope of this expansion:   “Significant Equity Investor” is defined as “(i) any private equity company with a financial interest in a provider, provider organization or management services organization; or (ii) an investor, group of investors or other entity with a direct or indirect possession of equity in the capital, stock or profits totaling more than 10 per cent of a provider, provider organization or management services organization; provided, however, that “significant equity investor” shall not include venture capital firms exclusively funding startups or other early-stage businesses.” “Private Equity Company” is defined as “any company that collects capital investments from individuals or entities and purchases, as a parent company or through another entity that the company completely or partially owns or controls, a direct or indirect ownership share of a provider, provider organization or management services organization; provided, however, that “private equity company” shall not include venture capital firms exclusively funding startups or other early-stage businesses.” “Management Services Organization” is defined as “a corporation that provides management or administrative services to a provider or provider organization for compensation.” Notably, transactions involving a Significant Equity Investor that result in a change of ownership or control of a provider or provider organization must now be reported to the applicable Massachusetts oversight authorities. However, private equity investment solely in a Management Services Organization may not need to be reported under the Act if the Management Services Organization does not also meet the definition of a “provider organization” (e.g., the Management Services Organization does not represent providers in contracting with carriers) and the transaction does not otherwise result in any change of ownership or control of a provider. So, while the Act adds a broad definition for Management Services Organizations, it appears to do so primarily to bolster the added definition for Significant Equity Investor. In the absence of clarifying guidance from the applicable Massachusetts oversight authorities, the Act does not seem to materially expand on the circumstances in which notification of a transaction involving only a Management Services Organization would need to be reported in Massachusetts. Further, the Act expands on the applicable regulatory authorities’ rights to gather data, including post-closing data, to assess impacts of any reportable material change in a couple of important ways. First, for material change transactions involving a Significant Equity Investor, regulators may require the Significant Equity Investor to submit information regarding its capital structure, general financial condition, ownership and management structure, and audited financial statements as part of the notice. Second, regulators may require providers and provider organizations to submit data and information necessary to assess the post-transaction impacts of a material change for a period of 5 years following completion of the reported change, greatly extending the amount of time that transacting parties in the healthcare industry remain under the microscope in Massachusetts. Every transaction is different. Therefore, each healthcare industry transaction involving a state with a healthcare transaction notification law, of which there are increasingly many, should be reviewed for any necessary notification requirements. These laws can impose significant reporting obligations and materially impact transaction timelines. Reach out to the authors of this post or your regular Dorsey attorney should you have any questions.

On July 1, 2024, Indiana’s new health care transactions notification law takes effect.[1] The law is designed to increase government oversight of mergers and acquisitions involving health care entities. Indiana joins a growing number of states that have passed similar legislation implementing notice requirements and increasing antitrust evaluations for certain health care transactions.[2] The following provides a general overview of Indiana’s new law. General Purpose and Key Definitions Indiana’s health care transactions notification law grants the Indiana Attorney General (AG) the authority to review certain mergers and acquisitions between two health care entities if at least one of the entities is an Indiana health care entity.[3] To enforce this oversight power, the law establishes specific notice requirements for the transacting health care entities. Such notice must be provided to the Indiana AG at least ninety (90) days before the date of the merger or acquisition.[4] Upon reviewing a submission of notice, the Indiana AG may issue a civil investigative demand for more information regarding the merger or acquisition. Below are key definitions from Indiana’s law defining the applicable scope: Transactions affected by the new notification requirements include mergers and acquisitions. “Merger” is defined as any change of ownership including: An acquisition or transfer of assets, or The purchase of stock effectuated by a merger agreement. “Acquisition” is defined as any agreement, arrangement, or activity that results in a person acquiring, directly or indirectly, control of another person. Entities affected by the new law are those specifically falling within the statute’s definition of health care entities.[5] “Health care entity” is defined as: Any organization or business that provides diagnostic, medical, surgical, dental treatment, or rehabilitative care. An insurer that issues a “policy of accident and sickness insurance,”[6] which generally includes a policy or contract covering bodily injury, disablement by injury or illness, or death by accident or disease.[7] The statute provides specific exceptions for several types of coverage.[8] A health maintenance organization. A pharmacy benefit manager, which refers to an entity that performs certain administrative functions on behalf of a health plan, state agency, insurer, managed care organization, or other third party payor.[9] An administrator, meaning a person who, on behalf of an insurer, “underwrites, collects charges or premiums from, or adjusts or settles claims on residents of Indiana in connection with life, annuity, or health coverage offered or provided by an insurer.”[10] The statute provides several specific exclusions for persons not considered an administrator.[11] A private equity partnership, regardless of where the private equity partnership is located, seeking to enter a merger or acquisition with any entity described above.[12] If a transaction meets the definition of merger or acquisition, and the entities involved are “health care entities” under the statute, then the transaction may be subject to certain notification requirements. Notification Requirements Indiana’s health care transactions notification law requires an Indiana health care entity “involved in a merger or acquisition with another health care entity with total assets, including combined entities and holdings, of at least ten million dollars ($10,000,000)” to provide written notice to the Indiana AG at least ninety (90) days before the date of the merger or acquisition.[13] For notice to be required under Indiana’s health care transactions notification law, the transaction must: (1) satisfy the statute’s definition of either a merger or acquisition; (2) involve two or more “health care entities,” one of which must be based in Indiana; and (3) concern at least ten (10) million dollars in total assets. If these characteristics are met, then the transacting health care entities must submit notice as outlined below. If the transaction is subject to Indiana’s notice requirements, each health care entity involved in the transaction must submit written notice to the Indiana AG, which must include the following information: The entity’s business address and federal tax number. The name and contact information of a representative of the health care entity concerning the merger or acquisition. A description of the health care entity. A description of the merger or acquisition, including the anticipated timeline. A copy of any materials that have been submitted to a federal or state agency concerning the merger or acquisition.[14] Attorney General Obligations and Oversight Powers Following a health care entity’s compliance with the above notice requirements, the Indiana AG will review the information submitted and provide a written analysis of any antitrust concerns regarding the merger or acquisition. The Indiana AG must provide its analysis not later than forty-five (45) days following the health care entity’s submission of notice. The analysis is given to the representative of the health care entity that submitted notice. Additionally, the Indiana AG has the power to issue a civil investigative demand to collect further information regarding the merger or acquisition from the health care entities submitting notice. The civil investigative demand must be made pursuant to Indiana’s existing law, which, in part, requires the attorney general to have reasonable cause to believe a person has violated a statute enforced by the attorney general.[15] Finally, Indiana’s health care transactions notification law imposes certain confidentiality requirements. The Indiana AG must keep confidential all nonpublic information provided through the notice requirements. Furthermore, any information received or produced by the Indiana AG is also considered confidential. If you have any questions regarding Indiana’s health care transactions notification law and how your organization or transaction may be impacted, please contact the authors or your regular Dorsey attorney. Summer Associate Katelyn Tarrolly provided substantial assistance researching and drafting this blog post. [1] Burns Ind. Code Ann. §§ 25-1-8.5-1—25-1-8.5-4. [2] See Lillie Cox, Randall Hanson, Jamie McCarty & Neal Peterson, Minnesota Attorney General Notification of Health Care Transaction, Dorsey Health Law Blog (May 30, 2023), https://www.dorseyhealthlaw.com/minnesota-attorney-general-notification-of-health-care-transactions/ (noting several states have enacted or are considering similar legislation, including California, Connecticut, Delaware, Massachusetts, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, and Washington). [3] To trigger Indiana’s transactions notification requirements, both entities must be health care entities. Additionally, the law requires at least one of those entities to be an “Indiana health care entity.” The statute does not define “Indiana health care entity.” Currently, there is no guidance that clarifies the criteria for being considered an “Indiana health care entity” under the new law. Burns Ind. Code Ann. § 25-1-8.5-4. [4] The statute provides that notice shall be given “at least ninety (90) days prior to the date of the merger or acquisition[.]” This likely means notice must be given ninety (90) days prior to the closing date of the merger or acquisition; however, there is no guidance currently clarifying the correct interpretation of this provision. Burns Ind. Code Ann. § 25-1-8.5-4. [5] “Health care entity” does not include the Medicaid program or the Medicare program. Burns Ind. Code Ann. § 25-1-8.5-2(b). [6] Burns Ind. Code Ann. § 25-1-8.5-2. [7] See Burns Ind. Code Ann. § 27-8-5-1 (“‘[P]olicy of accident and sickness insurance’, as used in this chapter, includes any policy or contract covering one (1) or more of the kinds of insurance described in Class 1(b) or 2(a) . . . .”).; see also Burns Ind. Code Ann. § 27-1-5-1 (defining Class 1(b) and Class 2(a) insurance). [8] An insurer that issues one or more of the following types of coverage is explicitly excluded from the definition of health care entity: “(A) accident only, credit, dental, vision, long term care, or disability income insurance; (B) coverage issued as a supplement to liability insurance; (C) automobile medical payment insurance; (D) a specified disease policy; (E) a policy that provides indemnity benefits not based on any expense incurred requirements, including a plan that provides coverage for: (i) hospital confinement, critical illness, or intensive care; or (ii) gaps for deductibles or copayments.; (F) worker’s compensation or similar insurance; (G) a student health plan; (H) a supplemental plan that always pays in addition to other coverage. Burns Ind. Code Ann. § 25-1-8.5-2(a)(2). [9] A pharmacy benefit manager is an entity that: “(1) contracts directly or indirectly with pharmacies to provide prescription drugs to individuals; (2) administers a prescription drug benefit; (3) processes or pays pharmacy claims; (4) creates or updates prescription drug formularies; (5) makes or assists in making prior authorization determinations on prescription drugs; (6) administers rebates on prescription drugs; or (7) establishes a pharmacy network.” Burns Ind. Code Ann. § 27-1-24.5-12. [10] Burns Ind. Code Ann. § 27-1-25-1. [11] Administrator does not include: (1) an employer or wholly owned direct or indirect subsidiary of an employer acting on behalf of the employees of: (A) the employer; (B) the subsidiary; or (C) an affiliated corporation of the employer; (2) a union acting for its members; (3) an insurer; (4) an insurance producer licensed under IC 27-1-515.6 that has a life or accident and health or sickness qualification and whose activities are limited exclusively to the sale of insurance; (5) a creditor acting for its debtors; (6) a trust established under 29 U.S.C. 186 and the trustees, agents, and employees acting pursuant to that trust; (7) a trust that is exempt from taxation under Section 501(a) of the Internal Revenue Code; (8) a financial institution that is subject to supervision or examination by federal or state banking authorities to the extent that the financial institution collects and remits premiums to an insurance producer or an authorized insurer in connection with a loan payment; (9) a credit card issuing company that: (A) advances for; and (B) collects from, when a credit card holder authorizes the collection; credit card holders of the credit card issuing company, insurance premiums or charges; (10) a person that adjusts or settles claims in the normal course of the person’s practice or employment as an attorney at law and that does not collect charges or premiums in connection with life, annuity, or health coverage; (11) a health maintenance organization; (12) a limited health maintenance organization; (13) a mortgage lender to the extent that the mortgage lender collects and remits premiums to an insurance producer or an authorized insurer in connection with a loan payment; (14) a person that is licensed as a managing general agent and acts exclusively within the scope of activities under the license; (15) a person that (A) directly or indirectly underwrites, collects charges or premiums from, or adjusts or settles claims on residents of Indiana in connection with life, annuity, or health coverage provided by an insurer; (B) is affiliated with the insurer; and (C) performs the duties specified in clause (A) only according to a contract between the person and the insurer for the direct and assumed life, annuity, or health coverage provided by the insurer. Id. [12] The statute does not define “private equity partnership.” Currently, there is no guidance interpreting what is considered a “private equity partnership.” Burns Ind. Code Ann. § 25-1-8.5-2(a)(6). [13] Burns Ind. Code Ann. § 25-1-8.5-4(a). [14] Burns Ind. Code Ann. § 25-1-8.5-4(b). [15] Burns Ind. Code Ann. § 4-6-3-3.

On January 1, 2024, final regulations issued by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) went into effect in order to implement the requirements of the Corporate Transparency Act (“CTA”). For background on the CTA and an outline of the final regulations generally, please see this separate Dorsey publication written by members of Dorsey’s CTA task force. The purpose of this Dorsey Health Law blog post is to dive deeper into the regulations and discuss the CTA’s reporting obligations as they may relate to the friendly physician model used widely across the provider sectors of the health care industry. Note that the CTA and implementing final regulations are both currently in their infancy and new regulatory guidance regarding these rules continues to be released. The analysis presented in this blog post is meant to be general and based on guidance available as of the date of this post only. Applicability of the CTA to any business structure should be assessed on a case-by-case basis. Friendly Physician Model A majority of the United States prohibits corporations owned by non-professional (unlicensed) persons from practicing medicine, e.g., by employing licensed physicians to provide patient care. This doctrine is commonly referred to as the corporate practice of medicine prohibition (“CPOM”). In order to comply with CPOM, many healthcare companies use a structure commonly referred to as the “friendly physician model”. The friendly physician model involves forming a professional entity (most often a professional corporation or professional limited liability company) owned by a licensed professional that contracts with a management services organization (“MSO”) for administrative services. The contracts entered into with the MSO also typically establish control mechanisms that allow the MSO to make certain non-professional business decisions on behalf of the professional entity, including decisions related to changes in ownership and governance of the professional entity by particular licensed professionals. CTA Beneficial Ownership Reporting The CTA requires that all “Reporting Companies” file a report of “Beneficial Owners” to FinCEN. The definition of “Reporting Company” is generally broad and includes all entities formed by filing with a secretary of state. However, this definition is limited by twenty-three (23) exemptions focused on highly regulated industries (e.g., banking; insurance; but not health care providers generally) and large organizations. If an entity qualifies as a Reporting Company but does not meet one of the twenty-three (23) exemptions, it must file a report with FinCEN that includes information on such entity’s Beneficial Owners, defined broadly as any “individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity; or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.”[1] Exemption from CTA Reporting for Friendly Physician Model Professional Entities The friendly physician model’s unique structure requires a nuanced analysis of the CTA and its implementing regulations in order to determine whether Beneficial Owner reporting is required for a professional entity formed within an organization’s friendly physician model. First, a few assumptions: The MSO contracting with a professional entity may itself be considered exempt from CTA reporting (likely under either the “large company” or “subsidiary” exemptions, discussed further below). The contracts entered into between the MSO and a professional entity include terms that establish control mechanisms that allow the MSO to make certain non-professional business decisions on behalf of the professional entity, including decisions related to changes in all ownership and governance of the professional entity by particular licensed professionals. Of the twenty-three (23) exemptions from CTA reporting available, only two (2) can likely be considered for a professional entity formed within an organization’s friendly physician model: the “large company” exemption or the “subsidiary” exemption. I. Large Company Exemption The large company exemption is available for any entity that “(i) employs more than 20 employees on a full-time basis in the United States; (ii) filed in the previous year Federal income tax returns in the United States demonstrating more than $5,000,000 in gross receipts or sales in the aggregate, including [consolidated receipts]; and (iii) has an operating presence at a physical office within the United States.”[2] While a professional entity formed within an organization’s friendly physician model may be able to demonstrate the gross receipts necessary for this exemption, many such professional entities may not be able to demonstrate direct employment of 20 employees. If a professional entity can meet this exemption, then such professional entity is not required to report Beneficial Owner information to FinCEN. II. Subsidiary Exemption The subsidiary exemption is available to any entity “of which the ownership interests are owned or controlled, directly or indirectly, by 1 or more [already exempt] entities.”[3] While the MSO contracting with a professional entity formed within an organization’s friendly physician model cannot be the direct owner of a professional entity (as such would be a violation of CPOM), it is possible that the MSO’s contracting relationship with the professional entity could be considered to establish at least indirect control over the professional entity sufficient to meet the subsidiary exemption. Neither the CTA nor the implementing regulations expressly detail what “control” means with respect to the subsidiary exemption. However, the implementing regulations do provide additional definitions for “control” in the context of Beneficial Ownership, and preamble language from FinCEN’s final regulations suggests it would be reasonable to review such “control”-related definitions in analyzing the subsidiary exemption. In rejecting rule commenters’ suggestions to include “wholly” controlled within the regulation’s subsidiary exemption language, FinCEN states that the use of the term ”control” already “covers the intended concept of control set out in the CTA.” In so stating, FinCEN indicates that the concept of “control” should be consistent throughout the implementation of the CTA. FinCEN’s CTA implementing final regulations provide the following, in part, related to the concept of “control”: “an individual exercises substantial control over a reporting company if the individual: . . . has authority over the appointment or removal of any senior officer or a majority of the board of directors (or similar body); or . . . directs, determines, or has substantial influence over important decisions made by the reporting company.” FinCEN clarifies that substantial control can be exercised indirectly “through . . . any other contract, arrangement, understanding, relationship or otherwise.” Further, FinCEN’s January 12, 2024 FAQ update provides that “control” is only established for purposes of the subsidiary exemption if control is maintained over all of the ownership interests. Therefore, with reference to the assumptions placed above, it would be a reasonable conclusion that a professional entity formed within an organization’s friendly physician model could be exempt from CTA reporting by way of being indirectly controlled by the MSO and therefore a subsidiary of an already exempt entity. In the event a professional entity formed within an organization’s friendly physician model is found to be a Reporting Company under the CTA, additional case-by-case analysis of who the Beneficial Owners are would be necessary. If you have any questions about the CTA’s potential application to a friendly physician model, reach out to your regular Dorsey attorney or to any member of the Dorsey & Whitney LLP Healthcare Transactions and Regulations practice group. Erin Bryan, a Partner in Dorsey’s Consumer Financial Services Group and a Member of the firm’s CTA Working Group, provided substantial consultation for this blog post.   [1] 31 U.S. Code § 5336(a)(3)(A) [2] 31 U.S. Code § 5336(a)(11)(B)(xxi) [3] 31 U.S. Code § 5336(a)(11)(B)(xxii)

On May 26, 2023, the Governor of Minnesota signed into law Minnesota bill HF 402 to increase government oversight of health care transactions that occur in Minnesota or involve Minnesota-based health care entities. A general overview of the new law’s oversight provisions can be found in a previous Dorsey Health Law blog post. The new law also contains provisions specific to nonprofit health care organizations, including additional transaction requirements and extension of the moratorium on certain conversion transactions. Given the prevalence of nonprofit health care organizations in Minnesota, we expect this new legislation to materially impact both payors and providers in the State. This blog post summarizes those provisions, all of which have already gone into effect. Additional Transaction Requirements for Nonprofit Health Care Entities In addition to the general notice requirements now effective under this new law and summarized in our previous post, HF 402 imposes further requirements on (1) nonprofit health care entities that are either incorporated under the Minnesota Nonprofit Corporation Act or organized as a Minnesota nonprofit limited liability company, and (2) the subsidiaries of such nonprofit entities, regardless of their incorporation or organizational status. These entities are now required to ensure the following before proceeding with a transaction: The transaction complies with the Minnesota Nonprofit Corporation Act, the charitable trusts statutes, and other applicable laws; The transaction does not involve or constitute a breach of charitable trust; The transferring nonprofit entity will receive the full and fair value for its public benefit assets, unless the discount between the full and fair value of the assets and the value received for the assets will further the nonprofit purposes of the entity or is in the public interest; The value of the public benefit assets to be transferred has not been manipulated in a manner that causes or has caused the value of the assets to decrease; The proceeds of the transaction will be used in a manner consistent with the public benefit for which the assets are held by the nonprofit health care entity; The transaction will not result in a breach of fiduciary duty; and There are procedures and policies in place to prohibit any officer, director, trustee, or other executive of the nonprofit health care entity from directly or indirectly benefiting from the transaction. Currently, it is not entirely clear how or to what extent these additional transaction requirements for nonprofit health care entities will be reviewed in conjunction with the general notice requirements for health care entities. Moratorium on Conversion Transactions A moratorium on conversion transactions involving nonprofit health plan entities operating under the Minnesota Nonprofit Health Service Plan Corporations Act or Health Maintenance Act that was set to expire July 2023 has been extended through July 2026. The moratorium was initially enacted in response to concerns of some lawmakers that nonprofit assets could be transferred to for-profit carriers in a merger or acquisition. These nonprofit health plan entities “may only merge or consolidate with; convert; or transfer, as part of a single transaction or a series of transactions within a 24-month period, all or a material amount of its assets to” an entity that is incorporated under the Minnesota Nonprofit Corporation Act; “or to a Minnesota nonprofit hospital within the same integrated health system as the health maintenance organization.” A “material amount” is defined as the “lesser of ten percent of an entity’s total admitted net assets as of December 31 of the previous year, or $50,000,000.” The moratorium does not apply if the nonprofit health plan entity files an intent to dissolve due to insolvency of the corporation or if insolvency proceedings are commenced. Related Study and Recommendations HF 402 requires that the Minnesota commissioner of health study and develop recommendations on the regulation of conversions, mergers, transfers of assets, and other transactions primarily affecting Minnesota-domiciled nonprofit health maintenance organizations (HMOs). These recommendations must address the following: Monitoring and regulation of Minnesota-domiciled for-profit HMOs; Issues related to public benefit assets held by a nonprofit HMO, including identifying the portion of the organization’s assets that are considered public benefit assets to be protected, establishing a fair and independent process to value the assets, and determining how public benefit assets should be stewarded for the public good; Providing a state agency or executive branch office with authority to review and approve or disapprove a nonprofit HMO’s plan to convert to a for-profit organization; Establishing a process for the public to learn about and provide input on a nonprofit HMO’s proposed conversion to a for-profit organization; and Issues, including statutory language and regulatory implementation, related to a potential statutory requirement that nonprofit HMOs licensed under Minnesota Statutes chapter 62D, and health systems organized as a charitable organization, upon the sale or transfer of control to an out-of-state or for-profit entity, return to the state’s general fund an amount equal to the value of any charitable assets the HMO or health system received from the state. The commissioner is required to seek public comment on the regulation of conversion transactions involving nonprofit HMOs no later than October 1, 2023. A final recommendations report must be submitted to the appropriate legislative committees by June 30, 2024. If you have any questions regarding HF 402 and how your organization or transaction may be impacted, please contact the authors or your regular Dorsey attorney. Summer Associate Lindsey VerMurlen provided substantial assistance researching and drafting this blog post.

On May 26, 2023, the Governor of Minnesota signed into law Minnesota bill HF 402 to increase government oversight of health care transactions that occur in Minnesota or involve Minnesota-based health care entities. Minnesota joins a growing number of states considering or enacting similar measures, including New York, Connecticut, Delaware, Massachusetts, Nevada, New Jersey, Oregon, Rhode Island, Washington, and California. The following is a general overview of this new law, many portions of which have gone into effect already. General Prohibition and Key Definitions HF 402’s purpose is to prohibit transactions by any health care entity that would “substantially lessen competition or tend to create a monopoly or monopsony.” In order to enforce this prohibition, HF 402 institutes a number of transaction notification requirements and grants the Minnesota attorney general with the power to review, enjoin, or unwind any applicable transaction in violation of HF 402. Here are key definitions from HF 402 that outline the law’s scope: “Health care entity” is defined as hospitals, hospital systems, captive professional entities, medical foundations, health care provider group practices, entities organized or controlled by one of the above entity types, and entities that own or exercise control over one of the above entity types. “Transaction” is defined as a single action or a series of actions that occur within a five-year period in Minnesota or involving a health care entity formed or licensed in Minnesota, that constitutes: A merger or exchange of a health care entity with another entity; The sale, lease, or transfer of 40 percent or more of the assets of a health care entity to another entity; The granting of a security interest of 40 percent or more of the assets of a health care entity to another entity; the transfer of 40 percent or more of the shares or other ownership of a health care entity to another entity; An addition, removal, withdrawal, substitution, or other modification of one or more members of a health care entity’s governing body that transfers control, responsibility for, or governance of the health care entity to another entity; The creation of a new health care entity; An agreement or series of agreements that results in the sharing of 40 percent or more of a health care entity’s revenues with another entity, including affiliates of such other entity; An addition, removal, withdrawal, substitution, or other modification of the members of a health care entity formed under the Minnesota Nonprofit Corporation Act that results in a change of 40 percent or more of the membership of the health care entity; or Any other transfer of control of a health care entity to, or acquisition of control of a health care entity by, another entity. “Control,” along with “controlling,” “controlled by,” and “under common control with” is defined as the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a health care entity, whether through the ownership of voting securities, membership in an entity formed under the Minnesota Nonprofit Corporation Act, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with, corporate office held by, or court appointment of, the person. Control is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 40 percent or more of the voting securities of any other person, or if any person, directly or indirectly, constitutes 40 percent or more of the membership of an entity formed under the Minnesota Nonprofit Corporation Act. Furthermore, the attorney general may determine that control exists in fact, notwithstanding the absence of a presumption to that effect. If a transaction meets the definition above (noting that certain transactions are excluded from the definition, including, for example, those involving only nursing homes and home care providers), such transaction may be subject to certain reporting requirements as outlined further below. Reporting Requirements Now effective, HF 402 requires notice to the attorney general and the Minnesota commissioner of health at least 60 days before the proposed closing date of any transaction where either “(i) the health care entity involved in the transaction has average revenue of at least $80,000,000 per year; or (ii) the transaction will result in an entity projected to have average revenue of at least $80,000,000 per year once the entity is operating at full capacity.” The notice to the attorney general and the commissioner of health must include a number of disclosures, including the following non-exhaustive list of items: The entities involved in the transaction; The leadership of the entities involved in the transaction, including all board members, managing partners, member managers, and officers; The services provided by each entity and the attributed revenue for each entity by location; The primary service area for each location; The proposed service area for each location; The current relationships between the entities and the affected health care providers and practices, the locations of affected health care providers and practices, the services provided by affected health care providers and practices, and the proposed relationships between the entities and the affected health care providers and practices; The terms of the transaction agreement or agreements; All consideration related to the transactions; Markets in which the entities expect post-merger synergies to produce a competitive advantage; Potential areas of expansion, whether in existing markets or new markets; Plans to close facilities, reduce workforce, or reduce or eliminate services; The brokers, experts, and consultants used to facilitate and evaluate the transaction; The number of full-time equivalent positions at each location before and after the transaction by job category, including administrative and contract positions; The current governing documents for all entities involved in the transaction and any amendments to these documents; The transaction agreement or agreements and all related agreements; Any collateral agreements related to the principal transaction, including leases, management contracts, and service contracts; All expert or consultant reports or valuations conducted in evaluating the transaction, including any valuation of the assets that are subject to the transaction prepared within three years preceding the anticipated transaction closing date and any reports of financial or economic analysis conducted in anticipation of the transaction; Copies of all filings submitted to federal regulators, including any filing the entities submitted to the Federal Trade Commission under the Hart-Scott-Rodino Act in connection with the transaction; A certification sworn under oath by each board member and chief executive officer for any nonprofit entity involved in the transaction; Audited and unaudited financial statements from all entities involved in the transaction and tax filings for all entities involved in the transaction covering the preceding five fiscal years; and Any other information or documents relevant to evaluating the transaction that are requested by the attorney general or the commissioner of health.   Effective January 1, 2024, HF 402 requires data reporting of certain smaller transactions to the commissioner of health at least 30 days before the proposed closing date of the transaction or within 10 business days of the date the parties first reasonably anticipate entering into the transaction if the expected completion is within less than 30 days, where either “(i) the health care entity involved in the transaction has average revenue between $10,000,000 and $80,000,000 per year; or (ii) the transaction will result in an entity projected to have average revenue between $10,000,000 and $80,000,000 per year once the entity is operating at full capacity.” This data reporting includes disclosure of much of the same type of information as outlined above. Please note that HF 402 imposes additional requirements on nonprofit health care entities not identified above. Attorney General Enforcement Powers HF 402 grants the attorney general broad enforcement powers. It permits the attorney general to extend the notice and waiting period for the $80,000,000+ transactions for an additional 90 days by notifying the health care entity in writing of the extension or to waive all or any part of the waiting period or disclosure requirements, including requirements for disclosures to the commissioner of health. Additionally, the attorney general is permitted to bring an action in district court to compel compliance with the notice, waiting period, disclosure and submission requirements, or to enjoin or unwind a transaction or seek other equitable relief necessary to protect the public interest if a health care entity or transaction violates HF 402 or is contrary to the public interest. Failure of the entities involved in a transaction to provide timely information to the attorney general or the commissioner of health is an independent and sufficient ground for a court to enjoin or unwind the transaction or provide other equitable relief, however the attorney general must notify the entities of the deficiency and provide a reasonable opportunity to remedy it. If you have any questions regarding HF 402 and how your organization or transaction may be impacted, please contact the authors or your regular Dorsey attorney.

After a 2-year hiatus, health care transactional attorneys and related industry professionals descended upon Nashville, TN April 25th – 27th for the 2022 American Health Law Association (“AHLA”) Health Care Transactions Conference. Aside from hot chicken and honky tonks, this conference was largely a celebration of the strength and resiliency of the health care industry during the past two COVID19-impacted years. Here are some of our main takeaways from the conference: Strong Transaction Activity: Health care-related deal value and volume has been at an all-time high, with evidence of continued growth. COVID19 increased federal and private health care funding and also highlighted various inefficiencies in the market. These factors have contributed to record transactional activity that takes advantage of the increased value and the opportunity to improve health care delivery in a post-COVID world. Industry experts do not expect this trend to slow down any time soon, especially with increased private equity and corporate investment in the space. Private Equity Leads the Charge: While not necessarily new to the world of health care transactions, private equity (“PE”) groups have taken a strong interest in increasing investment. PE groups view the health care space as a potentially untapped resource for short-term high rates of return. For the past 20 years, return on investment in health care transactions has largely edged out returns in all other industries. PE groups are not the only non-traditional players increasingly navigating health care transactions. Corporate investment from the likes of Walmart and Amazon continue to shift care delivery away from independent practice to a more corporate-backed model. Further, the growth of telehealth as a more accepted form of care delivery also makes the health care industry particularly inviting, considering what would traditionally be limited to local practice can now be expanded nationwide with relative ease. Of course, with increased corporate involvement comes increased scrutiny. Antitrust Overhaul: Federal and state enforcement of antitrust rules is on the rise. On July 9, 2021, President Biden issued an executive order urging the Federal Trade Commission (“FTC”) to bolster its antitrust review of health care transactions. The FTC is now actively reviewing its horizontal and vertical merger guidelines to determine whether such guidelines are too permissive. One of the items the FTC is considering is requiring that more information be provided on a pending transaction on a quicker timeline. Additionally, certain states (e.g., Nevada, Washington, Oregon, and Massachusetts) are beginning to implement their own pre-closing transaction notification requirements that would encompass a broader range of health care transactions (as compared to the current HSR filing threshold of $101 million). Stark and Anti-Kickback: Recent changes to the Stark and Anti-Kickback rules highlight that regulators may be starting to take a more business-oriented approach to framing acceptable compensation arrangements. This is mainly shown in the changes/clarifications made to language related to fair market value, commercially reasonable transactions, and the volume/value standard. For additional discussion of these rules, please see our previously published blog here. The 2022 AHLA Health Care Transactions Conference covered a lot of ground. If you have any questions on the topics covered, please do not hesitate to reach out to the author or your regular Dorsey attorney.  

On September 22, 2020, the Department of Health and Human Services (“DHHS”) finalized a new rule to expand the scope of qualified reimbursable expenses incurred by living organ donors to include lost wages, child-care expenses, and elder-care expenses. The new rule goes into effect on October 22, 2020, and is a win for living organ donation. This final rule aligns with the initial proposed rule, and you can read our post on the proposed rule here for additional background. The final rule is associated with Section 8 of Executive Order 13879 titled “Advancing American Kidney Health,” issued on July 10, 2019. The Executive Order directed DHHS to propose a regulation allowing living organ donors to be reimbursed for related lost wages, child-care expenses, and elder-care expenses through the Reimbursement of Travel and Subsistence Expenses Incurred toward Living Organ Donation program (the “Program”) authorized under section 377 of the Public Health Service Act. Every 10 minutes, another person is added to the national organ transplant waiting list, and approximately 20 people die every day while waiting for a transplant. This final rule should expand the pool of willing organ donors and also improve donation outcomes by: (i) providing for the receipt of more high quality organs; (ii) reducing the waiting period for an organ; and (iii) resulting in better clinical outcomes than continuing dialysis or receiving a deceased donor kidney transplant. A new regulatory section will be added at 42 C.F.R. § 121.14 to list the categories of “incidental non-medical expenses” to include lost wages, child-care expenses, and elder-care expenses. The other criteria of the Program remain applicable and will still need to be met for reimbursement to be provided to living organ donors and other individuals evaluated for living organ donation. Of note, concurrently with the publication of this final rule DHHS published a final notice that changes the Program’s eligibility guidelines to increase the household income eligibility threshold to 350 percent of the DHHS Poverty Guidelines (from the current threshold of 300 percent) for living organ donors and organ recipients. If you have any questions on this new rule, one of the authors or your regular Dorsey attorney would be happy to assist you.

On March 30, 2020, the Centers for Medicare & Medicaid Services (“CMS”) published a compilation of COVID-19 Emergency Declaration Blanket Waivers for Health Care Providers (each, a “Blanket Waiver”). Section 1135 of the Social Security Act gives CMS the authority to issue waivers that ease requirements for providers affected by an emergency if: (1) the President makes an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121-5207 (the “Stafford Act”); and (2) the Secretary of the Department of Health and Human Services declares a Public Health Emergency (“PHE”), both of which have now occurred in light of COVID-19. CMS is permitted to issue both blanket waivers and provider/supplier requested waivers on a case-by-case basis. Blanket waivers apply to all applicable providers and suppliers, while individual waivers apply only to the requesting provider or supplier. A provider or supplier need not request a provider/supplier-specific waiver of a requirement if CMS has issued a blanket waiver addressing the same requirement. It is important to note that 1135 waivers apply solely to federal requirements and do not apply to state licensure or other requirements. Any applicable state requirements (e.g., licensure) must also be addressed with the relevant state agency. Another important note of caution is that these 1135 waivers often include specific details and requirements. It is critical for health care providers to review the waivers carefully before taking action under them. To that end, providers should visit the CMS Coronavirus Waivers & Flexibilities website, here, to locate the specific guidance and requirements from CMS about the type of program waiver(s) being sought. CMS has provided numerous Frequently Asked Questions (“FAQ”) documents and provider-specific fact sheets that detail the details about and limits of the available waivers and flexibilities for each type of provider (hospital, skilled nursing facility, physicians, laboratories, home health providers, etc.). Additionally, this website contains links to all of the waivers provided in each state. The following is a summary of the Blanket Waivers CMS has made available to providers and suppliers on March 30, 2020. These Blanket Waivers are retroactively effective back to March 1, 2020 and will continue through the end of the emergency declaration. I. Hospital Waivers The Blanket Waivers include significant regulatory relief for hospitals. The following is a summary of the hospital-specific Blanket Waivers, and here is a CMS Fact Sheet that was published for hospitals to further explain these specific Blanket Waivers: a. Temporary Expansion Sites (a.k.a. Hospitals Without Walls) Under this Blanket Waiver, hospitals are permitted to offer health care services in locations that are not currently part of the hospital. Previously, hospitals would have been required to meet Life Safety Code and other regulatory provisions and obtain approvals to provide services in a new location. This waiver will help hospitals set up temporary expansion sites to offer inpatient services (e.g., nursing, room and board) in locations such as shell space in a hospital, parking structures, dormitories and the like – as long as the hospital exercises control and oversees the services provided at the location, and as long as the location is approved by the state (to ensure safety and comfort for patients and staff). CMS is also allowing currently enrolled ambulatory surgery centers (“ASCs”) to temporarily enroll as hospitals by calling the COVID-19 Provider Enrollment Hotline to complete and sign an attestation form in order to enroll and provide services during the PHE as a hospital. CMS also encourages other entities (e.g., freestanding emergency departments which are not currently allowed to enroll in Medicare) to call the COVID-19 Provider Enrollment Hotline to complete and sign an attestation form in order to enroll and provide services during the PHE. Further, CMS is allowing hospitals to change their provider-based locations to address patient needs, as well as allowing additional flexibilities related to inpatient services furnished under arrangements. Moreover, hospitals are permitted to screen patients at locations off of a provider’s campus, in order to avoid the spread of COVID-19. Further, for surge facilities in off campus departments, CMS is waiving the requirements to have policies and procedures for evaluating emergencies so these facilities do not need to focus time on drafting policies and procedures but rather can focus on patient care needs. b. Relaxed Paperwork, Policies, Cost Reporting, Filing Deadlines and Enrollment Requirements For hospitals that are impacted by a widespread outbreak of COVID-19, the timeframes for providing patients a copy of their medical records are waived, as are the requirements related to visitation and seclusion. Additionally, CMS is granting a 30-day post-discharge requirement to complete medical records, CMS is waiving medical records department staffing requirements, and also waiving specific requirements for the form and content of the medical record and the medical record completion requirements. Further, verbal orders can be authenticated more than 48 hours after the fact (although read-back verification is still required). CMS is also waiving requirements to provide information about advanced directives to patients. Further, To ensure that hospitals and critical access hospitals focus on patient care and ensuring patients are discharged in an appropriate setting, as opposed to focusing on the paperwork and other regulatory obligations, CMS is waiving the detailed regulatory paperwork and other requirements related to discharge planning. For example, CMS recognizes that during the PHE, hospitals may not be able to use specific quality metrics and other data, or a comprehensive list of nursing homes in the area, to select a nursing home or home health agency. However, hospitals are still required to work with families to ensure that the discharge meets patients’ care needs. Further, CMS is waiving the entire condition of participation related to utilization review plans and committees, nursing care plans, having available a current therapeutic diet manual, developing and implementing emergency preparedness policies and procedures and communication plans, as well as waiving the detailed provisions governing a hospital’s quality assessment and performance improvement program (although hospitals must still have such a program in place). CMS has established a toll-free hotline for all providers as well as significant flexibilities in provider enrollment. See here for additional information from CMS on provider enrollment relief, as well as our previous blog post on this topic, available here. Further, CMS is waiving the signature and proof of delivery requirements for Part B drugs and durable medical equipment (although the delivery and the fact that a signature could not be obtained due to COVID-19 should be documented in the record). Additionally, CMS is delaying the cost-report filing deadlines until June and July, and CMS is extending the data submission deadlines for hospitals on the reporting of occupational mix of employees until August 3, 2020. Further, Medicare Administrative Contractors (“MACs”), Qualified Independent Contractors (“QICs”), and Independent Review Entities (“IREs”) are allowed to grant extensions to providers on appeals and are permitted to offer other flexibilities on filings and deadlines. c. Critical Access Hospitals (“CAHs”) Without Walls CAHs are now permitted to exceed their 25 bed limit and the 96 hour length of stay limit. CMS is also permitting CAHs to treat patients in urban areas (they typically must be located in a rural area) as needed in order to establish surge locations. Further, CMS is waiving the restrictions on CAHs’ ability to establish off campus provider based locations, and to establish the normally restricted co-location arrangements with other providers. CMS is waiving the minimum personnel qualification requirements at CAHs for clinical nurse specialists, nurse practitioners and physician assistants, and CMS is deferring to the state for the requirements of staff licensure, certification or registration, which will allow more flexibility to CAHs in states where federal requirements are more stringent. d. Distinct Part Units CMS is also now allowing hospitals to house acute care patients in excluded distinct part units (as long as the unit’s beds are appropriate for acute inpatients). Hospitals are permitted to bill for the care provided in the distinct part unit under the Inpatient Prospective Payment System. Providers should annotate in the medical record to explain that the care was provided in the distinct part unit due to capacity issues related to the PHE. Hospitals are also now permitted to provide care in acute care beds and units for patients who would normally be treated in distinct part psychiatric units or distinct part rehabilitation units, as long as the acute beds and units are appropriate for such patients. Hospitals should continue to bill under the Inpatient Psychiatric or Inpatient Rehabilitation Prospective Payment System for those patients, and annotate in the medical record to explain that the care was provided in the acute care unit due to capacity issues or other exigent circumstances related to the PHE. e. Telemedicine CMS is waiving telemedicine restrictions on hospitals and CAHs to make it easier for these providers to provide telemedicine for their patients through agreements with off-site hospitals, in order to improve access to specialty care. f. Workforce CMS is waiving the sterile compounding requirements to allow the re-use of face masks. CMS is also waiving the 2-year reappointment period for medical staff re-credentialing, the requirement that patients in a hospital be under the care of a physician (to allow other practitioners like physician assistants and APRNs to be used to the fullest extent possible), and CMS is waiving the requirement for CRNAs to work under the supervision of a physician. Further, CMS has stated that Hospitals do not have to designate in writing the personnel qualified to perform specific respiratory care procedures or the amount of supervision required for personnel to carry out those procedures. II. Long-Term Care, Skilled Nursing Facilities, and Nursing Facility Waivers The Blanket Waivers provide a number of flexibilities related to nursing services. See here for the CMS fact sheet published specifically for long term care facilities. CMS is waiving the 3-day prior hospitalization requirement for coverage of a skilled nursing facility (“SNF”) stay, waiving the timeframe requirements for certain data submission for SNFs and long-term care (“LTC”) facilities, and allowing nursing homes to suspend pre-admission screening and annual resident review assessments. Certain physical environment requirements are now waived, allowing for expanded use of non-SNF buildings or non-resident rooms in a LTC facility for patients in certain emergency circumstances. To promote social distancing: requirements that residents participate in-person in resident groups are waived; requirements related to room-sharing and moving a resident’s room are waived for the purpose of grouping or separating residents with respiratory illness symptoms and/or residents with a confirmed COVID-19 diagnosis from residents without these symptoms or diagnosis; and physicians and non-physician practitioners may conduct visits through telehealth options when previously the visits were required to be in-person. CMS is also partially waiving training and certification requirements required for nurse aids employed for longer than four months at a facility in order to assist with potential staffing shortages. CMS has waived certain resident transfer and discharge requirements in particular circumstances, though advance notification and receiving facility agreements are generally still required, and related care planning requirements are also waived in certain circumstances. Additionally, CMS is delaying the cost-report filing deadlines until June and July, and CMS is extending the data submission deadlines for hospitals on the reporting of occupational mix of employees until August 3, 2020. Further, Medicare Administrative Contractors (“MACs”), Qualified Independent Contractors (“QICs”), and Independent Review Entities (“IREs”) are allowed to grant extensions to providers on appeals and are permitted to offer other flexibilities on filings and deadlines. III. Home Health, Hospice, ESRD, and DMEPOS Waivers CMS has provided FAQ documents on these waivers for home health, here; for hospice, here; for ESRD Facilities, here; and for DME Suppliers, here. Under the Blanket Waivers, CMS provided extensions for home health, hospice, and ESRD providers to complete certain assessment required for Medicare reimbursement. CMS also waived certain home health, hospice and ESRD in-person assessment, visit, and supervision requirements to reduce the need for ordinary course check-ins and to allow for greater use of telehealth. In addition, hospices are relieved of the requirement to provide non-core hospice services, such as physical therapy, occupational therapy, and speech-language pathology. In providing additional flexibility in timing and in-person visits, CMS’s goal is to support containment efforts for at-risk populations and to free up professional resources to focus on treatment of those infected with coronavirus and to focus on operations related to the pandemic. In addition, CMS is waiving certain routine audits, maintenance, and certification requirements for ESRD Facilities and ESRD Facility staff. Again, CMS is attempting to free up resources and provide flexibility to support providers’ focus on pandemic-related efforts. CMS authorized the establishment of Special Purpose Renal Dialysis Facilities (“SPRDF”) to mitigate transmission among the at-risk population. Such facilities do not require a federal survey to be completed before providing services. CMS is allowing physicians that are appropriately credentialed at a certified dialysis facility to provide care at a “designated isolation location” such as a SPRDF without separate credentialing. Dialysis services may now also be provided in nursing homes and SNFs, so long as the services and necessary equipment and supplies are provided by personnel of the resident’s usual Medicare-certified dialysis facility. In an effort to expedite supply of and reimbursement for DMEPOS, CMS is waiving the replacement requirements (such as the face-to-face requirement, a new physician’s order, and new medical necessity documentation) for DMEPOS that are lost, destroyed, irreparably damaged, or otherwise rendered unusable. DMEPOS suppliers must still provide a narrative description about why the equipment must be replaced. IV. Practitioner Licensure, Provider Enrollment, Appeals, and Medicaid/CHIP Waivers CMS has provided a specific fact sheet describing the waivers and flexibilities available for physicians and other clinicians, available here. The Blanket Waivers are intended to ease the burden on the health system in order to allow providers to focus on patient care. To that end, CMS is temporarily waiving the Medicare reimbursement requirements that out-of-state practitioners be licensed in the state in which they are providing services when they are licensed in another state when the following four conditions are met: The practitioner must be enrolled in Medicare; The practitioner must have a valid license to practice in the state which relates to his or her Medicare enrollment; The services must be furnished, whether in-person or remote 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 The practitioner must not be excluded in any state that is part of the PHE. Please note that the foregoing Medicare reimbursement waiver for licensure does not waive state or local licensure requirements. As a result, providers must review the state licensure requirements in each jurisdiction prior to delivering telehealth to patients in that location. Please see the blog post we published on this topic of telehealth opportunities here. Additionally, CMS has taken a number of steps to ease the provider enrollment requirements. See here for additional information from CMS on provider enrollment relief, as well as our previous blog post on this topic, available here. CMS has set up a hotline for physicians and non-physician practitioners to enroll and receive temporary Medicare billing privileges. Additionally, CMS has taken the following steps to facilitate the enrollment of providers in the wake of the COVID-19 outbreak, including: Waiver of certain screening requirements, including application fees, background checks, and site visits; Postponement of revalidation actions; Allowing licensed providers to render services outside their state of enrollment;  Expediting pending or new applications;  Easing telehealth restrictions; and Allowing physicians and non-physician practitioners to terminate opt-out status early and enroll in Medicare. Regarding appeals, the new waivers grant broad powers to MACs, QICs, and IREs to relax the requirements of federal regulations regarding the appeals process in FFS, and Parts C and D. MACs, QIEs, and IREs are instructed to allow extensions to file an appeal and to permit the waiver of requests for timeliness requirements for additional information to adjudicate appeals. MACs, QICs, and IREs are now allowed to process an appeal even with incomplete Appointment of Representation forms as outlined in federal regulations. Additionally, MACs, QICs, and IREs can now process appeals that do not meet the required elements of those same federal regulations. MACs, QICs, and IREs are given broad flexibility with respect to other parts of the appeals process so long as good cause requirements are satisfied. Finally, regarding Medicaid and CHIP, the new waivers permit states to request approval that certain statutes and implementing regulations be waived under section 1135. To request such an approval, states may submit an 1135 waiver request directly to their Center for Medicaid and CHIP Services (CMCS) state lead or Jackie Glaze, Acting Director, Medicaid and CHIP Operations Group, Center for Medicaid and CHIP Services at CMS by e-mail (Jackie.Glaze@cms.hhs.gov) or by letter. CMS sets forth a number of examples of the kinds of requests that states can make under this waiver, including: Waiver of prior authorization requirements for FFS programs; Waiver of out-of-state requirements for providers to provide care to another state’s Medicaid enrollees impacted by COVID-19; Temporary suspension of provider enrollment and revalidation requirements to increase access to care; Temporary waiver of state licensure requirements; Temporary suspension of requirements for pre-admission and annual screening requirements for nursing home residents. CMS encourages states to assess their needs and take advantage of these waivers. To assist states with the waiver request process and provide additional guidance, CMS released the Medicaid and CHIP Disaster Response Toolkit, which can be found here. Further, the CMS Coronavirus Waivers & Flexibilities website, here, contains a link to each state’s request for waivers and the responses from CMS. V. Stark Waivers On the same date, CMS also issued much-anticipated Blanket Waivers of sanctions under the federal physician self-referral law, or “Stark Law,” for “COVID-19 Purposes.” These Blanket Waivers are set forth here. Please see our separate post, available here, with detailed information about these Stark Law Blanket Waivers. * * * If you have questions about the new CMS waivers, please contact the authors or your regular Dorsey & Whitney LLP attorney. Dorsey is closely monitoring the rapidly evolving legal landscape related to the COVID-19 pandemic. You can access Dorsey’s health law blog related to health law updates, available here. You can also access Dorsey’s coronavirus resource center, which contains a wide variety of legal resources related to the coronavirus outbreak, available here.

On March 27, 2020, the President signed into law the “Coronavirus Aid, Relief, and Economic Security Act’’ (“CARES Act”). The CARES Act is the third phase of the federal government’s response to the coronavirus following two other laws to support American families and address health sector needs that were approved on March 6, 2020 (Phase I here) and March 18, 2020 (Phase II here). The CARES Act includes provisions which provide cash payments and other resources to help individuals, small businesses, state and local governments and hospitals/healthcare providers. The CARES Act includes four sections (called “Titles”) and each title addresses a different topic. This e-update summarizes Title III of the CARES Act titled “Supporting America’s Health Care System in the Fight Against the Coronavirus”. Title III provides much needed financial assistance to the health care industry, as well as additional guidance and other provisions which provide information on waivers and other benefits to help hospitals and others who are on the front lines of fighting the COVID-19 pandemic. The following is a summary of the major provisions of Title III, organized in order by section numbers under the CARES Act but does not address subtitle B – Education Provisions and subtitle C – Labor Provisions. We will provide links to summaries of other provisions in the CARES Act prepared by our colleagues throughout the firm as they become available. Click here to read the summary.

The COVID-19 pandemic has dramatically increased the number of patients and providers seeking to implement and use telehealth visits and other digital health solutions – and rapidly, at that.  The challenge of implementing digital health solutions, particularly telehealth, has historically been the patchwork setup of both federal and various state regulations that made it difficult for providers and telehealth vendors to offer solutions at a large scale, particularly across state lines.  In the current state of public emergency, both the federal government and various state governments are recognizing the need to ease prior restrictions and expand telehealth availability in order to help patients receive care at home; this helps limit the spread of COVID-19 by further enabling social distancing and freeing up providers’ brick-and-mortar hospitals and clinics to treat COVID-19 patients.  The need is clear, as is the desire by all parties to jump in and offer telehealth visits.  The new challenge has become understanding how state requirements fit in daily updates to federal law.  In this blog post, we will look first to the current legal environment with respect to the federal waiver and state regulations, and then provide recommendations (in numbered list below) as to what this means for your plans to offer telehealth visits. Specifically, clinical licensure has traditionally been amongst the most challenging regulations to contend with in offering telehealth visits.  Federal reimbursement and state clinician licensure rules generally restrict clinicians from offering telehealth services to a patient physically located in a state without the appropriate medical license in that state.  Now, however, through CMS 1135 waivers and state-specific executive orders, which we have described more below, clinicians are able to leverage relaxed cross-state reimbursement and licensure rules to offer telehealth services more easily and immediately during this time of public health emergency. Historically, the general rule, with few exceptions, is that a clinician must be licensed to practice in the state in which the patient receiving telehealth services is located. These rules are derived from state professional licensing laws, as well as from payor requirements, including the conditions of payment under the Medicare and Medicaid programs. Therefore, a physician licensed to practice in Minnesota, for example, could not typically provide telehealth services to a patient located in Iowa during the time of the visit without first obtaining an Iowa license to practice medicine. Failure to do so could subject the physician’s medical license to discipline, and could also render the services not billable to various private and governmental payors. Currently, the in-state licensure requirements of payors and professional licensing bodies are beginning to change within the confines of the COVID-19 public health emergency. With respect to Medicare and Medicaid billing requirements, under the emergency proclamation by the President, CMS has the authority to issue “1135 waivers” that will temporarily waive or modify certain Medicare and Medicaid requirements to ensure that sufficient health care items and services are available to meet the needs of individuals enrolled in Federal health care programs. Shortly following the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak, both HHS and CMS issued statements announcing a number of COVID-19 1135 waivers now either applicable automatically nationwide or available through request by individual providers and the states, depending on the type of waiver. These waivers encompass an array of options and relaxing of rules that apply to services provided to Medicare and Medicaid patients.  One of the waivers provides that CMS will “temporarily waive [reimbursement] requirements that out-of-state providers be licensed in the state where they are providing services when they are licensed in another state” (the “Clinician Licensing Waiver”).  (Other waivers ease restrictions surrounding provider Medicare and Medicaid enrollment, skilled nursing and other long-term care facility requirements, and bed allocation requirements).  This is an enormous and important shift, and one that digital health advocates have been championing for a long time, as it enables clinicians to “see” patients in other states without a protracted cross-state licensure process. The challenge, however, is understanding how the federal waivers and existing state requirements interact. These 1135 waivers apply only to federal requirements, and any providers looking to practice in accordance with these waivers must be careful to also comply with applicable state laws. Largely, the COVID-19 1135 waivers fall in two categories: (1) blanket waivers; and (2) case-by-case waivers. The blanket waivers include those waivers listed by CMS in their statement and are applicable automatically nationwide with respect to Medicare rules (not Medicaid or other CMS programs, except by request, as noted below). The Clinician Licensing Waiver is one such waiver. This waiver applies automatically to Medicare reimbursement, but clinicians must also ensure they are practicing in accordance with a particular state’s licensing rules before issuing professional services in that state. States that would like these Medicare blanket waivers, including the Clinician Licensing Waiver, to apply to their state’s Medicaid program must send a request to CMS for case-by-case approval. Currently, only Florida and Washington have received approval for their requested COVID-19 1135 waivers, including the Clinician Licensing Waiver along with other provider enrollment and prior authorization requirement waivers. However, CMS states that it will continue to expeditiously review and approve 1135 waivers during the COVID-19 public health emergency. This CMS website will provide up-to-date information on all states that receive any COVID-19 1135 waivers. While the Clinician Licensing Waiver is limited in applicability to Medicare and Medicaid reimbursement, states are beginning to follow suit by temporarily waiving their state level professional licensure requirements for telehealth providers. Still, providers should take caution to not provide services without a state license unless and until it is confirmed that the state will allow this practice. One state that we have identified as permitting telehealth practice without a state license during the COVID-19 public health emergency is Iowa. Iowa’s emergency proclamation contains a section that temporarily suspends various telehealth practice standards, including the requirement that Iowa telehealth providers be licensed in Iowa. Note, however, that commercial payor rules may be unaffected by both the federal waivers and the easing of state professional licensing rules. From an operational standpoint, the Clinician Licensing Waiver ostensibly eases offering telehealth visits across state lines, but the state-specific regulations still require ongoing vigilance.  For those providers and other types of vendors seeking to offer telehealth, we would encourage the following:   Identify exactly which populations you must be able to treat in order for the telehealth visits to be feasible and viable (financially and operationally) for your organization While organizations would like to be able to immediately offer telehealth visits for everyone, the reality at this time, while states sort out whether they will ease state licensure restrictions, is that you may only be able to conduct telehealth visits and receive reimbursement in states in which your clinician is allowed to practice without a license and for certain populations only.  It will vary tremendously by state, and the answer may change on a near-daily basis, as states make their decisions.   Speak with your attorney about the states in which you want to offer visits (or where your patient populations may currently be) to understand the current status for those states Per above, the situation is changing rapidly, and we strongly recommend asking your attorney to check the state’s status vis-à-vis the federal waivers.  We would advise adding that into your tracking document (see next item).   Draft your quick state-by-state plan and what your readiness checks will be to start with a new state (and do not worry – this can be rough-and-ready) We often help our clients with state rollout plans and readiness checklists, and they are still important now; however, given the dramatic need for speed, do not let the perfect be the enemy of the good.  Based on your answers to the above two items, you should confirm with your team both the plan for which states you will be able to offer visits in and also the criteria for when and how you will assess and identify the next states in which you can offer telehealth services.  You can perfect and polish these plans at a later point, but having a plan of action for all involved will prevent confusion or, worse, lack of compliance if you do not pay careful attention to states’ evolving rules.  We would recommend that your state readiness checklist include an attorney approval step; this is particularly important now, since the states’ rules are changing so rapidly.  The good news is that, for the most part, the changes are leaning toward the more permissive rather than restrictive, so you may find new states in which you are able to operate.   Identify exactly which active state licenses your clinicians hold and document, ideally in a spreadsheet or other easy tracking mechanism We recommend (and create for our clients) tracking tools with respect to clinical licensure during regular times, and it is equally important now.  While the goal is to be able to offer telehealth visits to patients in states in which your clinicians are not currently licensed, you will need to keep track of who is actually licensed where, so that if and when regulations should revert, or if and when there should be changes to the scope of licensure or reimbursement, you are able to quickly assess your own staff’s licensure status and pivot as needed.  These tracking tools need not be fancy, though it is helpful to tie them to calendar reminders or other ticklers to enable consistent monitoring.   Keep in mind – and regularly monitor – other relevant requirements as you contemplate the nature and process of the telehealth visits. For example, you will still want to abide by current HIPAA requirements (which are also changing during this public emergency – please see our article here), documentation requirements, and reimbursement-related considerations. Your standard operating procedure and telehealth visit process will likely need to be altered to include verbal caveats or discussion points between your providers and the patients.  We would advise reviewing and then either drafting or updating your current visit script, as well as the documentation presented on your website portal for the telehealth visit.   Your plan for downtime procedures is going to become all the more important – assess if you’re ready and that your providers are aware of what to do. With so many people using internet and particularly video chat services, our IT infrastructure and that of the telehealth platform vendors themselves is experiencing a surge in usage, which will test capacity levels.  This would be the case in “regular” life, but becomes more important now, as you reach out to and conduct telehealth visits with new patients: does your script and posted information include information as to how the patient can reach you if the telehealth visit is interrupted?  What should be their plan with respect to reaching out to local (in-state) providers versus your organization, both for downtime and post-visit? This issue is rapidly changing and being updated at both the Federal and state level on a day-to-day basis. For additional information on various COVID-19 responses, guidance and resources, please see our articles on Medicare payment for telehealth services; HIPAA provisions now allowing the use of personal devices and everyday communication technology to deliver telehealth; DEA prescribing laws now allowing controlled substances to be prescribed via telehealth without an in person exam; and numerous other helpful legal analyses and guidance on COVID-19 related matters. If you would like specific information on how your state is currently treating these issues, please reach out to the authors or your usual Dorsey attorney or Dorsey Health Strategies business consultant.

On December 20, 2019, the Department of Health and Human Services (“DHHS”) issued a notice of proposed rulemaking (the “Proposal”) that removes financial barriers to organ donation by expanding the scope of reimbursable expenses paid through the Health Resources and Services Administration’s Reimbursement of Travel and Subsistence Expenses Incurred toward Living Organ Donation program (the “Program”). Specifically, the Proposal would allow living organ donors to be reimbursed for donation-related lost wages, child-care expenses, and elder-care expenses through the Program. With the Proposal, DHHS is hoping to increase the number of living organ transplants and improve the overall quality and outcome of organ donations. Generally, federal law prohibits any person from knowingly acquiring, receiving, or otherwise transferring any human organ for valuable consideration for use in human transplantation. 42 U.S.C. § 274e. However, valuable consideration does not include “the reasonable payments associated with the removal, transportation, implantation, processing, preservation, quality control, and storage of a human organ or the expenses of travel, housing, and lost wages incurred by the donor of a human organ in connection with the donation of the organ.” Id.  (emphasis added). Therefore, organ donors can be reimbursed for their donation-related expenses under certain circumstances. Primarily to aid low-income organ donors in such reimbursement, 42 U.S.C. § 274f describes the Program, which funds the National Living Donor Assistance Center (the “NLDAC”), to reimburse an eligible organ donor’s qualified expenses. Nevertheless, the Program’s current guidelines specifically limit NLDAC qualifying expenses to only those incurred by the donor and/or his/her accompanying person(s) as part of: (1) donor evaluation and/or (2) hospitalization for the living donor surgical procedure, and/or (3) medical or surgical follow-up, clinic visits, or hospitalization within two calendar years following the living donation procedure. As such, the Program (through the NLDAC), does not currently reimburse organ donation-related expenses such as lost wages, child-care, or elder-care. Rather, reimbursement for such expenses can only be received from sources such as state compensation programs, insurance policies, or the recipient of the organ. This reduces the reimbursement options available, which may be especially significant to the low-income organ donors utilizing the Program. To address this, the Proposal sets out to amend the Organ Procurement and Transplantation Network Final Rule by adding Section 121.14(a), stating: The following incidental nonmedical expenses incurred by donating individuals toward making living donations of their organs may be reimbursed: (1) Lost wages; (2) Child-care expenses; and (3) Elder-care expenses.             The Proposal fulfills the President’s mandate under Executive Order 13879: Advancing American Kidney Health that DHHS propose a regulation to allow living organ donors to be reimbursed for donation-related lost wages, child-care expenses, and elder-care expenses through the Program. Therefore, some form of the Proposal is likely to become final, and DHHS is accepting comments on the Proposal until February 18, 2020. If you would like to submit comments or have any questions, one of the authors or your regular Dorsey attorney would be happy to assist you.

Medicare reimbursement for remote patient monitoring has taken a number of steps forward throughout this year. New and proposed rules from the Centers for Medicare and Medicaid Services both expand the billing options available to health care providers and also build in additional flexibility in the provision of remote patient monitoring in order to further the health industry’s push to value-based care. Remote patient monitoring (“RPM”) is a form of digital health in which medical data from individual patients is collected in one location and electronically transmitted to health care providers in a different location for assessment and recommendations. RPM differs from other digital health services in that there is not necessarily a live, or “real-time”, interaction between the patient and their health care provider. Instead, RPM is used by health care providers to monitor various aspects of their patient’s vital signs, including: weight, blood pressure, blood sugar, heart rate, and oxygen levels. RPM is not only a useful tool for health care providers to use during a patient’s hospitalization, but it is also useful in reducing the number of hospitalizations altogether. For example, RPM can be used to allow older or disabled individuals to live at home longer and avoid having to move into skilled nursing facilities, since their vitals can be monitored without having to see a health care provider in person. Until this year, Medicare reimbursement for RPM services was difficult to come by. While Medicare previously offered reimbursement for RPM services billed under CPT code 99091, the code did not take current technology and staffing models into account (likely because the language from the code dates back roughly 16 years). In order to address this issue and further incentivize health care providers to use RPM, the Centers for Medicare and Medicaid Services (“CMS”) finalized three new RPM billing codes that were effective January 1, 2019 (“Final Rule”). The new codes are titled, “Chronic Care Remote Physiologic Monitoring” and included the following descriptions: CPT code 99453: “Remote monitoring of physiologic parameter(s) (e.g., weight, blood pressure, pulse oximetry, respiratory flow rate), initial; set-up and patient education on use of equipment.” CPT code 99454: “Remote monitoring of physiologic parameter(s) (e.g., weight, blood pressure, pulse oximetry, respiratory flow rate), initial; device(s) supply with daily recording(s) or programmed alert(s) transmission, each 30 days.” CPT code 99457: “Remote physiologic monitoring treatment management services, 20 minutes or more of clinical staff/physician/other qualified healthcare professional time in a calendar month requiring interactive communication with the patient/caregiver during the month.” Finalization of these new codes did not come without fair criticism and disparate interpretations of the level of required supervision. In creating the codes, CMS stated that RPM could not be delivered “incident to” a practitioner’s professional services. Therefore, RPM services could not be reimbursed if the services were furnished by auxiliary personnel (individuals acting under the supervision of a physician). Following backlash of this conclusion, CMS issued a technical correction to the Final Rule on March 14, 2019, that allows “incident to” billing of RPM services by auxiliary personnel if they are under direct supervision. This was overall a win for RPM reimbursement; however, through separate codes (CPT 99487, 99489, and 99490), CMS allows reimbursement for Chronic Care Management under general supervision. The difference being that general supervision does not require a physician to be in the same building at the same time as the auxiliary personnel delivering the services. This contradictory treatment resulted in commentators arguing that CMS’s approach hinders, rather than increases, a patient’s access to digital health services by limiting where a physician may be located during the supervision of such services. CMS seems to be addressing this concern in the proposed 2020 Physician Fee Schedule that was published August 14, 2019 (“Proposed Rule”). The Proposed Rule would allow “incident to” RPM services to be reimbursed under general supervision rather than limiting reimbursement to direct supervision. By way of example, this means RPM could be reimbursed when the auxiliary personnel use RPM with patients who are in a hospital while the auxiliary personnel are supervised via other telemedicine modalities by a physician at their home. This change would greatly improve a patient’s access to RPM by enabling physicians to bill for such services delivered in a more flexible manner. In addition to this change, the Proposed Rule revises CPT code 99457 and adds yet another code to allow for additional reimbursement for each 20-minute interval that RPM services are provided.  This is in contrast to the Final Rule’s version of CPT code 99457, which allowed only one reimbursement for RPM services delivered for 20 minutes or more. CMS is accepting comments on the Proposed Rule until September 27, 2019. If you would like to submit comments or have any questions, one of the authors or your regular Dorsey attorney would be happy to assist you.    

The U.S. Department of Health and Human Services Center for Medicare and Medicaid Innovation (“CMS Innovation Center”) issued a press release on February 14, 2019, announcing the Emergency Triage, Treat, and Transport Model (the “ET3”). The ET3 is a five-year payment model that will test two new Medicare ambulance supplier and provider payments for: Treatment “on-the-scene” or through telehealth; and Emergency transport to alternative destinations such as a primary care office or urgent care clinic. Currently, Medicare only authorizes payment for emergency ambulance services when they transport patients to hospitals, critical access hospitals, skilled nursing facilities, and dialysis centers. As such, ambulance suppliers and providers often bring Medicare beneficiaries to a hospital emergency department, even if there is a more convenient and appropriate setting available. There are many instances where treatment could be provided either on-the-scene or at a lower-acuity destination, but those options are not payable under Medicare and thus largely ignored. Both new payment options offer the opportunity for ambulance suppliers and providers to deliver care to Medicare beneficiaries in ways not typically considered in the past. Ambulance suppliers and providers can expand their partnerships beyond hospitals to include primary care doctors’ offices, urgent care clinics, or any number of other lower-acuity destinations. Additionally, ambulance suppliers and providers can partner with qualified health care practitioners to provide telehealth services in order to increase their participation in the growing digital health industry. The goal is to help reduce unnecessary emergency department visits and improve the efficiency and quality of care. The ET3 summary provides three means by which the ET3 will “reduce expenditures and preserve or enhance quality of care": Providing person-centered care, such that beneficiaries receive the appropriate level of care delivered safely at the right time and place while having greater control of their health care through the availability of more options; Encouraging appropriate utilization of services to meet health care needs effectively; and Increasing efficiency in the EMS system to more readily respond to, and focus on, high-acuity cases, such as heart attacks and strokes. As stated in the press release, ET3 is another step in the larger effort towards a value-based health care system that aims to deliver the right care, from the right provider, at the right price. The CMS Innovation Center anticipates that payments made through the ET3 will begin January 1, 2020, and end December 31, 2024. Moving forward, the CMS Innovation Center will begin accepting applications from Medicare-enrolled ambulance suppliers and providers in summer 2019. Once participants are selected to test the ET3, the CMS Innovation Center will begin contracting with local governments or other entities that operate 911 dispatches in locations where participating ambulance suppliers and providers serve. These contracts will help develop medical triage lines that will screen 911 callers before ambulance launch. If you would like to explore these opportunities further, please contact anyone in Dorsey’s Healthcare practice or your regular Dorsey attorney.