Health Law Advisor

Thought Leaders On Laws And Regulations Affecting Health Care And Life Sciences

OIG’s Evaluation Process and Non-Binding Criteria for Section 1128(b)(7) Exclusions

LinkedIn Tweet Like Email Comment

Our colleagues George B. Breen, Jonah D. Retzinger, and Daniel C. Fundakowski of Epstein Becker Green have published a client alert that will be of interest to our readers: “OIG Issues New Guidance on Its Evaluation Process and Non-Binding Criteria for Section 1128(b)(7) Exclusions.”

Following is an excerpt:

On April 18, 2016, the Office of Inspector General (“OIG”) of the Department of Health and Human Services issued a revised policy statement applicable to exclusions imposed under Section 1128(b)(7) of the Social Security Act (“Act”), pursuant to which OIG may exclude individuals or entities from participation in federal health care programs for engaging in conduct prohibited by Section 1128A (civil monetary penalties) or Section 1128B (criminal penalties for acts involving federal health care programs) of the Act. OIG typically invokes Section 1128(b)(7) when initiating exclusion proceedings in the context of False Claims Act (“FCA”) matters.

The revised policy statement serves two purposes: (1) it describes how OIG evaluates risk to federal health care programs, and (2) it overhauls the non-binding factors that OIG uses in determining that some period of exclusion should be imposed against an individual or entity that has defrauded Medicare or any other federal health care program. The revised policy statement supersedes and replaces the policy statement published by OIG in 1997, which first set forth the non-binding criteria used by OIG in assessing whether to impose a Section 1128(b)(7) permissive exclusion.

A summary of the guidance and an overview of the ramifications for the health care industry are provided below. …

Read the full alert here.

Shielding Hospital Mergers From Federal Antitrust Scrutiny – One Size May Not Fit All

LinkedIn Tweet Like Email Comment

Patricia M. WagnerPaul A. GomezWest Virginia recently took a bold step to set the stage to shield an in-state hospital merger from further antitrust scrutiny by the Federal Trade Commission (FTC).  Certain healthcare stakeholders are likely watching these developments with some excitement and with some thought toward pursing similar initiatives in their respective states.  Although this may have some positive effects for healthcare mergers (depending upon one’s point of view) it is not altogether clear that state review processes that might shield a merger from federal antitrust enforcement will necessarily be less burdensome to those who want to merge.

Governor Tomblin recently signed into law a West Virginia bill to create a state authority for approval of certain healthcare mergers and other collaborations that involve teaching hospitals.  The measure would also give the state authority power to approve certain treatment cost increases, among other things.  This measure appears to have been designed to shield a particular hospital merger in West Virginia from FTC antitrust scrutiny via the state action immunity doctrine, although it will have application to certain other hospital mergers involving a teaching hospital that may be forthcoming in the state.  The state action immunity doctrine requires that the state policy must be articulated clearly and that the state must actively supervise the policy.  On March 24, 2016 in response to a joint request from the West Virginia hospitals and the FTC staff, the Commission issued an order withdrawing the matter from adjudication for thirty days.  As stated in the order, the withdrawal was to allow “the Commission to review the legislation- and to hear from both Complaint Counsel and Respondents as to the relevance of the legislation” to the pending proceeding.  That delay order expires at midnight on April 25th.

Some observers, including a former director of the FTC Bureau of Competition, believe that the FTC will most likely abandon its current action to block the pending merger for now in light of this state law development, potentially opting to wait to observe whether the state actually does actively monitor the merger and its conditions with sufficient zest to continue to confer the protection of the state action immunity doctrine over the longer run.  The FTC may also opt to wait for now and observe whether any anti-competitive effects actually manifest as a result of the merger.

This instance of West Virginia acting to protect a particular merger may be somewhat unique, with the state attorney general having already approved the merger with certain protective conditions, but the FTC electing to challenge it nonetheless.  However, some other states have also taken similar steps to potentially construct a shield against federal scrutiny of hospital or other healthcare provider mergers through the state action immunity doctrine.  And in at least some cases, it may not be clear that the state approval process for such mergers will generally be less onerous or more desirable than potential antitrust scrutiny from either the FTC or the U.S. Department of Justice.  For example, often in order to be granted such protection, the parties must submit extensive materials to the state demonstrating plans for improving access to care, quality of care, addressing patients’ needs, and lowering costs of care (and the benefit of that lower cost of care will passed on to patients).   In addition, the state maintains review authority over the parties, so that the parties must continue to report on their ability to meet the goals and benchmarks described.  The state retains the ability to revoke approval of the transaction if the parties fail to meet the commitments made as part of the approval process.

For those who may be considering pursuit of a state approval process for healthcare mergers as a potentially “better” alternative to federal antitrust scrutiny, one should also consider the political climate of the state and to what degree state politicians and regulators consider encouragement of mergers and acquisitions to be needed for better access and better integrated healthcare.  The prevailing wisdom in one state with a large rural population and a scarcity of healthcare providers may be significantly different than one with several major metropolitan areas and/or a large suburban population with multiple healthcare providers.  In sum, those who may be considering pursuit of similar measures as those enacted in West Virginia and certain other states should carefully assess political, economic and healthcare climate and market conditions of the state that they are in before investing heavily in such an endeavor.  One size does not necessarily fit all when it comes to potential use of the state action immunity doctrine.

Has Chevron Deference Run Out of Gas?

LinkedIn Tweet Like Email Comment
Robert E. Wanerman

Robert E. Wanerman

A group of conservative members of Congress have introduced a pair of bills (S. 2724 and H.R. 4768) that would sweep away one of the basic principles of administrative law if they became law. The proposed amendments would make it easier to challenge many determinations involving the Department of Health and Human Services in federal courts by legislatively overruling the deference commonly applied to agency interpretations of the law.

Even before the Administrative Procedure Act was enacted in 1946, the Supreme Court gave great weight to an administrative agency’s interpretations of the statutes they administer.  Since 1984, the scope of judicial review of agency action has been guided by the Court’s ruling in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984), which described a familiar two-part analysis: (1) if Congress has directly addressed the precise question in legislation, a court follows the statute; (2) if the statute is silent or ambiguous, then a court does not craft its own interpretation of the statute but determines if the agency’s action is based on a “permissible construction of the statute.”  Since that time, Chevron has become the most frequently cited case in federal administrative law, and Chevron-type deference has been central to judicial review of administrative decisions in hundreds of rulings by the Supreme Court and lower federal courts.

The bills would eliminate judicial deference to administrative agency determinations by requiring that a reviewing court, whether a district court or a court of appeals, make an initial determination on all relevant questions of law without regard to any interpretations of statutes or rules in the agency’s final decision.  According to the sponsors, this will expand the role of the judiciary as a check against agency action and remedy the perceived imbalance between the branches of government.  The lead sponsor in the Senate, Senator Hatch, stated in a press release that amending the Administrative Procedure Act is necessary to ensure that courts determine the law and not administrative agencies.  In support of their position, the sponsors cited to three decisions of the Supreme Court as examples of abuses under Chevron, even though two of those decisions were written by Justice Scalia and the third by Justice Thomas.

However, even if this amendment were enacted it might not achieve its stated goal. It likely would not require that all agency interpretations be discarded once a party seeks judicial review of agency action; under several pre-Chevron decisions of the Supreme Court, a reviewing court can still give an agency’s interpretation significant weight and defer to the agency’s position if it is persuaded that the agency has acted within the scope of its delegated authority from Congress and considered the matter thoroughly.  In addition, it would not halt the role of administrative agencies to fill necessary gaps created when Congress enacts ambiguous legislation.

Pursuing Medicare Appeals Is Not for the Impatient

LinkedIn Tweet Like Email Comment
Robert E. Wanerman

Robert E. Wanerman

Even after the Secretary of HHS admitted that the current backlog of Medicare Part B appeals would take ten years to adjudicate at current staffing and funding levels, that was not enough for a hospital to obtain any relief from a court. Cumberland County Hospital System, Inc. v. Burwell, No. 15-1393 (4th Cir., Mar. 7, 2016).  In that case, a North Carolina hospital had initially been paid for over 900 claims, but those claims were subsequently determined to be ineligible after a post-payment review by a Recovery Audit Contractor (“RAC”), which sought to recover over $12 million from the hospital.  Although the hospital complied with the deadlines for filing administrative appeals, the Medicare Office of Hearings and Appeals had not held hearings or made determinations within the 90-day deadline in the Medicare statute. In order to expedite the process, the hospital sought a writ of mandamus from a federal court to order the Secretary to conduct the hearings.  The district court denied the motion, and the U.S. Court of Appeals for the Fourth Circuit agreed with the Secretary that no relief was warranted.

The court noted the Secretary’s admission that there are over 800,000 pending Medicare appeals, and that absent any legislative remedy it would take over ten years to hear and decide the current caseload.  Despite these appalling statistics and the court’s own statement that, “HHS’s procedural arteries are seriously clogged,” the court agreed with the Secretary that because the Medicare statute gives claimants the option of escalating their claim to the next level of review if hearing deadlines are not met, the hospital was not entitled to the court order it sought.

The Cumberland County decision highlights a critical step for anyone seeking to appeal a Medicare coverage or reimbursement decision: making sure that the record is complete as early as possible in the appeal process.  Under the Medicare hearing regulations, it becomes more difficult to introduce additional evidence at each level of review, and new evidence will not be considered by a reviewing court. As a result, anyone appealing an unfavorable Medicare decision should either be prepared to be patient, or should make a complete record as early as possible in the process if an option is escalating an appeal to a higher level to get a timely hearing.  Although Congress is considering legislation that may help, the degree of that help or when that help may arrive is still too uncertain to predict.

U.S. Supreme Court Rules in Favor of Liberty Mutual

LinkedIn Tweet Like Email Comment
Stuart Gerson

Stuart Gerson

Today, the U.S. Supreme Court decided (6-2, with Kennedy writing for the majority and  Ginsburg and Sotomayor dissenting) the case of Gobeille v. Liberty Mutual Insurance Co.  The matter before the Court involved Vermont law requiring certain entities, including health insurers, to report payments relating to health care claims and other information relating to health care services to a state agency for compilation in an all-inclusive health care database. 

In an important victory for pre-emption advocates, the Court held that this law was pre-empted by The Employee Retirement Income Security Act of 1974 (ERISA) which expressly pre-empts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” And that includes any  state law that has an impermissible “connection with” ERISA plans, i.e., a law that governs, or interferes with the uniformity of, plan administration.  

In the context of this case pre-emption is necessary in order to prevent multiple jurisdictions from imposing differing, or even parallel, regulations, creating wasteful administrative costs and threatening to subject plans to wide-ranging liability. ERISA’s uniform rule design also makes clear that it is the Secretary of Labor, not the separate States, that is authorized to decide whether to exempt plans from ERISA reporting requirements or to require ERISA plans to report data such as that sought by Vermont. The Court went on to reject Vermont’s arguments about the lack of economic loss by Liberty Mutual or its traditional power to regulate in the area of public health. 

Finally, the Court held that ERISA’s pre-existing reporting, disclosure, and recordkeeping provisions maintain their pre-emptive force regardless of whether the newer Affordable Care Act’s reporting obligations also pre-empt state law.  

Antitrust Enforcement Agencies Issue Joint Statement Encouraging Repeal of Virginia’s CON Program

LinkedIn Tweet Like Email Comment

M. Brian Hall, IV

Daniel C. Fundakowski

On October 26, 2015, the Federal Trade Commission (“FTC”) and the Antitrust Division of the U.S. Department of Justice (“DOJ”) (collectively the “Agencies”) issued a joint statement to the Virginia Certificate of Public Need (“COPN”) Work Group encouraging the Work Group and the Virginia General Assembly to repeal or restrict the state’s certificate of need process.  The Virginia COPN Work Group was tasked by the Virginia General Assembly to review the current COPN process and recommend any changes that should be made to it.

Thirty-six states currently maintain some form of certificate of need (“CON”) program.  Although there are variations in the programs, in general, new entrants and incumbent providers are required to obtain state-issued approval before constructing new facilities, or in some cases prior to offering certain health care services, or making major capital expenditures—such as expanding the number of beds in a hospital or investing in robotic surgery equipment.

In their statement, the Agencies outlined their concerns that state certificate of need (“CON”) laws fail to achieve their original conceived goals of improving access to care and reducing health care costs.  Instead, the Agencies remarked that programs like the Virginia COPN process “prevent the efficient functioning of health care markets” in numerous ways:

  • By creating barriers to entry and expansion, limiting consumer choice, and stifling innovation;
  • By allowing incumbent firms to use CON laws to thwart or delay market entry by new competitors;
  • By denying consumers of an effective remedy following the consummation of an anticompetitive merger (specifically referencing the FTC v. Phoebe Putney case, which we previously reported on here); and
  • By failing to assist states in controlling health care costs or improving care quality (based on studies referenced by the Agencies).

For these reasons, the Agencies have historically taken the position that state CON laws should be repealed or limited.

In a concurring statement, FTC Commissioner Julie Brill agreed that the FTC was capable to advise the Virginia COPN Work Group about the impact of CON laws on competition. But Commissioner Brill took exception to the FTC’s comments concerning non-competition-related public policy goals, noting that the FTC lacks evidence of the impact of repealing CON laws.

The Virginia COPN Work Group issued its final report to the General Assembly in December 2015, recommending several changes to the COPN requirement but stopping short of recommending that Virginia repeal it.  The Work Group noted that the program currently lacks a statement of purpose and urged the General Assembly to draft one.  In addition, the Work Group suggested several steps to make the current application submission and review process more efficient and streamlined, including adopting a 45-day expedited review process for projects that are non-contested and raise few health planning concerns. The Work Group also suggested making the COPN program more transparent, including improved online access to COPN filings and other related documents.

On January 11, 2016, the Agencies submitted a similar joint statement, upon the request of South Carolina Governor Nikki Haley, regarding the competitive implications of CON laws and South Carolina House Bill 3250—a bipartisan bill that ultimately would repeal South Carolina’s CON program effective January 1, 2018.  While the Agencies observed certain flaws in the legislation, they expressed broad support for the proposed repeal of South Carolina’s CON program.  FTC Commissioner Brill also issued a dissenting statement, noting in large part the commendable non-competition policy goals advanced by CON programs.

Virginia’s COPN law also survived a recent constitutional challenge in the U.S. Court of Appeals for the Fourth Circuit.  In the case, Colon Health Centers v. Hazel, No. 14-2283 (4th Cir. Jan. 21, 2015), two providers of medical imaging services alleged that Virginia’s COPN law violated the dormant aspect of the Commerce Clause.  The Fourth Circuit affirmed the district court’s holding that the COPN requirement neither discriminated against nor placed an undue burden on out-of-state health care providers (and granting summary judgment to the Commonwealth).  This recent Fourth Circuit precedent may decrease the likelihood of the Agencies formally challenging Virginia’s COPN program following their joint statement encouraging that it be repealed.

Antitrust Law Post Antonin Scalia

LinkedIn Tweet Like Email Comment

Supreme CourtWith the untimely passing of Supreme Court Justice Antonin Scalia, perhaps the best known and most controversial Justice on the Court, commentators, including this one, have been called upon to assess his legacy – both immediate and long term – in various areas of the law.

Justice Scalia was not known primarily as an antitrust judge and scholar. Indeed, in his confirmation hearing for the Court, he joked about what he saw as the incoherent nature of much of antitrust analysis. What he was best known for, of course, is his method of analysis of statutes and the Constitution: a literal textualism with respect to statutes and a reliance on “originalism” with respect to the Constitution.

Probably his most influential antitrust opinion was the 2004 decision in Verizon Communications Inc. v. Law Offices of Curtis V. Trinko LLP which limited antitrust plaintiffs’ ability to hold a company with monopoly power liable for failing to cooperate with rivals.

Taking a literalist view of the Sherman Act, Justice Scalia wrote that there was a good reason why Section 2 claims required a showing of anti-competitive conduct, not just a monopoly.

The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system,” he wrote. “The opportunity to charge monopoly prices — at least for a short period — is what attracts ‘business acumen’ in the first place; it induces risk-taking that produces innovation and economic growth.

Thus, Justice Scalia fashioned a majority in holding that the competitive conduct of a monopolist that had earned its hegemony was not inherently suspect. This has come to be a dominant view generally in the antitrust field, but critics have argued that the decision entrenches power and judicial liberals who might succeed Justice Scalia could take a more restrictive, less literal view of the law.

In 1991, Justice Scalia led a majority in Columbia v. Omni Outdoor Advertising Inc., a case in which a competitor had claimed that an advertising rival and a municipality had conspired in passing an ordinance favoring the incumbent. In ruling against the plaintiff, Justice Scalia wrote that there was no “conspiracy exception” to Parker v. Brown, the 1943 Supreme Court case that established antitrust immunity for anti-competitive restraints imposed by state governments. On the other hand, in the recent North Carolina Dentists litigation with the FTC, Justice Scalia joined a majority that held the state action exemption did not apply to certain guild behavior where there was no active supervision by the state – again, a literalist approach.

Justice Scalia was influential in limiting class actions, enforcing arbitration agreements and requiring strict rules of pleading plausible causes of action. Cases like the antitrust actions in AT&T v. Concepcion and American Express v. Italian Colors, backing enforcement of arbitration agreements that blocked class treatment of claims, and the now often-cited cases of Twombley and Iqbal with respect to pleading currently rule the entry gate for large-case litigation, particularly antitrust.

For all of his conservative rulings, Justice Scalia was not a results-oriented judge determined to put antitrust plaintiffs in their place, I think that he would have argued that he was strictly neutral on the merits and didn’t care whether business prevailed or whether the class action plaintiffs prevailed. Whether, the conservative majority that adopted his methods will continue to hold, or whether some of these methods will be superseded by a more-elastic interpretive mode of judging will be at the forefront of the confirmation hearing of the next Justice.

Surprise Health Care Bill Protections Addressed in President Obama’s 2017 Budget for Health and Human Services

LinkedIn Tweet Like Email Comment

In its Fiscal Year 2017 Private Insurance Legislative Proposals, President Obama’s Budget contains a provision seeking to “eliminate surprise out-of-network healthcare charges for privately insured patients.” Described as an attempt to “promote transparency on price, cost, and billing for consumers,” this measure requires hospitals and physicians to collaborate so that patients receiving treatment at in‐network facilities do not face unexpected charges from out‐of‐network practitioners. This provision could have far-reaching effects, potentially impacting enrollees in traditional commercial plans, Exchange plans and government plans (such as Medicare Advantage plans).

A surprise bill situation arises when patients incur unexpected, out‐of‐network charges when receiving health care services at an “in-network” or “participating” hospital. For example, a surprise bill may arise from a situation where certain physicians (e.g., anesthesiologists or emergency room physicians) who provide services to the patient during an episode of care are not participating with a health plan, even if other providers who see the patient and the hospital itself are participating. In such scenarios, the non-participating providers may charge patients for both cost sharing and any unpaid balances for those specific services, as if the patient had gone to an “out-of-network” or “non-participating” provider.

The proposal in the Budget would change that and require hospitals and physicians to “work together to ensure that patients receiving treatment at in‐network facilities do not face unexpected out‐of‐network charges from out‐of‐network practitioners that cannot be avoided by the patient.” This would be accomplished by requiring hospitals to take “reasonable steps” to match patients with providers who are considered in‐network for the patient’s plan. Also, all physicians who regularly provide services in hospitals would be required to accept the contracted, in‐network rate as payment‐in‐full, even though no actual contract is in place. Thus, in situations where a hospital failed to match a patient to an in‐network provider, safeguards would still be in place to protect the patient from surprise out‐of‐network charges. How such amount would be calculated and enforced is not yet clear at this stage.

On a state level, legislation has been passed that affords patients protections against surprise bills in California, Texas, Florida, Illinois, Colorado, Maryland, West Virginia and New Jersey, but the state with the most rigorous protections is New York. A New York law went into effect in March 2015, protecting patients from surprise bills when services are performed by a non-participating doctor at a participating hospital or ambulatory surgical center or when a participating doctor refers an insured patient to a non-participating provider (the law also protects consumers from bills for emergency services).

Many particulars regarding the proposal in the Budget remain unclear, as limited information was presented around the proposed provision. Besides the need for legislative action, specific questions exist around what standards would be used for calculating new payment rates, implementation and enforcement mechanisms, provider appeal and dispute resolution processes, managed care contracting implications, state versus federal jurisdictional issues and impacts on plan premium pricing. However, what is clear is that the federal government has begun to follow states’ leads in introducing protections for patients from unforeseen medical expenses.

CMS Issues Long-Awaited Rule Regarding Reporting and Returning Overpayments

LinkedIn Tweet Like Email Comment

Epstein-Becker-Green-ClientAlertHCLS_gif_pagespeed_ce_KdBznDCAW4In February 2012, two years after the passage of the Affordable Care Act (“ACA”), the Centers for Medicare & Medicaid Services (“CMS”) issued a proposed rule, which was subject to significant public comment, concerning reporting and returning certain Medicare overpayments (“Proposed Rule”). On February 12, 2016, four years from the issuance of the Proposed Rule (and six years after passage of the ACA), CMS issued the final rule, which becomes effective on March 14, 2016 (“A and B Final Rule”).

The A and B Final Rule applies only to providers and suppliers under Medicare Parts A and B. The return of overpayments under Medicare Parts C and D are addressed in a final rule that was published by CMS in May 2014 (“C and D Final Rule”). To date, no final regulations have been adopted that address Medicaid requirements.

Among other things, the A and B Final Rule and its preamble provide:

  • a six-year lookback period;
  • that providers and suppliers must exercise “reasonable diligence” in connection with identifying potential overpayments;
  • that the time period to conduct “reasonable diligence” should be no more than six months, except in extraordinary circumstances; and
  • that “identification” includes quantifying the amount of the overpayment.

Kirsten M. Backstrom, George B. Breen, Anjali N.C. Downs, David E. Matyas, and Meghan F. Weinberg coauthored a Health Care and Life Sciences Client Alert that addresses a number of the significant provisions of the A and B Final Rule, describes an important difference between the two final rules, and sets forth a list of nine key “takeaways” that we believe all Medicare providers and suppliers should be aware of.

Click here to read the full Health Care and Life Sciences Client Alert.

Zika Virus: What Employers Should Know – Employment Law This Week

LinkedIn Tweet Like Email Comment

The top story on Employment Law This Week is the unfolding Zika virus crisis.

For the fourth time in history, the World Health Organization has declared a global public health emergency, following the spread of the Zika virus throughout Latin America and the Caribbean. The disease can have harmful effects on fetuses, and the CDC has warned against travel for pregnant women and their partners. The Zika crisis has important implications for employers. Workers who travel for their jobs may request accommodations, and employers should make them aware of the risks if they aren’t already. Denise Dadika, from Epstein Becker Green, shares some advice for employers.

View the episode below, or read Amy Lerman’s earlier post on the Zika crisis.