Health Law Advisor

From our Thought Leaders in Health Law video series: On March 31, 2025, the U.S. District Court for the Eastern District of Texas ruled that the Food and Drug Administration (FDA) lacks the statutory authority to regulate laboratory-developed tests (LDTs).

The court’s judgment vacates the agency’s controversial final rule of May 6, 2024 (the “Final Rule”), regulating LDTs as medical devices, just weeks before the Final Rule’s initial implementation deadline and remands the issue back to the FDA for further consideration.

When Congress adopted the Inflation Reduction Act (IRA) in 2022, creating the Medicare Drug Price Negotiation Program (MDPNP), the bill did not receive support from any Republican senators. In 2025, the question remains what Congress and the current administration will do with the MDPNP, and we are starting to find out.

On April 15, 2025, President Trump issued Executive Order 14273, entitled “Lowering Drug Prices by Once Again Putting Americans First.” This comes on the heels of the release of the Final CY 2026 Part D Redesign Program Instructions (“Program Instructions”) by the Centers for Medicare and Medicaid Services (CMS) on April 7—concurrent with the CY 2026 Announcement of Medicare Advantage Capitation Rates and Part C and D Payment Policies (see our recent blog post on the latter.) 

Executive Order 14273 includes a number of provisions addressing the IRA, including:

Hospitals that serve a high number of indigent patients are faced with a dilemma: they must provide high-quality care but fixed Medicare reimbursement rates often do not take into account the higher operating costs that they incur when treating certain low-income patients.  That problem was made more difficult when the Supreme Court ruled 7-2 in favor of the Secretary of HHS in an appeal brought by over 200 hospitals that depend on disproportionate share hospital (“DSH”) payments. Advocate Christ Medical Center v. Kennedy, No. 23-715 (Apr. 29, 2025).

Congress recognized that hospitals that serve a high number of low-income or indigent patients may incur additional costs that are not captured in the regular Medicare inpatient prospective payments.  Congress provided a remedy for these hospitals in the form of a complex formula that sums two fractions.  The first fraction, known as the Medicare fraction, is the total of all of the hospital’s inpatient days attributable to “patients who (for such days) were entitled to benefits under part A of [Medicare] and were entitled to supplementary security income [SSI] benefits[under Title XVI of the Social Security Act]” and the denominator is the number of all inpatient days attributable to all Medicare beneficiaries. The DSH payment is made as a supplement to the Medicare DRG bundled payment for each discharge. The larger the numerator of the fraction, the larger the DSH payment.

On April 22, 2025, U.S. Attorney General Pam Bondi issued a memorandum entitled “Preventing the Mutilation of American Children” (“the AG Memorandum”). Directed to all Justice Department employees, the AG Memorandum sets forth steps that the Department will take to counteract gender affirming care to treat gender dysphoria. This is the most recent step in a series of actions that the Administration has taken targeting care for transgender children and represents a significant escalation in the Administration’s enforcement efforts. 

Background

On January 20, 2025, as one of his first official acts, the president signed Executive Order 14168 entitled “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government” (the “Gender Ideology EO”). Eight days later, the president issued Executive Order 14187, entitled “Protecting Children from Chemical and Surgical Mutilation” (the “Surgical Mutilation EO”) Broadly, the two Executive Orders (EOs) target laws and practices related to the role of transgender individuals in American society. The Surgical Mutilation EO specially addresses medication and surgical treatment for gender dysphoria and states, “[I]t is the policy of the United States that it will not fund, sponsor, promote, assist, or support the so-called ‘transition’ of a child from one sex to another, and it will rigorously enforce all laws that prohibit or limit these destructive and life-altering procedures.”

Drug manufacturer Eli Lilly has filed suit against four companies involved in making, prescribing, and/or selling compounded versions of its weight loss and diabetes drugs ZEPBOUND® and MOUNJARO®. Lilly’s drugs, injected under the skin, are the only FDA-approved medicines containing tirzepatide in the United States.

Two complaints, filed April 23 in the U.S. District Court for the Northern District of California, contend that the founders and chief executive officers of Mochi Health Corp. (“Mochi Health”) and Fella Health exerted control over multiple affiliated entities, including medical groups, in violation of California law prohibiting unlicensed individuals and corporations from practicing medicine (generally known as the “Corporate Practice of Medicine” or “CPOM” laws). The plaintiffs allege unfair competition and false advertising under state law and the Lanham Act; and assert state CPOM claims through supplemental and/or diversity jurisdiction.

This latest development on the drug compounding front comes at a time when states are keeping a sharp eye on private investment in the health care space—increasingly proposing legislation to strengthen CPOM laws and also increase oversight on corporate transactions involving health care entities. The majority of U.S. states have some form of CPOM restriction, and some, including Oregon, Texas, and Washington, are considering taking steps advocates say will strengthen theirs—with proposals, for example, to prevent private equity groups or hedge funds from interfering with health care decisions and limiting or eliminating common forms of affiliation with professional medical practices.

Several April releases seem to signal some basis for optimism for stakeholders in Medicare Advantage and Part D, though with sufficient undertones to recommend caution. In April, the Centers for Medicare and Medicaid Services (CMS) released its Final Rule on CY 2026 Policy and Technical Changes to the Medicare Advantage (MA) Program, Medicare Prescription Drug Benefit (Part D) Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly (PACE) (the “2026 Final Rule)—and also released this CY 2026 Rate Announcement for MA and Part D. At approximately the same time, CMS posted an appeal for input on approaches and opportunities to streamline Medicare regulations and reduce unnecessary regulatory burden, providing MA and Part D stakeholders with an opportunity to highlight areas for potential change. 

Of particular note, the CY 2026 Rate Announcement includes a plan payment increase that is up more than $25 billion from its original proposal and continues the three-year phase-in of the move to the V28 risk adjustment model. This came just days after CMS issued the 2026 Final Rule. Created under a sharply different political landscape, the 2026 Final Rule departs from the Proposed Rule of November 26, 2024 (“2026 Proposed Rule”) in a number of ways.  

As we predicted in our previous Insight, the Trump Administration chose not to finalize some aspects of the 2026 Proposed Rule. The 2026 Final Rule balked at a number of proposals—owing at least in part to Executive Order 14192 of January 31, 2025, “Unleashing Prosperity Through Deregulation,” which was cited by CMS. With deferrals listed at 90 FR 15795 and 15892, the 2026 Final Rule is perhaps notable for

With newly confirmed Dr. Mehemet Oz at its helm, the Centers for Medicare & Medicaid Services (CMS) maintained but delayed the deadline for its requirement that Skilled Nursing Facilities (SNFs) to report significantly expanded information to CMS about the ownership, management and relationships with private equity (PE) and real estate investment trusts (REIT), and newly defined “additional reportable parties” (ADPs). Scheduled to take effect on May 1, 2025, CMS recently announced a three-month reprieve, pushing the deadline back to August 1, 2025.  This comes at the same time that CMS is seeking suggestions on lowering the Medicare regulatory burden and simplifying Medicare reporting requirements.  

The delay announcement came as a surprise since, as recently as Friday, April 11, CMS reminded SNFs about the May 1 deadline that was fast-approaching for the  Off-cycle SNF Revalidation of all Medicare-enrolled SNFs. Originally issued on October 1, 2024, every SNF was required to complete the new Form 855A that was designed to improve transparency and accuracy in SNF enrollment data under new reporting rules that were finalized by CMS in the Medicare and Medicaid Programs; Disclosures of Ownership and Additional Disclosable Parties Information for Skilled Nursing Facilities and Nursing Facilities; Medicare Providers' and Suppliers' Disclosure of Private Equity Companies and Real Estate Investment Trusts, on November 17, 2023.

Effective October 1, 2024, CMS added the new “SNF Attachment” to Form 855A, the Medicare Enrollment Application for Institutional Providers. All SNFs must now revalidate CMS enrollment by submitting the updated form by August 1, 2025. Medicare-enrolled SNFs should have received a revalidation notice by the end of the calendar year 2024. Even if the letter got lost in the mail, CMS expects every Medicare enrolled SNF to contact their Medicare Administrative Contractor (MAC) to ensure they revalidate their enrollment before August 1, 2025, or risk what will be serious consequences.

New from the Diagnosing Health Care Podcast: Important changes are unfolding in the vaccine space.

How have vaccine exemptions posed a significant risk to populations across the country? What are the long-lasting effects of the new administration's federal health agency funding cuts?

On this episode, Epstein Becker Green attorneys Richard Hughes, Spreeha Choudhury, and Will Walters, as well as Anna Larson of EBG Advisors, discuss vaccine-related topics ranging from the measles outbreak and the reduction of the federal workforce to decreased government funding of public health programs. 

Thomson Reuters Practical Law has released the 2025 Practice Note titled “Health Care Non-Competes,” authored by David J. Clark.

The Note discusses non-compete agreements in the health care sector, examining the legal and policy considerations impacting their enforceability. It highlights the unique challenges posed by health care non-competes, including patient access and continuity of care, and reviews state-specific statutes that restrict or prohibit these agreements for various health care workers. This Note discusses alternative restrictive covenants, such as non-solicitation and non-treatment agreements, and provides insights into the jurisdictional variations in non-compete enforceability. It also addresses ethical concerns raised by health care non-competes, particularly those affecting physicians, and examines the implications of telemedicine and health care deserts on non-compete enforcement. This Note offers guidance on best practices for drafting and enforcing non-competes. It is jurisdiction-neutral but will be useful to employers and their counsel in all jurisdictions.

On April 14, 2025, the United States Court of Appeals for the Seventh Circuit issued a decision in a case involving the federal Anti-Kickback Statute (“AKS”) and marketing services that the court framed as an appeal “test[ing] some of the outer boundaries of the [AKS]….” In United States vs. Mark Sorensen, the Court of Appeals overturned the judgment of conviction against Mark Sorensen from the United States District Court for the Northern District of Illinois. In the district court case, Sorensen, the owner of SyMed Inc., a durable medical equipment (“DME”) distributor, was found guilty of one count of conspiracy and three counts of offering and paying kickbacks in return for the referral of Medicare beneficiaries to his DME company, which the United States claimed resulted in SyMed’s fraudulently billing $87 million and receiving $23.6 million in payments from Medicare. The district court judge denied Sorensen’s post-trial motions for acquittal and for a new trial, finding that the evidence regarding willfulness allowed the jury to find beyond a reasonable doubt that Sorensen “knew from the beginning of the agreement in 2015 that the percentage fee structure and purchase of the [doctors’] orders violated the law.” He was sentenced to 42 months in prison and ordered to forfeit $1.8 million.