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CMS Announces Post-Acute Priorities for 2020 – Final Regulations, State Operation Manual Updates, Home Health and Hospice Survey Process Revisions

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On December 11, 2019, the Center for Clinical Standards and Quality/Quality, Safety & Oversight Group at the Centers for Medicare & Medicaid Services (“CMS”) issued a memorandum to State Survey Agency Directors entitled “Fiscal Year (FY) 2020 Mission & Priority document (MPD) – Action” (“FY 2020 Memo”) that announced its work and intentions for the fiscal year 2020.

The Fiscal Year Mission & Priority document is an annual document that directs and outlines the work of the Quality, Safety & Oversight Group, the CMS Regional Offices and the State Survey Agencies based on regulatory changes, adjustments in budget allocations and new initiatives, as well as new requirements based on statutes such as the Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”).

Prior Goals

In its Fiscal Year 2019 Mission Priority document, CMS announced its intention to: (1) issue these proposed regulations in areas it identified as unnecessary, obsolete or excessively burdensome on health care providers and suppliers; and (2) publish a proposed rule to fully enforce Section 1150B requirements for reporting crimes to nursing home residents, which would propose a regulation that would allow Civil Money Penalties to be imposed of up to $200,000 against covered individuals (staff, volunteers, etc.) who fail to report reasonable suspicion of crimes.

Fiscal Year 2020 Goals

The FY 2020 Memo announced the following post-acute priorities for 2020.

Nursing Homes: Finalize Regulations, Then Update State Operations Manual

Earlier in 2019, CMS released proposed regulations motivated by an intention to remove requirements for participation CMS identified as unnecessary, obsolete or excessively burdensome nursing homes. The FY 2020 Memo announced that CMS intends to finalize those regulations in 2020.

CMS confirmed that once those regulations are finalized, it will provide guidance to state agencies for surveying for compliance with the final regulations. On November 22, 2019, the Quality, Safety & Oversight Group at CMS issued a memorandum entitled “Updates and Initiatives to Ensure Safety and Quality in Nursing Homes” that announced they will release updated Interpretive Guidance for Phase 3 of the Regulations in the second quarter of 2020. At that time, CMS will also release information on training and implementing related changes to the Long-Term Care Survey Process.

Nursing Homes: Agreements to Arbitration of Disputes

Earlier in 2019, CMS issued a final rule updating the requirements nursing homes must meet to use binding arbitration agreements. The FY 2020 Memo confirms that CMS is allowing binding arbitration agreements, but will prohibit nursing homes from requiring residents to sign binding arbitration agreements as a condition for receiving care, and will require nursing homes to inform residents or their representatives that they are not required to sign a binding arbitration agreement.

CMS confirmed that it is prohibiting nursing home arbitration agreements from including language preventing residents or anyone else from communication with federal, state or local officials.

The FY 2020 Memo announced that CMS will issue guidance to state agencies for surveying for compliance with the final rule on arbitration agreements in 2020.

Nursing Homes: Facility Reported Incidents and Complaint Investigations

The FY 2020 Memo states that CMS plans to release guidance in Chapter 5 of the State Operations Manual related to the management of facility-reported incidents and complaints. The FY 2020 Memo provides that changes would include the development and implementation of policies and procedures that are consistent with federal guidelines, adherence to federal time frames for investigation, the collection of mandated elements from the initial and investigation reports and the collection of data to support the tracking of facility-reported incidents.

Home Health Agencies

CMS announced it will implement a new survey process for home health agencies in FY 2020 and will simplify procedures for moving from standard to partially extended to extended surveys.

The FY 2020 Memo states that home health surveys should include a sample of extension locations.

Hospice Agencies

CMS announced it is working on revisions to the hospice survey process with a target release date of late 2020. Under the IMPACT Act of 2014, each Medicare-certified hospice must be surveyed by the State Agency or Accrediting Organization no less frequently than every 36 months.

The FY 2020 Memo states that hospice surveys should include a sample of multiple locations in the survey process. At a minimum, the sample should be included in the record reviews and onsite visits when possible.

If you have questions or would like additional information about this topic, please contact:

More information about Hall Render’s Post-Acute and Long-Term Care services can be found here.

The post CMS Announces Post-Acute Priorities for 2020 – Final Regulations, State Operation Manual Updates, Home Health and Hospice Survey Process Revisions appeared first on Law Firm | Health Care Law Firm in the USA | Hall Render.


2020 Non-Monetary Compensation to Physicians (And Chance to Review 2019)

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Under the federal Stark Law, hospitals may provide non-monetary compensation to physicians up to an aggregate amount of $423 for calendar year 2020. The dollar limit for “medical staff incidental benefits” (e.g., meals, parking and other items or incidental services that are used on the hospital’s campus) is less than $36 per occurrence. Other requirements of the Stark Law’s exception for non-monetary compensation and medical staff incidental benefits also need to be met. Hospitals should take inventory of such non-monetary compensation and benefits to confirm they are meeting the law’s requirements.

Detailed Analysis

The Stark Law provides that if a hospital has a financial relationship with a physician, the physician may not refer to the hospital for the provision of “designated health services” (including inpatient and outpatient hospital services) and the hospital may not bill for such services unless an exception is met. A “financial relationship” under the Stark Law is construed very broadly, which means all remuneration from a hospital to a physician must be considered, including in-kind compensation.

Pursuant to the Stark Law regulations at 42 C.F.R. § 411.357, there are exceptions for non-monetary compensation. Generally, the non-monetary compensation exception may be used to protect items or services provided to a physician such as entertainment, meals and other non-cash equivalent benefits. Specific detail about the exception is outlined below. Hospitals should review and ensure they are meeting these exceptions.

Non-Monetary Compensation up to $423

Compensation from an entity in the form of items or services (not including cash or cash equivalents such as gift cards) that do not exceed an aggregate of $423 per year, if all of the following conditions are satisfied:

  • The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated by the referring physician.
  • The compensation may not be solicited by the physician or the physician’s practice (including employees and staff members).
  • The compensation arrangement does not violate the Anti-Kickback Statute or any federal or state law or regulation governing billing or claims submission.

Where an entity has inadvertently provided non-monetary compensation to a physician in excess of the $423 limit, such compensation is deemed to be within the $423 limit if the value of the excess non-monetary compensation is no more than 50 percent of the $423 limit and the physician returns to the entity the excess non-monetary compensation (or an amount equal to the value of the excess non-monetary compensation). The return must be made by the end of the calendar year in which the excess non-monetary compensation was received or within 180 consecutive calendar days following the date the excess non-monetary compensation was received by the physician, whichever is earlier. This “return” option may be used by an entity only once every three years with respect to the same referring physician.

Medical Staff Incidental Benefits

Compensation in the form of items or services (not including cash or cash equivalents) from a hospital to a member of the medical staff when the item or service is used on the hospital’s campus if all of the following conditions are met:

  • The compensation is offered to all members of the medical staff practicing in the same specialty (but not necessarily accepted by every member to whom it is offered) without regard to the volume or value of referrals or other business generated between the parties.
  • Except with respect to identification of medical staff on a hospital website or in hospital advertising, the compensation is provided only during periods when the medical staff members are making rounds or are engaged in other services or activities that benefit the hospital or its patients.
  • The compensation is provided by the hospital and used by the medical staff members only on the hospital’s campus. Compensation, including, but not limited to, internet access, pagers or two-way radios, used away from campus only to access hospital records or information or to access patients or personnel who are on the hospital campus, as well as the identification of the medical staff on a hospital website or in hospital advertising, meets this “on campus” requirement.
  • The compensation is reasonably related to the provision of, or designed to facilitate directly or indirectly the delivery of, medical services to the hospital.
  • The compensation is of low value (that is, less than $36) with respect to each occurrence of the benefit (e.g., each meal given to a physician while he or she is serving patients who are hospitalized must be of low value).
  • The compensation is not determined in any manner that takes into account the volume or value of referrals or other business generated between the parties.
  • The compensation arrangement does not violate the Anti-Kickback Statute or any federal or state law or regulation governing billing or claims submission.
  • Other facilities and health care clinics (including, but not limited to, federally qualified health centers) that have bona fide medical staffs may provide compensation under this exception on the same terms and conditions applied to hospitals.

Practical Takeaways

Hospitals should update 2020 non-monetary compensation tracking tools to reflect the new non-monetary compensation limit of $423 and medical staff incidental benefits limit of $36 per occurrence. Further, hospitals should review non-monetary compensation provided in 2019 to ensure that such compensation did not exceed the 2019 limit of $416 and take any necessary corrective action to repay excess amounts within the earlier of 180 days of the overpayment or by December 31, 2019.

If you have any questions or would like any additional information about this topic, please contact:

The post 2020 Non-Monetary Compensation to Physicians (And Chance to Review 2019) appeared first on Law Firm | Health Care Law Firm in the USA | Hall Render.

Hall Render’s This Week in Washington – December 23, 2019

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Massive FY 2020 Funding Bills Loaded with Health Care-Related Provisions

Just hours before another looming government shutdown, President Trump signed a two-part spending deal funding federal agencies that include CMS, FDA and NIH, among others. The funding bill contains several significant health policy provisions. Most notably, it will repeal three taxes enacted as part of the ACA – the medical device excise tax, the annual fee on insurers known as the health insurance tax (“HIT”) and the 40 percent excise tax on high-cost health insurance plans known as the “Cadillac Tax,” which is the largest cost of the bill at more than $373 billion over 10 years. The measure also delays DSH pay cuts for another 5 months and raises the minimum age to purchase tobacco products to 21.

Several Medicare and Medicaid extenders will be funded through May 22, 2020, which are: community health centers, National Health Service Corps; Teaching Health Center Graduate Medical Education Program; Special Diabetes Program and Special Diabetes Program for Indians; Work Geographic Price Cost Index; outreach and assistance for low-income programs; quality measure endorsement and selection; State Health Insurance Assistance Programs; Area Agencies on Aging; Aging and Disability Resource Centers; Certified Community Behavioral Health Clinic demonstration, along with some additional funding for substance-use disorder treatments; spousal impoverishment protections; and the Money Follows the Person demo. The May 2020 deadline is intended to create pressure for a Memorial Day deal on a comprehensive health care package for items such as prescription drug pricing and surprise billing.

Other health-related provisions in the spending deal include laboratory payment data reform and a prohibition to stop the administration from barring “silver loading” or the practice allowing insurance plans to add costs to the silver-tiered insurance plans purchased on the insurance exchanges. The CREATES Act is also included, which will make it easier for generic drug companies to access samples of brand-name drugs. The funding bill also extends the Patient-Centered Outcomes Research center for 10 years and adds research priorities such as maternal mortality and developmental disabilities.

Despite all of these provisions, the legislation leaves Congress with a lengthy health care to-do list for next year. Here’s what wasn’t included in the spending bill that is expected to come up again 2020:

Surprise Medical Bills: Despite an agreement between HELP Chairman Sen. Lamar Alexander and House Energy and Commerce leadership, surprise billing provisions were not included in the spending package. Because the temporary Medicare and Medicaid extenders expire in May, Congress has time to work out the details on a surprise billing package that could be included in the extenders legislation.

Prescription Drug Pricing: The CREATES Act is the only drug-pricing provision included in the spending bill. Congress is working on a larger, more ambitious package to potentially pass in May 2020.

Price Transparency and Other Health Cost Legislation: Proposals related to health costs, such as in hospital/insurance contacts and pharmacy benefit manager provisions, were not included in this package but are expected to be addressed next year.

Administration Proposes Prescription Drug Import Plan

On December 18, HHS moved forward with its plan to allow states and drug makers to import lower-cost prescription drugs from other countries. Specifically, the proposed rule would allow states to pursue pilot programs allowing importation of drugs from Canada. However, the import rule excludes controlled substances, biological products and intravenous drugs. The FDA also issued draft guidance allowing drug manufacturers to import their own products and sell them under different drug codes.

So what would be the impact of this proposal? Todd Nova, the attorney who leads Hall Render’s pharma practice, answers, “this is really about the FDA taking more concrete steps to issue regulatory guidance using mechanisms already authorized by Congress. Ultimately, depending on what is contained in the final rule, it may be the case that the mere threat of importation could result in reduced pricing for common shortage drugs, decreasing the incentive for interested parties to go through the importation process. The true impact will really be seen once we see what barriers to entry are imposed in the final rule. To be sure, we anticipate both manufactures and purchasers will submit a large number of comments both in support of and in opposition to this rule. Those comments will be due by March 8, 2020 assuming the anticipated publication timeline is met.”

President Trump Impeached in the House

The House of Representatives voted to impeach President Trump before heading home for the holidays. Once House Speaker Nancy Pelosi (D-CA) transmits the articles of impeachment to the Senate, that body is expected to hold a trial in January to determine whether the president will be acquitted or removed from office. Given that Republicans control the Senate and it takes 67 votes to remove the president from office, it is very likely that he will be acquitted.

Health-Related Bills Introduced This Week

Rep. Jan Schakowsky (D-IL) introduced H.R. 5501 to amend the Public Health Service Act to establish an Office of Drug Manufacturing.

Sen. Tina Smith (D-MN) introduced S. 3126 to amend the Public Health Service Act to authorize a special behavioral health program for Indians.

Rep. Adam Kinzinger (R-IL) introduced H.R. 5481 To amend Title XVIII of the Social Security Act to restore state authority to waive for certain facilities the 35-mile rule for designating critical access hospitals under the Medicare program. Sen. Dick Durbin (D-IL) introduced S. 3103 for this purpose in the Senate.

Rep. Gus Bilirakis (R-FL) introduced H.R. 5473 to amend Title XVIII of the Social Security Act and the SUPPORT for Patients and Communities Act to provide for Medicare and Medicaid mental and behavioral health treatment through telehealth.

Sen. Mike Crapo (R-ID) introduced S. 3085 to amend Title XVIII of the Social Security Act to modernize payments for ambulatory surgical centers under the Medicare program.

Next Year in Washington

This Week in Washington’s motto for 2020 is “New Year, New You.” Congress returns on January 7, and this publication will return on Monday, January 13, reporting on the first week back as The Week in Washington. The Week in Washington will publish on Mondays and have a new format while reporting on all of the exciting health policy developments in 2020.

Readers – we wish you happy holidays and a happy new year!

For more information, please contact:

The post Hall Render’s This Week in Washington – December 23, 2019 appeared first on Law Firm | Health Care Law Firm in the USA | Hall Render.

NLRB Curtails “Quickie” Election Rules

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We previously wrote about the “quickie” election rules here. On December 13, 2019, the NLRB released new election rules that significantly dialed back several previous amendments. Under the quickie election rules, or “Old Rules,” the median number of days from petition to election had decreased by a total of approximately 15 days.[1]

Union Election Basics and the 2014 Amendments

To start the election process, the union or employees who want a union must file a petition for election with the nearest National Labor Relations Board (“NLRB”) Regional Office showing interest in the union from at least 30 percent of employees in the proposed unit. The NLRB regional office then investigates the petition,[2] after which the employer and the Union often negotiate the terms of the election in an election agreement. If the employer and the union are unable to agree on the election or its terms, depending on the subject of the disagreement, they proceed to what is called a “Representation” or “R-Case” hearing.

As a cumulative result of the “quickie” election rules, which were roughly 25 separate regulatory amendments, the median time between petition and election had gone from 38 to 23 days in the case of an election agreement, and 59 days to as low as 36 days where there was a contested hearing.[3] The changes were seen as particularly unfavorable to employers since they had far less time to prepare for elections, educate employees and handle their election-related obligations.

The New Rules

The New Rules were released in response to concerns that the time frame created under the “quickie rules” was too short for employers to meet various obligations while educating employees before the election. The New Rules addressed this issue by creating more time between the filing of the petition and the actual [contested] election. Here are some of the most significant changes:

  1. Under the New Rules, elections can be set no fewer than 20 business days after the direction of an election. The Old Rules had eliminated the pre-2014 requirement of a 25-day gap between the day the board ordered an election and the day it was conducted. The New Rules reinstate a modified version of the gap by further providing “unless a waiver is filed, the regional director will normally not schedule an election before the 20th business day after the date of the direction of election.”[4]
  2. Under the New Rules, issues of unit scope and employee eligibility should be litigated before the election. Under the Old Rules, “[d]isputes concerning individuals’ eligibility to vote or inclusion in an appropriate unit ordinarily need not [have been] litigated or resolved before an election [was] conducted,” and pre-election testimony was limited to items “relevant to the existence of a question of representation.” This is in great contrast to the New Rules, which suggest that disputes concerning unit scope, voter eligibility and supervisory status will normally be litigated and resolved by the regional director before an election is directed.
  3. The New Rules reinstate the right of the parties to submit post-hearing briefs after pre-election hearings. Under the Old Rules, post-hearing briefs were not allowed absent “special permission” from the regional director.
  4. Under the New Rules, the pre-election hearing will be scheduled to open 14 business days from the notice of hearing. Under the Old Rules, this was only 8 calendar days.
  5. Under the New Rules, the employer will now be required to post and distribute the Notice of Petition for Election within 5 business days after service of the notice of hearing. The Old Rules required posting and distribution within 2 business days.
  6. Under the New Rules, non-petitioning parties are now required to file and serve their Statement of Position within 8 business days after service of the notice of hearing, and regional directors will have the discretion to permit additional time for filing and service for a good cause. Under the Old Rules, non-petitioning parties were formerly required to file and serve the Statement of Position one day before the opening of the pre-election hearing (typically 7 calendar days after service of the notice of hearing).
  7. The New Rules require the employer to provide voter lists within 5 business days; under the Old Rules, they had only 2 business days.

Practical Takeaways

The New Rules are a considerable step back from the “vote now, decide later” framework that characterized the 2014 quickie election rules that were more focused on the need for speed in elections. Despite the New Rules being welcome news, celebrations may not yet be in order:

  • The New Rules are not expected to take effect until mid-April, 2020, some 120 days after they are scheduled to be published in the Federal Register.
  • Under the New Rules, particularly where there are contested issues, employers will have more time to educate their employees.
  • Since the NLRB issued the final rule without going through the full notice and comment rulemaking process, “pursuant to its authority to change its own representation case procedures,” the controversial changes may nevertheless be subject to further judicial review.
  • Time will tell whether the additional time before an election will significantly alter election outcomes.

If you have any questions or would like additional information, please contact:

Resources

[1] https://www.nlrb.gov/news-outreach/graphs-data/petitions-and-elections/median-days-petition-election

[2] The investigation typically entails making sure the NLRB has jurisdiction over the employer, the union is qualified to represent employees, and that there are no existing labor contracts that would bar an election.

[3] https://www.nlrb.gov/news-outreach/graphs-data/petitions-and-elections/median-days-petition-election

[4] https://www.federalregister.gov/documents/2019/12/18/2019-26920/representation-case-procedures

The post NLRB Curtails “Quickie” Election Rules appeared first on Law Firm | Health Care Law Firm in the USA | Hall Render.

Health Provider News – January 3, 2020

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NATIONAL

NORTHEAST

(Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Vermont)

CONNECTICUT

MAINE

MASSACHUSETTS

NEW HAMPSHIRE

NEW YORK

RHODE ISLAND

VERMONT

MID-ATLANTIC/EAST                                                                 

(Delaware, District of Columbia, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia)

DELAWARE

DISTRICT OF COLUMBIA

MARYLAND

NEW JERSEY

PENNSYLVANIA

VIRGINIA

WEST VIRGINIA

CENTRAL

(Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota)

IOWA

KANSAS

MINNESOTA

MISSOURI

NEBRASKA

NORTH DAKOTA

SOUTH DAKOTA

MIDWEST

(Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin)

ILLINOIS

INDIANA      

KENTUCKY

MICHIGAN

OHIO

WISCONSIN

SOUTH/SOUTHEAST

(Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee)

ALABAMA

FLORIDA

GEORGIA

MISSISSIPPI

NORTH CAROLINA

SOUTH CAROLINA

TENNESSEE

SOUTH-CENTRAL/SOUTHWEST

(Arkansas, Arizona, Louisiana, New Mexico, Oklahoma, Texas)

ARKANSAS

ARIZONA

LOUISIANA

NEW MEXICO

OKLAHOMA

TEXAS

NORTHWEST

(Alaska, Idaho, Montana, Oregon, Washington, Wyoming)

ALASKA

IDAHO

MONTANA

OREGON

WASHINGTON

WYOMING

WEST

(California, Colorado, Hawaii, Nevada, Utah)

CALIFORNIA

COLORADO

HAWAII

NEVADA

UTAH

The post Health Provider News – January 3, 2020 appeared first on Law Firm | Health Care Law Firm in the USA | Hall Render.

Failure to Encrypt Laptop and Failure to Comply with Technical Assistance from OCR Leads to $65,000 Settlement

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On December 30, 2019, the Department of Health and Human Services (“HHS”) Office for Civil Rights (“OCR”) announced a resolution agreement with an ambulance company (“Company”) covered entity that provides both emergency and nonemergency transportation services. The Company employs only 64 workers. The Company will pay $65,000 and enter into a Corrective Action Plan (“CAP”) to settle potential violations of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).

The Settlement

The Company filed a breach report with OCR in 2013 when an unencrypted laptop fell off the bumper of an ambulance. The unencrypted laptop held the protected health information (“PHI”) of 500 individuals. OCR investigated and uncovered multiple failures to comply with HIPAA’s requirements. Such failures included:

  • Lack of a risk analysis;
  • Failure to provide security training to the Company’s workers; and
  • Failure to implement policies to comply with the HIPAA Security Rule, including failure to have a HIPAA security training program.

OCR indicated that it provided technical assistance to the Company, but the Company did not implement such technical assistance.

The CAP

The Company entered into a two-year CAP with HHS. The CAP requirements include the completion of a risk analysis. The Company is also required to adopt, implement and train its workforce on adequate policies and procedures. The CAP additionally includes a requirement for the Company to install “HIPAA compliant encryption software on all of its computers.” This is notable given encryption’s status as an addressable rather than a required safeguard within the HIPAA regulations.

Complying with Technical Assistance from OCR

A covered entity’s alleged failure to comply with OCR’s technical assistance or other recommendations has been a common theme in recent HIPAA settlements. See our previous articles here and here.

Implementing technical assistance received from OCR provides one means for a covered entity to address compliance concerns to OCR’s satisfaction, sometimes in lieu of engaging in a protracted negotiation with OCR over a fine or penalty. Failure to comply with technical assistance could be interpreted by OCR as a covered entity’s disregard or inability to comply with HIPAA requirements, absent mitigating factors. When a covered entity undertakes efforts to implement such technical assistance, there may be instances where a number of individual factors could impede, delay or prevent a covered entity from complying with such technical assistance, such as a good faith misunderstanding or financial difficulties. If a covered entity determines that it is unable to comply with technical assistance from OCR, it may be worthwhile for the covered entity to seek assistance from legal counsel to communicate with OCR to find alternate solutions to address OCR’s concerns or to negotiate an alternative resolution.

Practical Takeaways

In light of this settlement, covered entities should keep the following in mind:

  • While OCR automatically investigates breaches that affect over 500 individuals, reporting any breach to OCR can trigger an investigation into a covered entity’s HIPAA compliance that can extend beyond the scope of the breach. Such investigations may uncover additional compliance issues, in addition to those that led to a breach. It is advisable for covered entities to take the time to assess HIPAA compliance more broadly whenever a reportable breach occurs in order to address issues, mitigate harm and prevent further breaches.
  • Encryption, especially encryption of portable devices like laptops, flash drives and cellular phones, can help prevent the compromise of PHI. This is especially important with devices that contain or connect to systems containing enormous amounts of PHI. Encryption is an “addressable” standard and not technically a “required” standard under the HIPAA Security Rule. This means that a covered entity must implement encryption or an equivalent alternative measure whenever reasonable and appropriate. If a covered entity determines that encryption is not reasonable or appropriate, it must document: the determination and its reasons for such determination; whether an alternative safeguard was implemented; and if not, why such alternative safeguard was not implemented. This documentation should include discussion of the factors that were considered and the results of the risk assessment on which the decision was based. Additionally, covered entities should confirm that lack of encryption does not impact any cybersecurity insurance coverage.
  • A covered entity’s workforce is the front line for preventing, identifying and addressing security incidents, especially when they are related to lost or stolen devices. A security awareness and training program should be specifically tailored to the covered entity’s security framework, business operations and identified risk areas.
  • A risk analysis should be conducted at least annually, and a risk management plan based on the risk analysis results should be drafted, implemented and monitored.
  • Violations of the HIPAA Security Rule may give rise to HIPAA privacy breaches. Security policies and procedures should be in place, available to appropriate workforce members and reviewed and updated at least annually, particularly to address items identified as part of the annual risk analysis and risk management plan.

If you have any questions or would like additional information about this topic, please contact:

For more information on Hall Render’s HIPAA, Privacy & Security services, click here.

The post Failure to Encrypt Laptop and Failure to Comply with Technical Assistance from OCR Leads to $65,000 Settlement appeared first on Law Firm | Health Care Law Firm in the USA | Hall Render.

Health Provider News – January 10, 2020

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NATIONAL

NORTHEAST

(Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Vermont)

CONNECTICUT

MAINE

MASSACHUSETTS

NEW HAMPSHIRE

NEW YORK

RHODE ISLAND

VERMONT

MID-ATLANTIC/EAST                                                                 

(Delaware, District of Columbia, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia)

DELAWARE

DISTRICT OF COLUMBIA

MARYLAND

NEW JERSEY

PENNSYLVANIA

VIRGINIA

WEST VIRGINIA

CENTRAL

(Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota)

IOWA

KANSAS

MINNESOTA

MISSOURI

NEBRASKA

NORTH DAKOTA

SOUTH DAKOTA

MIDWEST

(Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin)

ILLINOIS

INDIANA      

KENTUCKY

MICHIGAN

OHIO

WISCONSIN

SOUTH/SOUTHEAST

(Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee)

ALABAMA

FLORIDA

GEORGIA

MISSISSIPPI

NORTH CAROLINA

SOUTH CAROLINA

TENNESSEE

SOUTH-CENTRAL/SOUTHWEST

(Arkansas, Arizona, Louisiana, New Mexico, Oklahoma, Texas)

ARKANSAS

ARIZONA

LOUISIANA

NEW MEXICO

OKLAHOMA

TEXAS

NORTHWEST

(Alaska, Idaho, Montana, Oregon, Washington, Wyoming)

IDAHO

MONTANA

OREGON

WASHINGTON

WYOMING

WEST

(California, Colorado, Hawaii, Nevada, Utah)

CALIFORNIA

COLORADO

HAWAII

NEVADA

UTAH

The post Health Provider News – January 10, 2020 appeared first on Law Firm | Health Care Law Firm in the USA | Hall Render.

Texas v. United States – House of Representatives and Defender States Petition Supreme Court for Review: Will Obamacare Fall?

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On December 18, 2019, in a 2-1 decision, the U.S. Court of Appeals for the Fifth Circuit held that the plaintiffs in Texas v. United States[1] had standing to bring a case challenging a provision of the Affordable Care Act (“ACA”) known as the individual mandate (26 U.S.C. §5000A) and that the individual mandate requiring most U.S. citizens to purchase health insurance (i.e., minimal essential coverage) or pay a penalty is unconstitutional.[2] As to the District Court for the Northern District of Texas holding that the entire ACA must fall because the individual mandate is inseverable from the remainder of the statute, the Fifth Circuit declined to uphold this portion of the district court’s decision, having concluded that the district court’s “severability analysis” was incomplete.[3] The Fifth Circuit remanded the case back to the district court for a more careful and thorough analysis addressing why the remainder of the ACA is inseverable from the individual mandate.

On January 3, 2020, the U.S. House of Representatives, having intervened in Texas v. United States on February 14, 2019, and 21 appellant Democratic states (“Petitioners”) filed a petition for a writ of certiorari with the Supreme Court asking the Supreme Court to review the case. The Petitioners also requested expedited review of the certiorari petition as well as expedited merits briefing and oral argument, if certiorari is granted. The Petitioners hope for resolution of the case in 2020 given the high stakes nature of a  lower court decision that would overturn the entire ACA. In a quick response on January 6, 2020, the Supreme Court directed the Trump administration and the states opposed to the ACA to file a response to the request for expedited review with the Supreme Court by Friday, January 10, 2020. [4] The fate of the ACA hangs in the balance.

Background

Texas v. United States – Another Challenge to the ACA

On February 26, 2018, multiple states filed a lawsuit challenging the ACA in the District Court for the Northern District of Texas. This lawsuit was filed two months after Congress passed the Tax Cuts and Jobs Act of 2017 (“TCJA”)[5], and named the United States, the Department of Health and Human Services (“HHS”), Alex Azar as the Secretary of HHS, and the Internal Revenue Service along with its Acting Commissioner as defendants. Later, the eighteen state plaintiffs were joined by two individual plaintiffs.

The plaintiffs in Texas v. United States reasoned that since the penalty for not purchasing health insurance pursuant to Section 5000A was now zero, the individual mandate no longer could be considered constitutional as an exercise of Congress’s authority to tax and spend, as articulated by Chief Justice John Roberts in National Federation of Independent Businesses v. Sebelius[6] (“NFIB”) because the penalty no longer produced revenue for the federal government – an essential feature of a tax. Nor, the plaintiffs contended, was the individual mandate sustainable under the Interstate Commerce Clause, which gives Congress the power to regulate commerce. And, since the remainder of the ACA relied on the existence of the individual mandate as an essential feature of the ACA, the individual mandate was inseverable from the remainder of the ACA; accordingly, if the individual mandate was no longer valid, the ACA must fall with it.

On December 14, 2018, the District Court for the Northern District of Texas issued its opinion ruling in favor of the plaintiffs. The court held that: (1) the individual plaintiffs had standing to file suit because the individual mandate compelled them to buy insurance (an injury) even though they would not have been penalized had they failed to do so; (2) setting the shared responsibility payment to zero dollars rendered the individual mandate unconstitutional because the payment could no longer properly be viewed as a tax pursuant to Congress’s taxing power; and (3) the unconstitutional individual mandate could not be severed from the remainder of the ACA. The court granted the plaintiffs’ claim for declaratory relief, declaring the individual mandate to be unconstitutional and the remaining portions of the ACA inseverable from the individual mandate and therefore invalid. This decision effectively struck down the ACA. The district court stayed judgment pending appeal.

The Appeal

In January 2019, Democratic attorneys general who had intervened in the lower court case in May 2018 and the Department of Justice appealed the Texas trial court decision to the Fifth Circuit. [7] Additional states and the House of Representatives moved to intervene to defend the ACA. A three-judge panel of the Fifth Circuit considered the following questions:

  1. Whether there was a “live case or controversy” before the court as required by Article III of the Constitution, even though the federal defendants had conceded many aspects of the dispute;
  2. Whether the plaintiffs, intervenor defendant states, and the House of Representatives had standing to bring the appeal;
  3. Whether the individual mandate was constitutional given that the associated penalty for failing to purchase minimum essential coverage (i.e., health insurance) was amended to zero dollars by the TJCA; and
  4. Whether the individual mandate, if determined to be unconstitutional, could be severed from the remainder of the ACA or whether other provisions of the ACA also would be invalidated.

The Fifth Circuit issued its opinion on December 18, 2019 and revised it on December 20, 2019. It held the following:

  1. There is a live case or controversy because the intervenor defendant states had standing to appeal (they would lose funding under the ACA if it were struck down as standing requires a showing of “injury, causation, and redressability”[8]), and even if they didn’t, there was a live case or controversy between the plaintiffs and the federal defendants.
  2. The individual plaintiffs had standing to challenge the ACA-the individual mandate injured them by requiring them to buy insurance they didn’t want (even though there would have been no monetary penalty if they declined to comply with the law). The mandate also injured the state plaintiffs by increasing their costs of complying with the reporting requirements that relate to the individual mandate. The matter of the U.S. House of Representatives’ standing to intervene was questionable but was not necessary to resolve as other parties in the case were deemed to have standing and sought the same “ultimate relief” as the House.[9]
  3. The individual mandate is unconstitutional because it cannot be viewed as a tax under Congress’s spend and tax powers as the penalty for noncompliance is zero. Related, the shared responsibility payment no longer possesses the “essential feature of any tax” because it does not produce revenue for the government.[10] No other provision of the Constitution supports the individual mandate.[11]
  4. The case must be remanded to the district court for additional consideration and analysis of the severability question. Specifically, the district court must explain what provisions of the ACA are inseverable from the individual mandate. The Fifth Circuit opined that the district court opinion did not explain with sufficient precision how particular provisions of the extensive and complex ACA are “inextricably linked to the individual mandate”[12] and “rise or fall on the constitutionality of the individual mandate.” [13] The district court was also tasked with considering the federal defendants’ new suggestions for addressing the appropriate scope of relief in this case. For example, the federal defendants suggested enjoining enforcement of only those provisions of the ACA that injure the plaintiffs or declaring the ACA unconstitutional only as to the plaintiff states and the two individual plaintiffs.

Analysis and Practical Takeaways

The ACA will remain law while the case is either reconsidered in the District Court for the Northern District of Texas or reviewed by the Supreme Court if the Supreme Court agrees to grant certiorari. If the Supreme Court agrees to hear the case, it is possible the fate of the ACA will be decided in the Supreme Court’s current term. Otherwise, this case may not be resolved for some time. In either case, the constitutional challenge to a significant piece of legislation will be certain to garner attention in this presidential election year.

Texas v. United States creates uncertainty as to whether any or all of the ACA will be struck down, which, in turn, creates operational risk for the entire health care industry, including hospitals. For example, if the ACA were struck down in its entirety, there would be far-reaching effects:

  • Lost Insurance Coverage. Roughly 21 million people could lose their insurance.[14] This includes millions who purchase health insurance through the health care exchanges and millions who are insured as a result of the Medicaid expansion established by the ACA. This, in turn, could negatively affect, among other health care providers, hospitals that, likely, would have many more uninsured and underinsured patients presenting to their emergency rooms for treatment resulting in a rise in uncompensated care and a significant financial strain on hospitals.
  • Heavier Burden for States. States that expanded Medicaid under the ACA would have to decide whether they could afford to continue the expansion without the federal subsidies for Medicaid expansion provided by the ACA. If states walked back their Medicaid expansion, low-income families could lose their Medicaid coverage. An election to maintain expanded Medicaid coverage, could potentially increase state taxes to make up for the federal subsidy shortfall.
  • Insurance Discrimination. Roughly 133 million Americans with pre-existing conditions would lose important protections from insurance discrimination. Without statutory protections, and with the likelihood that many healthier Americans will choose to forgo health insurance altogether, patients with chronic illnesses might not be able to afford insurance due to significant increases in health plan costs. Further, patients with pre-existing conditions could be denied coverage for certain health care services. Again, loss of health coverage could severely impact hospitals and other health care providers because they will be providing more unreimbursed care and their patients will be sicker.[15]
  • Removes Minimum Health Benefits. The ACA established essential health benefits that guarantee a minimum package of important benefits. Without the ACA, the robustness of health benefit plans would diminish and overall population health would be affected.
  • Impact on Native American Communities. The Indian Health Care Improvement Act, which provides the legal basis for the provision of health care to American Indians and Alaska Natives, was made permanent as part of the ACA. Theoretically, this authority would fold with the ACA.[16]
  • Stifles Innovation. The Center for Medicare and Medicaid Innovation (“CMMI”), which tests innovative health care programs, was created as part of the ACA. Theoretically, the CMMI would go away along with pilot programs and health care delivery models that augment focus on quality and safety in health care delivery.[17]
  • Changes Fraud and Abuse Protections. Fraud and abuse provisions incorporated in the ACA would be affected. For example, the Physician Payments Sunshine Act[18] requires drug and medical products manufacturers to disclose to the Centers for Medicare & Medicaid Services, gifts and payments to physicians and teaching hospitals as well as disclosure of physician ownership or investment interests in manufacturers and group purchasing organizations.
  • Effect on Medicare Trust Fund. The Medicare Hospital Insurance Trust Fund might lose several years of fiscal solvency if the ACA falls.[19]
  • Contract Disruption and Increased Litigation Costs. If the ACA is invalidated, agreements between health care providers and payors could be affected. Many of these agreements allow termination and amendment of contractual relationships if federal law changes. Payors and providers could quickly find themselves litigating insurance coverage disputes to determine whether payors would be required to continue paying for previously authorized and approved long-term treatment plans of patients who lose coverage as a result of ACA invalidation.

Hall Render will continue to follow developments on Texas v. United States. Stay tuned for further updates.

If you have any questions or would like any additional information about this topic, please contact:

Resources

[1] Texas, et al. v. United States, et al., No. 4:18-cv-00167 (U.S. Dist., N.D. Tex. Dec. 14, 2018).

[2] State of Texas et al. v. United States, et al., No. 19-10011 (5th Cir. Dec. 18, 2019 as revised Dec. 20, 2019)

[3] Id. at p.56

[4] Harper Neidig, Supreme Court sets Friday Deadline for Responses in Obamacare Case, The Hill, Jan. 6, 2020 @ https://thehill.com/regulation/court-battles/477012-supreme-court-sets-friday-deadline-for-responses-in-obamacare-case (last visited on Jan. 8, 2020).

[5] The TCJA effectively eliminated the individual mandate or “shared responsibility payment” by amending 26 U.S.C. §5000A to set the penalty at zero dollars.

[6] National Federation of Independent Businesses v. Sebelius, 567 U.S. 519 (2012).

[7] Of note, since the appeal to the 5th Circuit, the federal defendants have vacillated on the severability issue. After contending in the district court that only certain provisions were inseverable from the individual mandate, they later asserted in an opening brief that all of the ACA is inseverable. On appeal, the federal defendants stated the court should not enjoin enforcement of the ACA, or, alternatively, the district court’s decision should be affirmed “except insofar as it purports to extend relief to ACA provisions that are unnecessary to remedy plaintiffs’ injuries.” State of Texas et al. v. United States, et al., No. 19-10011 (5th Cir. Dec. 18, 2019 as revised Dec. 20, 2019) at p.11.

[8] State of Texas et al. v. United States, et al., No. 19-10011 (5th Cir. Dec. 18, 2019 as revised Dec. 20, 2019) at p.12 and p.14.

[9] Id. at p.16.

[10] Id. at p.38.

[11]Id. at p.34. Under NFIB referenced by the Fifth Circuit, the individual mandate is not supported by the Interstate Commerce Clause because that clause gives Congress the “power to regulate commerce, not compel it.” Nor could the individual mandate be sustained under the Constitution’s Necessary and Proper Clause because the individual mandate was not “proper” because it expanded federal power. Id. at p.35.

[12] Id. at p.56.

[13] Id. at p.51.

[14] Reed Abelson, Abby Goodnough and Robert Pear What Happens if Obamacare is Struck Down? N. Y. Times, Mar. 26, 2019 updated Jul. 9, 2019) found at: https://www.nytimes.com/2019/03/26/health/obamacare-trump-health.html (last visited on 1/8/2020)

[15] Id.

[16] https://www.ihs.gov/ihcia/

[17] Juliette Cubanski, Tricia Neuman, Gretchen Jacobson and Cristina Boccuti, What Are the Implications of Repealing the Affordable Care Act for Medicare Spending and Beneficiaries? (Dec. 13, 2016) @ https://www.kff.org/health-reform/issue-brief/what-are-the-implications-of-repealing-the-affordable-care-act-for-medicare-spending-and-beneficiaries/

[18] Section 6002 of the Affordable Care Act (P.L. 111-148 (Mar. 23, 2010)).

[19]Cubanski et al., supra n.16.

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Do-It-Yourself Legal Review Part 2: A Guide for Helping Businesses Evaluate Software Terms

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In part 1 of this series about negotiating procurement deals, we talked about the parties to the agreement and how that easily overlooked issue can cause problems such as unlicensed use of the software being acquired. Other basic issues can cause deals to go sideways. This post addresses the first issues that an organization’s business team is likely to discuss with its vendors, which may also be under-defined in the agreement.

You might not even think about them, but they are the heart of the contract that you will ultimately sign: what are you buying, when are you going to get it, when are you going to pay for it and how much are you paying? If your agreement is clear about those issues, your company is going to avoid some of the most significant problems that can arise in procurement deals.

What are you buying?

The buyer who has spent a lot of time with the vendor’s salesperson may be taking this element for granted. After all, the salesperson may have given several product demonstrations, sent numerous emails and repeatedly called the buyer to talk about the deal. So when the buyer is ready to pull the trigger, seeing the common name of the product (Generic SaaS or Software) or service (Branded Threat Assessment Services) that you’ve discussed for months may be all that is needed for you to understand what you expect the vendor to deliver. Will the judge with no experience in your industry share that understanding if something goes wrong with the deal? Perhaps not.

The judge is going to look to the terms of your agreement to evaluate whether the vendor delivered what it was required to deliver. Since many parts of vendors form contracts work to eliminate everything the salesperson said from that evaluation, they need to be reviewed holistically. Consider the near-ubiquitous “AS-IS, WITH ALL FAULTS” disclaimer that many software agreements contain, or disclaimers about not meeting customer requirements, or integration clauses specifying that the contract is the entire agreement, superseding any prior discussions.

Does the common name of the product seem sufficient in light of these concerns? Probably not. Health care organizations can be left paying for software products that do not meet their needs, sometimes for significant amounts. For example, one medical group was left footing an $800,000 bill for a failed software integration when the agreement contained no commitment about the product working seamlessly with its patient management system, as the salesperson had allegedly promised.[1]

When are you going to get it?

Vendors may have very different ideas about delivery timing than their salespeople may lead their customers to believe. Does the agreement say anything about delivery? Is there an implementation period before you’ll be able to put the product into use? Whether there’s a simple disclosure of login information to start using the product or a complex implementation that the vendor needs to lead, it’s perfectly fair to put a no-later-than date in the agreement about when the product must be live.

For complex implementations, the vendor will often demur on giving such a commitment, citing all the things that it needs from the customer in order to complete the project. But that’s a discussion the parties need to be having before signing anyway; if vendors require customers to provide any resources to get the product working, they should be prepared to describe that assistance in the agreement. Once the customer has agreed to provide that particular assistance, is there a good reason to omit that deadline for completion in the agreement?

When are you going to pay for it (and how much)?

The total cost of the product or service often commands the bulk of the customer’s attention. However, the savings that you think you’re getting may evaporate if there are delivery problems. For example, if the product is expected to cut costs once implemented, but the go-live date arrives months later than expected, how much did the delay cost? Maybe there’s a prior agreement that you had to renew because the new product wasn’t delivered on time, or maybe you only had to keep paying for the existing agreement until the new product went live.

Which vendor do you think is going to be more motivated to hit your timelines: the one you’ve paid 100 percent upon signing your new agreement, or the one who has some or all of its fees withheld until completion? And which party is bearing the risk of failure? If final payment is due on completion or, say, 90 days from signing, “whichever comes first,” there’s a different incentive structure than if payment is due on the later of those two dates.

Software often requires separate maintenance and support fees in connection with a license agreement, and those fees may be just as significant as the up-front costs. Does the commencement date for those fees align with the signing of the agreement or the successful delivery of the software? Again, consider how the payment structure allocates the risk of a failed or delayed implementation.

Practical Takeaways

Your approach to the issues discussed in this post may vary across deals. Communicating your intent about them to your attorney will not only make your legal reviews more efficient, but also help to avoid disputes with your vendors.

For more information on this topic, please contact Jon Boguth at (248) 457-7845 or jboguth@hallrender.com or your regular Hall Render attorney.

For more information on Hall Render’s Health IT services, click here.

Resources

[1] See Amicas, Inc. v. GMG Health Sys., Ltd., 676 F.3d 227, 229 (1st Cir. 2012).

 

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Hall Render’s The Week in Washington – January 13, 2020

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Welcome to the new The Week in Washington! This newsletter will publish on Monday to review the past week’s news for Congress and the administration, as well as provide a preview for the upcoming week.

Health Care on the Hill – What to Expect in 2020

Since 2020 is an election year, Congress traditionally does not take up much in the way of controversial legislation. However, with health care polling as a top issue among voters, lawmakers are feeling political pressure to deliver legislative action on some health care issues. There is a looming health care to-do list, yet a very narrow window to make progress. Last year’s spending deal extended several health programs, known as Medicare extenders, through May 22, 2020. This May deadline was intentionally created to pressure Congress for a Memorial Day deal on a comprehensive health care package that includes items such as the aforementioned Medicare extenders, prescription drug pricing and surprise medical billing.

For surprise billing, the two House committees working on the issue did not make progress over the holiday break and continue to appear on opposite ends of the issue. In December, Senate Health, Education, Labor, and Pensions (“HELP”) Chairman Lamar Alexander (R-TN) and the House Energy & Commerce Committee negotiated a surprise billing fix. The measure would set benchmark payment rates and create a baseball-style arbitration process that would allow providers to appeal claims over $750. However, despite this bipartisan, bicameral agreement, the legislation was not put in the year-end spending package because lawmakers could not come to a consensus on the proper mechanism to address the problem.

Furthermore, other committees with jurisdiction over health care have also become engaged in the debate. The House Ways and Means Committee leadership is still developing a proposal but has indicated the approach will be different from the HELP/Energy and Commerce package. Ways and Means Ranking member Kevin Brady (R-TX) said he and Chairman Richie Neal (D-MA) want their own bill to avoid “government rate-setting” and to build broad agreement on the issue. While there is not currently an agreed-upon mechanism, supporters still hope that something can be passed this year. Many congressional leaders, such as Chairman Alexander and House Speaker Nancy Pelosi (D-CA), have stressed that surprise billing is the top 2020 priority and that they will find a way to get it done. However, many stakeholders are skeptical that House and Senate leadership will want to force their members to vote on legislation that divides powerful industries in the middle of a campaign season.

Prescription drug pricing legislation has an even lower probability of passing than surprise billing. Neither the prescription drug bill from the House majority nor the bipartisan proposal in the Senate Finance Committee has a path forward in a divided Congress. However, provisions in the measures will provide starting points for negotiations on drug pricing. The House majority is insisting that any major drug price deal authorize the government to directly negotiate drug prices, which is a non-starter for many Senate Republicans. Come May, Congress is likely to pass another Medicare extenders packaged and table surprise billing and prescription drug pricing until after the election.

New Vertical Merger Guidelines Released by the DOJ and the FTC

Last Friday, the Department of Justice and Federal Trade Commission issued a proposal for new guidelines governing vertical mergers, or combinations of companies that aren’t in direct competition but are in the same supply chain. The proposed new guidelines cover topics including how vertical mergers can harm competition and how those harms will be analyzed, as well as the competitive benefits attributed to such tie-ups. Comments on the draft guidelines can be emailed to verticalmergerguidelines@ftc.gov and verticalmergerguidelines@usdoj.gov and must be received no later than February 11, 2020.

Hall Render’s antitrust team will be releasing a more comprehensive analysis on this proposal soon.

Health-Related Bills Introduced This Week

Rep. Gregory Murphy (R-NC) introduced H.R. 5582 to amend Titles XIX and XXI of the Social Security Act to require hospitals and certain other participating providers under Medicaid or the Children’s Health Insurance Program to disclose the provider’s policy on parental consent for the provision, withdrawal or denial of life-sustaining treatment for minors.

Rep. Lauren Underwood (D-IL) introduced H.R 5575, the Primary and Behavioral Health Care Access Act.

Sen. Cory Booker (D-NJ) introduced S. 3169 to direct the Secretary of Health and Human Services to carry out a Health in All Policies Demonstration Project.

Sen. Elizabeth Warren (D-MA) introduced S. 3163 to authorize the collection of supplemental payments to increase congressional investments in medical research.

The Week Ahead

  • On Tuesday, the House Energy and Commerce Oversight and Investigations subcommittee holds a hearing on “A Public Health Emergency: State Efforts to Curb the Opioid Crisis.”
  • On Wednesday, the House Energy and Commerce Health subcommittee holds a hearing on “Cannabis Policies for the New Decade.” The hearing will consider a half-dozen marijuana bills, ranging from medical research proposals to comprehensive legalization blueprints.
  • Starting today, the 38th Annual J.P. Morgan Healthcare Conference will gather health care officials, investors, executives and more than 9,000 other attendees in San Francisco to discuss a wide variety of health care priorities such as innovative technology, data privacy and security, price transparency and data sharing.

Congressional Fun Fact: Hill of Beans

Since 1904, the House of Representatives cafeterias have served bean soup on a daily basis with one exception. Upon finding that it had been eliminated from the menu on one hot day, Rep. Joseph Cannon (R-IL), who served as Speaker from 1903 to 1911, declared that bean soup should be served every day regardless of the weather… and it still is.

For more information, please contact:

For more information on Hall Render’s Federal Legislative & Regulatory Advocacy services, click here.

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DOJ’S 2019 False Claims Act Recoveries Total More Than $3 Billion

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On January 9, 2020, the Department of Justice (“DOJ”) announced that it collected over $3 billion in settlements and judgments under the False Claims Act (“FCA”) in the federal fiscal year 2019. The FCA has historically been the government’s primary tool for combatting perceived fraud, waste and abuse in the health care system, and 2019 was no different. Health care cases accounted for $2.6 billion—nearly 90 percent of total recoveries. This is the tenth consecutive year that the DOJ’s FCA health care recoveries exceeded $2 billion. The DOJ and whistleblowers brought these cases against a variety of health care providers and suppliers including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories and physicians.

The largest health care settlements involved pharmaceutical companies. In one case, a drug manufacturer paid $195 million to settle civil allegations that it paid kickbacks to induce physicians and nurse practitioners to prescribe its drug to patients. The government alleged that the company paid kickbacks in the form of sham speaker arrangements, providing lavish meals and entertainment and setting up jobs for prescribers’ friends and relatives. In another case, the government received $500 million from the maker of an opioid addiction treatment. The payment resolved civil allegations that the maker promoted its drug inappropriately, including by making false or misleading claims that one formulation of the drug was less susceptible to diversion, abuse and pediatric exposure than other similar drugs. The DOJ also settled with seven drug manufacturers who paid a combined total of $624 million to resolve claims that they paid copays for Medicare and Medicaid patients through purportedly independent foundations.

The DOJ settled a large number of claims against health care providers, including physician clinics, nursing facilities, hospitals and health systems. In several of these settlements, the DOJ pursued individuals as well as corporations. In one case, owners of a group of companies that operates orthopedic clinics entered into individual settlements which, when combined with the corporate settlement, totaled $7.1 million. The companies and their owners further agreed to a five-year corporate integrity agreement that requires them to undertake extensive compliance efforts.

Whistleblower cases continued to be a major factor in the DOJ’s enforcement efforts. 633 new qui tam claims were filed in 2019, and the DOJ recovered more than $2.1 billion from those and existing whistleblower actions.

Practical Takeaways

Health care enforcement continues to be a profitable pursuit for the federal government. From 2016 through 2018 (the most recent period for which data is available), the Office of Inspector General reports that it collected $4.00 for every $1.00 spent on enforcement efforts.

In this environment, developing and implementing an effective compliance program has become a standard expectation within the health care industry. While even the best program cannot prevent all violations, a tailored, proactive compliance program is more likely to identify issues early. Additionally, the existence of such a program is a positive factor when negotiating with the government, should that become necessary. Finally, if any significant compliance issues are detected through your own compliance program activities, self-reporting is usually a much-preferred position as opposed to being a target in another one of these government enforcement actions.

Hall Render attorneys have years of experience in providing practical advice to all types of health care entities. For help understanding your legal obligations, designing a compliance program that is right for your organization or investigating a potential issue, please contact:

For more information on Hall Render’s Compliance Counsel services, click here.

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Congress Delays Laboratory Data Reporting Requirements Until 2021

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Under the Protecting Access to Medicare Act (“PAMA”), certain laboratories must report private payor data to the Centers for Medicare & Medicaid Services (“CMS”). This data is in turn used by CMS to establish a single, national Clinical Laboratory Fee Schedule. For a more detailed discussion on PAMA and the types of laboratories that are required to report see our previous article available here.

Laboratories that qualify as “applicable laboratories” under PAMA are required to report private payor data every three years and were supposed to report data between January 1 and March 31, 2020. However, Section 105(a)(1) of the Further Consolidated Appropriations Act of 2020 delayed the reporting requirements by one year. Accordingly, applicable laboratories must now report private payor data between January 1 and March 31, 2021. It is important to note that although the data reporting period was delayed by one year, labs must still report data from the original data collection period of January 1 through June 30, 2019. Thereafter, data reporting will resume on a three-year cycle, beginning in 2024.

CMS issued updated instructions on the PAMA reporting requirements with the revised data, which is available here.

If you have questions or would like additional information about this topic, please contact:

For more information about Hall Render’s Reimbursement & Payment Practices services, click here.

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Health Provider News – January 17, 2020

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NATIONAL

NORTHEAST

(Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Vermont)

CONNECTICUT

MAINE

MASSACHUSETTS

NEW HAMPSHIRE

NEW YORK

RHODE ISLAND

VERMONT

MID-ATLANTIC/EAST                                                                 

(Delaware, District of Columbia, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia)

DELAWARE

DISTRICT OF COLUMBIA

MARYLAND

NEW JERSEY

PENNSYLVANIA

VIRGINIA

WEST VIRGINIA

CENTRAL

(Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota)

IOWA

KANSAS

MINNESOTA

MISSOURI

NEBRASKA

NORTH DAKOTA

SOUTH DAKOTA

MIDWEST

(Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin)

ILLINOIS

INDIANA      

KENTUCKY

MICHIGAN

OHIO

WISCONSIN

SOUTH/SOUTHEAST

(Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee)

ALABAMA

FLORIDA

GEORGIA

MISSISSIPPI

NORTH CAROLINA

SOUTH CAROLINA

TENNESSEE

SOUTH-CENTRAL/SOUTHWEST

(Arkansas, Arizona, Louisiana, New Mexico, Oklahoma, Texas)

ARKANSAS

ARIZONA

LOUISIANA

NEW MEXICO

OKLAHOMA

TEXAS

NORTHWEST

(Alaska, Idaho, Montana, Oregon, Washington, Wyoming)

ALASKA

IDAHO

MONTANA

OREGON

WASHINGTON

WYOMING

WEST

(California, Colorado, Hawaii, Nevada, Utah)

CALIFORNIA

COLORADO

HAWAII

NEVADA

UTAH

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Informational Bulletin from CMS Addresses Best Practices to Avoid 340B Duplicate Discounts

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On January 8, 2020, the Centers for Medicare & Medicaid Services (“CMS”) released an Informational Bulletin titled “Best Practices for Avoiding 340B Duplicate Discounts in Medicaid” (“Bulletin”). The Bulletin outlines best practices that CMS encourages state Medicaid agencies to consider to avoid the situation where a manufacturer provides both a Medicaid drug rebate and a discount under the 340B drug discount program (“340B Program”), commonly referred to as a “duplicate discount.”

The prohibition on duplicate discounts has always been part of the 340B Program. The increasing number of Medicaid managed care beneficiaries and the volume of prescriptions filled at 340B Program covered entity (“Covered Entity”) contract pharmacies, however, has made preventing duplicate discount billing progressively more difficult. Unfortunately, the size, scope and complexity of the 340B Program have prevented policymakers and the industry from finding a single workable solution to the duplicate discount problem.

The Bulletin is the latest effort by CMS and the Health Resources & Services Administration (“HRSA”) to provide potential solutions and best practices for states to consider to avoid duplicate discounts. While not all of the recommended best practices are new, and the Bulletin is not legally binding, it provides insight to 340B Program stakeholders regarding CMS’s 340B Program priorities and Covered Entities should assume that many state Medicaid agencies will eventually implement some or all of the recommendations.

In anticipation, Covered Entities should, at a minimum, review existing policies and operational procedures for preventing duplicate discounts and begin preparing for increased scrutiny by state Medicaid agencies, manufacturers, Medicaid managed care organizations and third-party auditors.

Background and the Bulletin

State Medicaid agencies are prohibited from billing manufacturers for Medicaid rebates for drugs dispensed to Medicaid patients that were already discounted under the 340B Program. In order to avoid claiming these duplicate discounts, state Medicaid agencies must be able to identify claims that include 340B drugs and exclude them from the utilization data submitted to drug manufacturers.

To help states determine whether a 340B drug was dispensed to a Medicaid beneficiary, HRSA established the Medicaid Exclusion File (“MEF”) for Medicaid fee-for-service (“FFS”). The MEF lists Covered Entities that elected to dispense 340B-purchased drugs to Medicaid patients, along with their National Provider Identification (“NPI”) numbers and Medicaid billing number. The use of the MEF to identify 340B drug claims, however, is imperfect and state Medicaid agencies are not required to use the MEF. In addition, the MEF is limited to Medicaid FFS.

State Medicaid agencies have attempted to use a variety of other mechanisms to avoid duplicate discounts. These include requiring certain modifiers on claims, using unique bank identification numbers (“BINs”) and processor control numbers (“PCNs”) and shifting Medicaid pharmacy benefits entirely to the Medicaid FFS system.

The Department of Health and Human Services Office of Inspector General (“OIG”) issued multiple reports[1] highlighting the various state Medicaid agency oversight activities and methods and the continued risk of duplicate discounts despite these efforts. A 2017 OIG report, for instance, found that the State of Wisconsin’s Department of Health Services (“DHS”) failed to properly invoice manufacturers for rebates of approximately $3 million in physician-administered drugs, resulting in improper reimbursement from federal funds over three years.[2] Specifically, the report stated that the Wisconsin DHS failed to invoice manufacturer rebates on single-source drugs and top-20 multiple-source drugs.

In response to these challenges and the OIG reports encouraging CMS to show state Medicaid agencies ways to avoid duplicate discounts, CMS developed the Bulletin outlining seven regulatory strategies for state Medicaid agencies to consider when developing their own policies. The strategies are not all new. Many of the strategies, such as the use of the MEF, represent approaches that state Medicaid agencies currently use. Below is the complete list of specific strategies recommended in the Bulletin:

  1. State Medicaid agencies should consider referring to the MEF to organize information about the Medicaid Drug Rebate Program (“MDRP”) submissions to drug manufacturers and which Covered Entities billed for 340B drugs;
  2. State Medicaid agencies should consider entering written, three-party agreements between the state Medicaid agency, a Covered Entity and its contract pharmacy to govern the retrospective identification of 340B Program claims. In such cases, the Covered Entity must submit a copy of the agreement to HRSA for inclusion in Covered Entity reports;
  3. State Medicaid agencies should consider entering a state plan amendment (“SPA”) to limit Covered Entities’ and contract pharmacies’ abilities to use 340B Program-purchased drugs to treat Medicaid beneficiaries. SPAs may help resolve situations that can result in duplicate discounts by restricting the entities that may distribute 340B drugs or requiring the reporting of certain 340B drug distribution information;
  4. State Medicaid agencies should consider using 340B Program claims identifiers such as submission clarification codes, state-specific modifiers or physician-administered drug billing modifiers to prospectively identify 340B Program claims;
  5. State Medicaid agencies should consider implementing processes and procedures to exclude 340B Program claims submitted to Medicaid managed care organizations from state Medicaid agency’s MDRP rebate requests;
  6. State Medicaid agencies should consider providing additional claims-level data to drug manufacturers that may facilitate rebate 340B Program claim identification; and
  7. State Medicaid agencies should consider working with pharmacy benefit managers (“PBMs”) to require Medicaid managed care organizations to use specific BIN/PCN combinations unique to Medicaid products. This would help facilitate the identification and removal of such claims from state Medicaid agency’s MDRP rebate requests since states can more quickly determine whether a 340B drug was dispensed to a Medicaid beneficiary at a Covered Entity location.

Practical Takeaways

The Bulletin is not legally binding on the 340B Program or state Medicaid programs. Rather, it serves as guidance for state Medicaid agencies given their responsibility and role with respect to ensuring mechanisms that prevent duplicate discounts. It also demonstrates that CMS and manufacturers are more attuned to duplicate discounts in the Medicaid managed care space. As a result, 340B and Medicaid managed care contracting staff should be aware of the potential for increased scrutiny regarding Medicaid managed care plans and 340B Program duplicate discounts.

Adopting certain proposed strategies could significantly impact Covered Entities and contract pharmacies, as well as the corresponding 340B Program savings realized. Of particular concern to Covered Entities, for instance, is language in the Bulletin stating that state Medicaid agencies could “limit the ability of some or all of the covered entities and/or contract pharmacies in the state to use 340B-purchased drugs for Medicaid beneficiaries” via the SPA process.

Since the implications could extend to Medicaid managed care plans, Covered Entity and contract pharmacy advocacy team members should be aware of this focus and should look for opportunities to work with state Medicaid agencies in evaluating whether to adopt one or more of these proposed strategies.

If you have any questions or would like additional information about this topic, please contact:

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FTC, DOJ Release Draft Vertical Merger Guidelines

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On January 10, 2020, the Federal Trade Commission (“FTC”) and Antitrust Division of the U.S. Department of Justice (“DOJ”) (collectively, the “Federal Antitrust Enforcers”) proposed their first new vertical merger guidelines (the “Draft Vertical Merger Guidelines”) in 36 years. The Draft Vertical Merger Guidelines, which will supersede and replace the 1984 DOJ “Non-Horizontal Merger Guidelines,” provide guidance to the business community and antitrust practitioners on the analytical processes underlying the FTC and DOJ’s enforcement decisions on vertical mergers. This updated guidance comes on the heels of the DOJ litigating and losing its first major vertical merger case in more than 40 years when it recently challenged AT&T’s merger with Time Warner.

A vertical merger combines firms or assets that operate at different stages of the same supply chain. In health care, a classic example of a vertical merger is the acquisition of a physician group by a hospital or health system. Similarly, vertical mergers can occur at different points in the supply chain, such as when a health system acquires a post-acute care provider or a health plan.

Historically, vertical mergers have been seen as procompetitive because they tend to create efficiencies in the supply chain and eliminate double marginalization. But as detailed in the Draft Vertical Merger Guidelines, the FTC and DOJ are concerned that vertical mergers may foreclose a more efficient rival post-transaction or may raise that rival’s costs. For example, if a health system acquires a large multi-specialty physician group, a more efficient rival health system may be foreclosed in the future from competing due to the loss of the physician group’s referrals.

Vertical Merger Guidelines

The Draft Vertical Merger Guidelines create a quasi-safe harbor for mergers when the parties have less than 20 percent market share for a relevant product (i.e., general acute care inpatient services) and less than 20 percent market share for a related product (i.e., physician services and the related referrals).

While the Draft Vertical Merger Guidelines are a welcome update from the 1984 guidelines and detail the current process the FTC and DOJ use to analyze vertical mergers, the Draft Vertical Merger Guidelines are squishy enough and give the FTC and DOJ enough flexibility to provide limited comfort to merging parties. Indeed, the more interesting aspect will be whether the FTC and DOJ become more active and aggressive in investigating and challenging vertical mergers. In the health care arena, the FTC and DOJ have let two large vertical mergers proceed in the last couple of years with limited concessions—CVS/Aetna and Cigna/Express Scripts. To this end, it is interesting to note that both of the FTC’s Democratic commissioners abstained from voting on the Draft Vertical Merger Guidelines. Instead, each issued statements saying that while they agreed that the old guidelines should be rewritten, these Draft Vertical Merger Guidelines were too “lax” and failed to adequately protect consumers from potential anticompetitive harm.

Comments on the draft guidelines can be submitted via email (verticalmergerguidelines@ftc.gov or verticalmergerguidelines@usdoj.gov) and must be received no later than February 11, 2020. Following the submission of written comments, the FTC and DOJ may make changes and finalize the new Vertical Merger Guidelines.

Practical Takeaways

  • As lines blur in health care and more health systems look to vertically integrate through acquisitions, it is important to understand the competitive dynamics in all relevant markets and understand whether the acquisition will harm competition.
  • Coupling this new guidance with the DOJ’s first litigation of a vertical merger case in 40 years, it is likely that we will see a renewed focus by the FTC and DOJ on investigating and challenging vertical mergers. This is especially true in the health care industry where more and more economic studies and academic papers conclude that both vertical and horizontal mergers are leading to increased health care costs.
  • While historically antitrust enforcement has stayed above the political fray, given the partisan split among the FTC commissioners, it is possible that in the future we see a more politicized discussion surrounding the antitrust laws and perhaps even a policy shift towards a more aggressive overall enforcement environment.

If you have any questions or would like additional information, please contact:

For more information about Hall Render’s Antitrust services, click here.

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Health Provider News – January 24, 2020

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NATIONAL

NORTHEAST

(Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, Vermont)

CONNECTICUT

MAINE

MASSACHUSETTS

NEW HAMPSHIRE

NEW YORK

RHODE ISLAND

VERMONT

MID-ATLANTIC/EAST                                                                 

(Delaware, District of Columbia, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia)

DELAWARE

DISTRICT OF COLUMBIA

MARYLAND

NEW JERSEY

PENNSYLVANIA

VIRGINIA

WEST VIRGINIA

CENTRAL

(Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota)

IOWA

KANSAS

MINNESOTA

MISSOURI

NEBRASKA

NORTH DAKOTA

SOUTH DAKOTA

MIDWEST

(Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin)

ILLINOIS

INDIANA      

KENTUCKY

MICHIGAN

OHIO

WISCONSIN

SOUTH/SOUTHEAST

(Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee)

ALABAMA

FLORIDA

GEORGIA

MISSISSIPPI

NORTH CAROLINA

SOUTH CAROLINA

TENNESSEE

SOUTH-CENTRAL/SOUTHWEST

(Arkansas, Arizona, Louisiana, New Mexico, Oklahoma, Texas)

ARKANSAS

ARIZONA

LOUISIANA

NEW MEXICO

OKLAHOMA

TEXAS

NORTHWEST

(Alaska, Idaho, Montana, Oregon, Washington, Wyoming)

ALASKA

IDAHO

MONTANA

OREGON

WASHINGTON

WYOMING

WEST

(California, Colorado, Hawaii, Nevada, Utah)

CALIFORNIA

COLORADO

HAWAII

NEVADA

UTAH

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USDA Hemp Producer License – Do the Opportunities Outweigh the Risks?

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The USDA Hemp Producer License Rule and Framework

On October 31, 2019, the United States Department of Agriculture (“USDA”) published an interim final rule[1] with request for comments in the Federal Register regarding hemp production (“USDA Hemp Rule” or the “Interim Final Rule”).[2] The USDA Hemp Rule establishes a federal hemp producer license and related requirements for state regulation of hemp production pursuant to the Agriculture Improvement Act of 2018 (“2018 Farm Bill”). Hemp is defined as the plant species Cannabis sativa L.[3] containing less than 0.3% delta-tetrahydrocannabinol (“THC”) within a distribution, also known as the “acceptable hemp THC level.”[4] The USDA Hemp Rule establishes requirements that hemp producers must meet in order to obtain the USDA Hemp Producer License:

  1. Licensing requirements;
  2. Filing and maintaining information regarding the land on which hemp is produced;
  3. Procedures for testing the THC concentration levels for hemp;
  4. Procedures for disposing of non-compliant plants;
  5. Compliance provisions; and
  6. Procedures for handling violations.

Under the Interim Final Rule, but currently effective, regulatory framework, a Licensed Producer will be found to have negligently violated the licensure rules if it fails to:

  1. Provide a legal description of the land (along with geospatial location) where hemp is cultivated and grown;
  2. Obtain a license; or
  3. Produce plants within the acceptable level THC content.[5]

That said, the Interim Final Rule does provide some degree of latitude with respect to those Licensed Producers who, despite exercising reasonable efforts to produce hemp plants that are consistently within specification (<0.3% THC content), may experience limited THC concentration variation above 0.3%. Specifically, if after following proper quality control testing a hemp sample exceeds 0.3%, but less than 0.5% THC, the Interim Final Rule contemplates that this would not necessarily violate the terms of the producer’s license.[6]

Unsurprisingly given the specific procedures required under the USDA Hemp Rule, Licensed Producers are also subject to reporting and record-keeping requirements.[7]

In addition, the Interim Final Rule establishes a process for USDA approval of state and tribal plans to license hemp producers. Notably, the USDA will deny a hemp producer’s application for federal licensure if the state has a plan pending approval or an approved plan.[8] If a state does not have a USDA-approved state plan, then the standards of the USDA Hemp Producer License will apply.[9] It is worthy of mention that the USDA Hemp Producer License does not preempt any state laws that are more stringent than the provisions of the USDA Hemp Rule.[10]

Although hemp is declassified as a controlled substance, which removes its cultivation and growth from Drug Enforcement Agency (“DEA”) oversight, the quality control laboratories that test hemp samples for THC concentration must be DEA-registered.[11] Moreover, the USDA is considering other, potentially different, mechanisms for requiring accreditation and quality standards and has requested comments on how to proceed.[12]

The Doors Open – Opportunities Budding from Hemp Producer License

The USDA Hemp Rule appears to simplify and strengthen the supply chain for obtaining hemp and hemp-derived products. Previously, hemp producers had to be DEA registered to supply hemp for research purposes and there was only one DEA registered producer in the country.[13] Following the 2018 Farm Bill and the USDA Hemp Rule, the DEA no longer controls the cultivation of hemp, leaving the industry seemingly poised to incrementally expand production and sales of domestic hemp and hemp-derived products, ostensibly in answer to the past five years of renewed consumer demand.

The Food and Drug Administration (“FDA”) has signaled that the declassification of hemp in the 2018 Farm Bill “may streamline the process for researchers to study cannabis and its dozens of derivatives, including cannabidiol (“CBD”), that fall under the definition of hemp, which could speed the development of new drugs.”[14] The FDA is beginning to recognize “the significant public interest in CBD” and the need to “work together with stakeholders and industry to fill in the knowledge gaps about the science, safety, and quality of many of these products.”[15] In fact, the FDA has indicated that it is actively working to learn about the effect of cumulative exposure to CBD, the effects of CBD on special populations and the safety of CBD for use on pets and animals.[16]

States have indicated significant interest in hemp production as well. Since the USDA Hemp Rule was published, 32 states have either submitted a State Plan to the USDA or expressed an interest in submitting a State Plan.[17] As of January 7, 2020, Ohio, New Jersey, Louisiana and three tribal governments have received approval from the USDA for their plans.[18] Additionally, 47 states have legislation permitting hemp production although states vary as to whether hemp production is limited to research purposes or permitted for commercial and industrial uses as well.[19]

The interest of the FDA and state governments is potentially promising news for companies and entities interested in research and drug development for hemp-derived products.

Slow Your Grow – Activity Since the USDA Hemp Rule Took Effect Indicates Significant Risks

But don’t get too excited. The FDA and FTC have been clear that insufficient evidence exists to support CBD products. Since the enactment of the USDA Hemp Rule, shipment of lawfully produced hemp has led to several cases involving criminal charges and seizure of the product by law enforcement,[20] indicating that local law enforcement is insufficiently trained to distinguish illegal marijuana from lawfully produced hemp. Additionally, state approaches to hemp production are widely varied.

Companies with existing hemp-derived and CBD products should be cautious: as we previously discussed here, the FDA and the Federal Trade Commission (“FTC”) have issued Warning Letters to CBD companies that have made outrageous and scientifically unsupported health claims about CBD products.[21] Following a recent flurry of Warning Letters issued in November 2019, the FDA has reiterated that only one CBD drug product – designed to treat two rare forms of epilepsy – has been approved and that, under the federal Food, Drug & Cosmetic Act, it is currently illegal to market CBD as a dietary supplement or regulated food.[22] Although the FDA has indicated support for research and drug development, companies should consult with legal counsel regarding proposed advertising and marketing claims about their cannabinoid-derived products.

The 2018 Farm Bill is clear that a state may not prohibit the transshipment of hemp or hemp products lawfully produced under the USDA Hemp Producer License or under a State Plan.[23] However, this legal protection is easier to rely on in theory than in practice. There is no roadside test to measure THC levels and evaluate the product.[24] Many jurisdictions, especially those where hemp production is illegal, permit law enforcement officers to rely on the unique scent of cannabis flower to establish probable cause for stopping, detaining, arresting an individual or seizing the cannabis flower being transported. However, law enforcement officers cannot tell the difference between hemp and marijuana plants based on differences in smell alone and are often not trained to assess if a plant is lawfully produced hemp by evaluating the producer’s license and laboratory testing of the plant’s THC content. Although some jurisdictions, like Miami-Dade county are implementing an “odor-plus” probable cause determination, most officers are unlikely to be trained in the nuances applicable to this quickly evolving area of law. This means that shipment of hemp can subject the producer to a significant risk that their lawfully produced hemp might be seized and their driver might be charged with drug trafficking charges.

Additionally, producers and businesses should not conflate the ability to grow hemp under a USDA Hemp Producer License or an approved State Plan with the ability to process, create or sell hemp-derived products in any state. For example, many states permit hemp production for research purposes, but not for commercial purposes.[25] States that do permit hemp production for commercial purposes, like Florida, have separate rules requiring permits to process, prepare and sell food containing hemp or CBD.[26] And hemp production is still prohibited in South Dakota, Mississippi and Idaho.[27]

Practical Takeaways

So, after weighing the benefits and the risks, where does this leave businesses and individuals interested in hemp production?

To benefit from this new regulatory construct, the parties involved should first identify whether their intended hemp producer is governed by a USDA approved state plan or the federal USDA Hemp Producer License by tracking approved, submitted and pending state plans here. Additionally, even though producers are relieved from DEA registration requirements, laboratories that test THC content of hemp samples must still be DEA registered and comply with forthcoming accreditation standards. The USDA has published a list of DEA registered hemp analytical testing laboratories here.

The parties should then determine the purpose for which they are interested in hemp production and ensure that their purpose aligns with the state laws applicable to hemp production, and the processing and sale of hemp-derived products. As noted previously, the FDA and FTC have indicated that a narrow path is open to research hemp-derived CBD, but CBD infused products are not otherwise FDA approved.

If the parties are interested in shipping hemp or hemp-derived products across state lines, the parties should do the following to ensure that they are protected by the 2018 Farm Bill: (1) ensure that their product is solely produced under the USDA Hemp Producer license or an approved State Plan; and (2) ensure that the product is tested by an approved, DEA registered laboratory. However, any shipping route will inevitably cross multiple law enforcement jurisdictions, each of which may have unique probable cause requirements and varying levels of officer education and training. As it relates to interstate transshipment of hemp, parties should be aware that even if they meet the requirements to gain protection from the 2018 Farm Bill, there is no guarantee that their drivers and products will not be subject to law enforcement scrutiny and the costs associated with that.

In short, anyone interested in hemp production should consult with legal counsel on the compliance and enforcement risks before engaging in the production, shipment or sale of hemp in any state. Even with the advice of sophisticated counsel, this area of law is still evolving, complicated and uncertain.

Hall Render regularly monitors regulatory and enforcement developments relating to USDA, FDA and FTC regulated products, including hemp and hemp-derivatives. If you have any questions about this guidance please contact:

Resources

[1] Although comments are currently being accepted in response to the USDA Hemp Rule, the published requirements of the Rule are currently effective. An interim final rule is typically issued when the agency has good cause to publish a final rule without first publishing the proposed rule. Interim final rules are effective immediately upon publication, but the agency stipulates that it will alter the interim rule if warranted by comments. This specific type of rulemaking process is often used when the agency is following a statutory deadline.

[2] 84 Fed. Reg. 58522, 58522.

[3] The interim final rule acknowledges that it does not amend or alter federal law relative to the definition of hemp.

[4] 84 Fed. Reg. 58525.

[5] 84 Fed. Reg. 58530.

[6] Again, this presumes that the Licensed Producer at all times prior to such testing has exercised reasonable efforts to ensure that all hemp production produces plants with less than 0.3% THC content.

[7] 84 Fed. Reg. 58531.

[8] 84 Fed. Reg. 58528.

[9] 84 Fed. Reg. 58523, 58527 – 58528.

[10] 84 Fed. Reg. 58523.

[11] 84 Fed. Reg. 58525.

[12] 84 Fed. Reg. 58525.

[13] Drugabuse.gov, National Institute on Drug Abuse, NIDA’s Role in Providing Marijuana for Research, Revised August 2019, Available at https://www.drugabuse.gov/drugs-abuse/marijuana/nidas-role-in-providing-marijuana-research (last accessed October 31, 2019).

[14] Fda.gov, FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD), October 16, 2019, Available at, https://www.fda.gov/news-events/public-health-focus/fda-regulation-cannabis-and-cannabis-derived-products-including-cannabidiol-cbd (last accessed October 31, 2019).

[15] Fda.gov, FDA News Release, FDA warns 15 companies for illegally selling various products containing cannabidiol as agency details safety concerns, November 25, 2019, Available at https://www.fda.gov/news-events/press-announcements/fda-warns-15-companies-illegally-selling-various-products-containing-cannabidiol-agency-details (last accessed January 9, 2020).

[16] Fda.gov, Consumer Updates, What You Need to Know (And What We’re Working to Find Out) About Products Containing Cannabis or Cannabis-derived Compounds, Including CBD, November 25, 2019, Available at https://www.fda.gov/consumers/consumer-updates/what-you-need-know-and-what-were-working-find-out-about-products-containing-cannabis-or-cannabis (last accessed January 9, 2020).

[17] Ams.usda.gov, Status of State and Tribal hemp Production Plans for USDA Approval, Updated January 7, 2020, https://www.ams.usda.gov/rules-regulations/hemp/state-and-tribal-plan-review. Six (6) states – Arkansas, Maine, Minnesota, Missouri, New Mexico, and Wisconsin – that participated in a pilot program in 2014 will continue to operate under the terms of the pilot program.

[18] Note that the following states have not submitted a plan or expressed interest in submitting a plan for USDA review: Alaska, Idaho, Kansas, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New York, North Carolina, Oklahoma, Rhode Island, South Carolina, South Dakota, and Vermont.

[19] See generally National Conference of State Legislatures, State Laws Related to Industrial Hemp, August 2, 2019, Available at https://www.ncsl.org/research/agriculture-and-rural-development/state-industrial-hemp-statutes.aspx (last accessed January 20, 2020).

[20] Steve Davies, Agri-Pulse Communications, Hemp transportation issue unresolved 10 months after farm bill, October 16, 2019, Available at https://www.agri-pulse.com/articles/12715-hemp-transportation-still-an-issue-10-months-after-farm-bill (last accessed January 20, 2020); Jolie McCullough, The Texas Tribune, He spent a month in Texas jail accused of hauling 3,350 pounds of marijuana. But lab results say it was legal hemp, January 7, 2020, Available at, https://www.texastribune.org/2020/01/07/marijuana-texas-dps-arrest-hemp/ (last accessed January 20, 2020); Carlos Miller, Miami New Times, Cops Keeping Arresting Innocent People for Legal Hemp, January 8, 2020, Available at, https://www.miaminewtimes.com/marijuana/police-arrest-innocent-people-for-trafficking-legal-hemp-11421856 (last accessed January 20, 2020).

[21]See also, ftc.gov, Federal Trade Commission and Food and Drug Administration, Joint Warning Letter, March 28, 2019, Available at https://www.ftc.gov/system/files/attachments/press-releases/ftc-joins-fda-sending-warning-letters-companies-advertising-selling-products-containing-cannabidiol/advancedspine_relievus_wl.pdf (last accessed October 31, 2019); ftc.gov, Federal Trade Commission, Warning Letters Advertising CBD-Infused Products as Treatments for Serious Diseases, Including Cancer, Alzheimer’s, and Multiple Sclerosis, September 10, 2019, Available at https://www.ftc.gov/news-events/press-releases/2019/09/ftc-sends-warning-letters-companies-advertising-their-cbd-infused (last accessed October 31, 2019).

[22] Fda.gov, Consumer Updates, What You Need to Know (And What We’re Working to Find Out) About Products Containing Cannabis or Cannabis-derived Compounds, Including CBD, November 25, 2019, Available at https://www.fda.gov/consumers/consumer-updates/what-you-need-know-and-what-were-working-find-out-about-products-containing-cannabis-or-cannabis (last accessed January 9, 2020); See also, fda.gov, FDA News Release, FDA warns 15 companies for illegally selling various products containing cannabidiol as agency details safety concerns, November 25, 2019, Available at https://www.fda.gov/news-events/press-announcements/fda-warns-15-companies-illegally-selling-various-products-containing-cannabidiol-agency-details (last accessed January 9, 2020).

[23] Pub .Law 115-334, Section 10114. Interstate Commerce, December 20, 2018, Available at, https://www.congress.gov/115/plaws/publ334/PLAW-115publ334.pdf (last accessed January 21, 2020); See also, United States Department of Agriculture, Memorandum: Executive Summary of New Hemp Authorities, May 28, 2019, Available at, https://www.ams.usda.gov/sites/default/files/HempExecSumandLegalOpinion.pdf (last accessed January 21, 2020).

[24] Steve Davies, Agri-Pulse Communications, Hemp transportation issue unresolved 10 months after farm bill, October 16, 2019, Available at https://www.agri-pulse.com/articles/12715-hemp-transportation-still-an-issue-10-months-after-farm-bill (last accessed January 20, 2020).

[25] See generally National Conference of State Legislatures, State Laws Related to Industrial Hemp, August 2, 2019, Available at https://www.ncsl.org/research/agriculture-and-rural-development/state-industrial-hemp-statutes.aspx (last accessed January 20, 2020).

[26] Id.

[27] Id. Note that South Dakota Governor Noem has recently indicated a willingness to permit hemp production, but a bill decriminalizing hemp production has yet to be passed and hemp production remains illegal. Ricardo Lewis, Dakota News Now, Governor Noem offers plans to “Decriminalize Hemp,” January 9, 2020, Available at, https://www.ksfy.com/content/news/Governor-Noem-offers-plans-to-Decriminalize-Hemp-566863271.html (last accessed January 20, 2020). Additionally, Idaho’s governor signed an Executive Order permitting the transshipment of hemp across its borders in alignment with the 2018 Farm Bill, but hemp production is still prohibited within the state. Executive Department, State of Idaho, Executive Order No. 2019-13, Transportation of Hemp, November 19, 2019, Available at, https://gov.idaho.gov/wp-content/uploads/sites/74/2019/11/eo-2019-13.pdf (last accessed January 21, 2020).

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Hall Render’s The Week in Washington – January 27, 2020

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Coming This Week: CMS to Release Medicaid Block Grant Plan

Expected on Thursday, CMS will announce a plan to overhaul Medicaid by letting states shift certain program funding to block grants. CMS Administrator Seema Verma has been very passionate about implementing a block grant option, as she said this was the pathway to give states more flexibility. This controversial plan would target who joined the program under the Affordable Care Act’s coverage expansion by encouraging states to apply for Section 1115 waivers to allow them to cap their spending on those patients. Provider groups and states are very likely to challenge the rule in court. Stakeholders are estimating the proposed rule could reduce Medicaid funding by up to almost $50 billion a year.

MedPAC Approves Pay Recommendations for 2021

The Medicare Payment Advisory Commission (“MedPAC”) voted unanimously last week to recommend that Congress update the hospital base rate pay by 2 percent for 2021. Additionally, MedPAC recommended that Congress “provide hospitals with an amount equal to the difference between the update recommendation and the amount specified in current law through the Commission’s recommended hospital value incentive program.” MedPAC Commissioners also recommended tying some of the pay raise to quality improvements.

The MedPAC meeting also discussed a staff analysis of the relationship between the 340B drug savings program and oncology drug costs, as requested by the House Energy and Commerce Committee in 2018. The study concluded that the 340B Drug Pricing Program doesn’t create strong incentives for participating hospitals to use more expensive drugs.

MedPAC is an independent Congressional agency created to provide Congress with analysis and policy advice on the Medicare program. While MedPAC recommendations are non-binding, their annual reports are closely reviewed by Congressional committees.

FTC to “Crack Down” on Anti-Competitive Hospital Behavior

Federal Trade Commission (“FTC”) Commissioner Christine Wilson said the agency is focusing on ending anti-competitive behavior in hospitals and hospital systems. While speaking at a health care event, Commissioner Wilson stated the FTC will be increasing oversight of Certificates of Public Advantage (“COPAs”) and urged stakeholders to comment on the newest vertical merger guidelines. Notably, Wilson stated the Commission is “intent on challenging every hospital merger and we have a number in the pipeline.” The FTC will also explore expanding the scope of practice of certain providers, such as nurse practitioners.

Health-Related Bills Introduced This Week

Rep. Gus Bilirakis (R-FL) introduced H.R. 5672 for the Commission on Sustaining Medicare and Social Security Act of 2020.

Sen. Bill Cassidy (R-LA) introduced S. 3224, the VA Research Approval Efficiency Act of 2020.

Rep. Jim Costa (D-CA) introduced H.R. 5654, the Expanding Medical Education Act of 2020.

Rep. Brett Guthrie (R-KY) introduced H.R. 5663 to amend the Federal Food, Drug, and Cosmetic Act to give authority to the Secretary of Health and Human Services, acting through the Commissioner of Food and Drugs, to destroy counterfeit devices.

Sen. Roy Blunt (R-MO) introduced S. 3216 to amend Title XXVII of the Public Health Service Act to prohibit group health plans and health insurance issuers offering group or individual health insurance coverage from imposing cost-sharing requirements or treatment limitations with respect to diagnostic examinations for breast cancer that are less favorable than such requirements with respect to screening examinations for breast cancer.

The Week Ahead

  • The House Energy and Commerce Health Subcommittee holds a hearing Wednesday on improving safety and transparency in U.S. food and drugs.
  • On Tuesday, the House Ways and Means Committee holds a hearing to discuss legislative proposals for paid family and medical leave.
  • The House Education and Labor Committee holds a hearing Tuesday on maternal and infant health in the U.S.
  • HHS’s Office of the National Coordinator for Health Information Technology is hosting its two-day annual meeting this week. Topics to be discussed include the potential for a patient identification system, patients’ right to access their records, burdens surrounding electronic health records and seamless data sharing.
  • Next week, the House is likely to vote on a sweeping labor bill to amend federal workplace laws to bolster a wide range of legal protections on the job.

For more information, please contact:

For more information on Hall Render’s Federal Legislative & Regulatory Advocacy services, click here.

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Fate of Obamacare Remains Uncertain During Election Season

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On January 21, 2020, the Supreme Court denied a motion to expedite consideration of a petition for certiorari in a case directly challenging the constitutionality of the Affordable Care Act (“ACA”).[1] Given the Supreme Court’s decision, it is likely that the fate of Obamacare will not be decided until sometime after the 2020 presidential election.

In Texas v. United States[2], multiple plaintiffs challenged the ACA in the District Court for the Northern District of Texas. On December 14, 2018, Judge O’Connor ruled that the individual mandate requiring individuals to purchase health insurance under the ACA was unconstitutional because the penalty for non-compliance was reduced to zero dollars. A zero dollar penalty could not be considered a “tax” pursuant to Congress’s taxing power. Judge O’Connor deemed the individual mandate to be a vital centerpiece of the landmark legislation and declared the entire ACA invalid because the remaining portions of the legislation could not be severed from the individual mandate.

The Department of Justice, certain Democratic states, and the House of Representatives appealed Judge O’Connor’s ruling to the Fifth Circuit.[3] In an opinion issued on December 18, 2019, the Fifth Circuit affirmed that the individual mandate was unconstitutional but declined to strike the down entire ACA. The Fifth Circuit remanded the case back to the District Court for further consideration as to whether any of the provisions of the ACA could be severed from the individual mandate and preserved.

To avoid putting the fate of the ACA back in the hands of Judge O’Connor, the Democratic states and House of Representatives filed a petition for certiorari with the United States Supreme Court and requested expedited review. Without comment, the Supreme Court announced that the request for expedited review was denied. Presumably, the Court will consider the request for cert at a later date. Click here for a detailed discussion of Texas v. United States.

Analysis

The Supreme Court’s denial of expedited review could be viewed as a political win for the Trump administration in a presidential election year.[4] A Supreme Court decision striking down, or significantly eviscerating the ACA, could cause a vitriolic backlash from the millions of individuals who would lose insurance coverage and/or providers whose uninsured populations would undoubtedly rise. It is unlikely that Judge O’Connor will issue a new ruling before November 2020.

While a Supreme Court decision may not play a role in the presidential election, the ACA is likely to remain an important issue during election season. On January 21, 2020, Senator Joe Biden tweeted his reaction to the Supreme Court’s announcement: “Coverage for millions of Americans and protections for pre-existing conditions are on the ballot. We have to protect the progress we’ve made and show up to the polls to defend the Affordable Care Act.[5] Senator Biden’s response suggests that the ACA is a big issue for voters that will be addressed at the polls.

Although the outcome of this case remains uncertain, many commentators believe the Supreme Court would likely uphold the ACA based on its current composition.[6] If the case drags on and President Trump is reelected, some worry that another conservative Supreme Court Justice would place the ACA in greater jeopardy.[7]

Stay tuned for further updates.

If you have any questions or would like any additional information about this topic, please contact:

Resources

[1] California, et al., Petitioners v. Texas, et al. No. 19-10011

[2] Texas, et al. v. United States, et al., No. 4:18-cv-00167 (U.S. Dist., N.D. Tex. Dec. 14, 2018).

[3] Texas, et al. v. United States, et al., No. 19-10011 (5th Cir. Dec. 18, 2019 as revised Dec. 20, 2019)

[4] The U.S. Department of Justice specifically asked the Supreme Court not to review the case until after the case is reconsidered in the District Court for the Northern District of Texas. Katie Keith, Trump Administration, Plaintiffs Urge Against Expedited Review in Texas, Health Affairs Blog, Jan. 11, 2020 @ https://www.healthaffairs.org/do/10.1377/hblog20200111.835640/full/ (last visited on Jan. 22, 2020).

[5] Susannah Luthi, Supreme Court Won’t Fast-track Obamacare Case, Politico, Jan. 21, 2020 @ https://www.politico.com/news/2020/01/21/supreme-court-wont-review-obamacare-lawsuit-before-the-election-101356 (last visited on Jan. 22, 2020).

[6] Peter Sullivan, Democrats’ Worries Grow as ObamaCare Court Fight Drags On, The Hill, Jan. 5, 2020 @ https://thehill.com/policy/healthcare/476733-dem-worries-grow-as-obamacare-court-fight-drags-on (last visited on Jan. 23, 2020).

[7] Id.

The post Fate of Obamacare Remains Uncertain During Election Season appeared first on Law Firm | Health Care Law Firm in the USA | Hall Render.

Health Provider News – January 31, 2020

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