Bipartisan bill proposes to leverage CFIUS in assessing pharmaceutical supply chain

By Michael J. Lowell, Sarah Wronsky, Alison Peters, Manasi Venkatesh and Paula Salamoun on 10 July 2020 Posted in Legislative Developments

On June 30, 2020, United States Senators Elizabeth Warren (D-Mass.) and Marco Rubio (R-Fla.) introduced legislation proposing the Committee on Foreign Investment in the United States (CFIUS), an interagency committee authorized to review certain transactions involving foreign investment in the United States for national security concerns, and assist the Federal Trade Commission (FTC) in “conduct[ing] a study on the United States’ overreliance on foreign countries and the impact of foreign direct investment in the U.S. pharmaceutical industry.” In the last decade, CFIUS reviewed a number of mergers and acquisitions in the healthcare industry that resulted in a foreign person obtaining control of a U.S. pharmaceutical supplier, among other pharma entities. More recently, CFIUS jurisdiction was expanded to include not only the review of transactions that result in foreign control of a U.S. business, but also certain non-controlling foreign investments as well, including investments in biotech and companies working with genetic information of U.S. citizens.

The United States Pharmaceutical Supply Chain Review Act (full text available here), comes on the heels of another bipartisan initiative sponsored by Senators Rubio and Warren earlier this year, the Strengthening America’s Supply Chain Act and National Security Act, which focuses on combating U.S. supply chain dependence on Chinese medical supplies. Both Acts build on Senator Rubio’s plan to protect U.S. business interests from what he describes as China’s quest for “global dominance” through China’s government-backed manufacturing and innovation initiative, Made in China 2025. In a broader context, these bipartisan Acts are consistent with the U.S. Government and CFIUS’s continued focus on China-related transactions as well as those involving other foreign parties, with particular emphasis on transactions impacting U.S. critical infrastructure (see, e.g., May 1, 2020 Executive Order on Securing the United States Bulk-Power System).

In this case, the United States Pharmaceutical Supply Chain Review Act would require the FTC and the Secretary of the Treasury, acting through CFIUS, to provide Congress with a report on the following:

An assessment of: (A) the supply chain of the pharmaceutical industry of the United States and the effect of concentration and reliance on foreign manufacturing within that industry; (B) the effect of foreign investment in the pharmaceutical industry of the United States on domestic capacity to produce drugs and active and inactive ingredients of drugs; and (C) the effect of foreign investment in technologies or other products for sequencing or storage of DNA, including genome and exome analysis, in the United States, including the effect of such investment on the capacity to sequence or store DNA in the United States.
The number of reviews and investigations conducted by the Committee, in each of the 10 fiscal years preceding the year in which the study is conducted, with respect to covered transactions (as defined in section 721(a) of the Defense Production Act of 1950 (50 U.S.C. 4565(a))—(A) in the pharmaceutical industry of the United States; or (B) relating to the sequencing or storage of DNA in the United States.
A short description of each such review or investigation, including whether the transaction was approved or prohibited. See United States Pharmaceutical Supply Chain Review Act.

The Act intends to leverage certain CFIUS data in order to increase transparency and identify vulnerabilities in the U.S. pharmaceutical supply chain. As a practical matter, however, the utility of such data may be limited. For example, most CFIUS reviews related to U.S. pharmaceuticals in the last ten years arose from parties who voluntarily notified CFIUS of the transaction. Any data provided by CFIUS pursuant to the Act would not capture unreported (i.e., ‘non-notified’) transactions that avoided CFIUS review and therefore the proposed report may not be indicative of overall investment or industry trends. In addition, the Act directs CFIUS to provide “a short description of each such review or investigation, including whether the transaction was approved or prohibited” but does not address whether the report to Congress would be classified. CFIUS is generally bound by statute to maintain strict confidentiality of such information and ordinarily would not be authorized to release transaction details or results publicly.

Notwithstanding those practical limitations, the Act reflects an intensifying scrutiny by U.S. government on the role foreign parties serve in the domestic healthcare industry, particularly after COVID-19 illuminated vulnerabilities in the domestic medical supply chain capacity. For example, earlier this year, formerly reliable trade partners such as India significantly restricted exports of certain critical active pharmaceutical ingredients (APIs), the requisite components used in generic drugs. Similarly, as recently as May, as U.S. health care workers faced a dire shortage of personal protective equipment (PPE), the Food and Drug Administration (FDA) banned 65 of the 80 authorized manufacturers for N95-style face masks that were later determined to be ineffective at blocking COVID-19. With respect to pharmaceuticals, the global pandemic has left legislators, medical professionals, and policy analysts alike struggling to protect Americans’ access to critical drugs (including those to assist COVID-19 patients), as an estimated 80 percent of APIs are imported from abroad.

If signed into law, the U.S. Pharmaceutical Supply Chain Review Act would provide critical data on medical supply trade patterns as well as domestic manufacturing capacity. The Act may also prompt legislation requiring significant changes to upstream and downstream supply chains of U.S. pharmaceutical companies importing APIs.

Reliance on telehealth ramps up during COVID-19, and may be here to stay

By Kelly Kearney and Andrew Lu on 25 June 2020 Posted in Department of Health and Human Services, Regulatory Developments

As technology has advanced over the years, there has been a corresponding push for virtual visits with health care providers. In fact, many state boards of medicine and other regulatory agencies have sought to amend regulations and guidances to make telehealth a reality for patients across the U.S. However, despite the technical allowance for telehealth, many regulatory, privacy, and financial barriers have stood in the way of allowing telehealth to be the norm — that is, until the COVID-19 pandemic.

Once shelter-in-place orders went into effect across the country, there was great appeal to patients in being able to still get medical treatment and advice without leaving the safety of their homes. Thus, federal and state regulators acted quickly to amend regulations, issue temporary waivers, and publish guidance documents setting out ways patients could communicate with, and be treated by, their providers virtually. Many regulators even relaxed certain licensing requirements to allow providers a broader reach so that they could treat patients located in other states via telehealth.

The outcome of this quick call to action was a huge boom in telehealth — a week before the shelter-in-place orders went into effect, Medicare reported there were 11,000 telehealth visits in one week. One month later, this number skyrocketed to 1.3 million in a single week. The apparent success of telehealth thus far has left many wondering why this mechanism was not widely utilized before the pandemic, and the answer likely comes down to data protection and insurance.

Specifically, first, the Health Insurance Portability and Accountability Act (HIPAA) requires health care providers and insurers to protect patient data and the electronic transmission of the same. Without the assistance of regulatory legal counsel to advise on how best to navigate privacy laws in an arguably new and nuanced space, many health care providers opted away from telehealth rather than run the risk of violating HIPAA. Second, until the pandemic, Medicare and Medicaid would not cover telehealth services unless, for example, the patient was in a rural area or suffered a rare condition. Now, during COVID-19, the U.S. Department of Health and Human Services (HHS) has eased many of the rules that previously made telehealth visits financially difficult.

Although many of the regulation amendments, waivers, and guidances are allegedly temporary and only in effect during the COVID-19 crisis, many industry stakeholders are wondering if they might outlast the HHS’s lift of the public health emergency. As the state boards and federal agencies continue to adapt to these unprecedented times, we recommend that health care providers stay attuned to the laws of the states in which both they, and their patients, are located, as well as public postings and guidance documents released by federal agencies, such as the U.S. Food & Drug Administration. Should you have any questions related to telehealth during COVID-19 and in the future, please do not hesitate to reach out to the health care attorneys at Reed Smith.

Office for Civil Rights issues final rule scaling back nondiscrimination requirements for health care covered entities as Supreme Court broadens discrimination protections

By Carol Loepere, Rebecca E. Dittrich and Taber Rueter on 23 June 2020 Posted in Department of Health and Human Services

A final rule published by the Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) and the Centers for Medicare & Medicaid Services (CMS) significantly scales back nondiscrimination regulations first released in 2016. The final rule, which was published in the Federal Register on June 19, 2020, implements Section 1557 of the Affordable Care Act (ACA) and pares back numerous nondiscrimination regulations applicable to covered health care entities in an effort to reduce regulatory costs and eliminate duplicative legal obligations.

In doing so, the final rule drastically changes the interpretation of Section 1557’s scope, waters down stringent requirements designed to promote universal access to covered programs and providers, and alters enforcement provisions. Despite these notable changes, certain core nondiscrimination provisions remain, such as communication and access standards for disabled and limited English proficiency (LEP) individuals. As a result, covered entities will need to understand how their obligations under the final rule change, what remains the same, and what to look out for moving forward when it becomes effective on August 18, 2020. Below are the new rule’s main takeaways.

FDA issued guidance on statistical considerations for clinical trials during the COVID-19 public health emergency

By John D. Kendzior and Ryan Pate on 19 June 2020 Posted in Food & Drug Administration Regulations, Other FDA Developments

On June 17, the Food and Drug Administration (FDA) continued its efforts to mitigate COVID-19’s disrupting impact on clinical trials by issuing guidance on statistical considerations for changes to trial conduct (FDA previously relaxed restrictions on protocol modifications). As expected, public health measures designed to control COVID-19’s rapid emergence as a global pandemic—social distancing, travel restrictions, site closures, etc.—have impeded drug and device industry innovation. Many clinical trials have been delayed; others cannot get up and running. Meanwhile, participant enrollment continues to present a challenge due to fear of infection, and logistics firms are working tirelessly to smooth unprecedented supply chain interruptions. The expected downstream effect is delayed access to important medical products. FDA’s latest guidance therefore aims to protect the continuity of clinical trials and equip sponsors to adapt to these challenging circumstances without compromising trial integrity and safety. Likewise, the guidance is not limited to trials for the development of COVID-19 treatments; the recommendations apply equally to other diseases

FDA’s statistical considerations for modifying clinical trials to address the impact of COVID-19 begin with three guiding principles:

Proactive planning: Sponsors should update statistical analysis plans prior to modifying primary or secondary endpoints.
Bias avoidance: Sponsors should not propose trial modifications that have the potential to bias the interpretation of findings and should implement safeguards such as a data monitoring committee.
Appropriate data selection: While making trial modifications, sponsors should focus on summaries of participant-specific data, such as null values, treatment discontinuation, treatment interruptions, trial withdrawal, and endpoints.

FDA’s guidance concludes by applying the above principles to scenarios that sponsors commonly encounter in the COVID-19 context. In each case, FDA offers detailed statistical considerations for trial design and analysis strategies. For example, FDA stresses the importance of performing sensitivity analyses to evaluate the impact of any change in endpoint definition or ascertainment.

HHS announces another round of CARES Act funding for Medicaid and CHIP providers as well as Safety Net Hospitals

By Carrie Gorner on 11 June 2020 Posted in Centers for Medicare & Medicaid Services Regulations, Other HHS Developments

On June 9, 2020, the U.S. Department of Health and Human Services (HHS) announced additional distributions from the CARES Act Provider Relief Fund to several groups of providers, totaling approximately $25 billion. $15 billion of these funds is targeted towards eligible Medicaid and Children’s Health Insurance Program (CHIP) providers participating in state Medicaid and CHIP programs. Another $10 billion is allocated to “safety net hospitals,” serving more vulnerable individuals and can come as soon as this week. In connection with these new disbursements, HHS is launching a newly enhanced Provider Relief Fund Payment Portal to allow reporting of annual patient revenues.

Medicaid and CHIP Distribution

HHS will disburse a payment that, at a minimum, is equal to 2 percent of reported gross revenue from patient care to eligible providers serving Medicaid and CHIP beneficiaries. Providers who have not yet received a disbursement from the initial General Distribution on June 3, 2020 are eligible for this new distribution. The initial General Distribution was authorized under the CARES Act and reached about 62 percent of all providers participating in Medicaid/CHIP. This new, targeted distribution is aimed at reaching the remaining 38 percent of those providers. HHS believes almost one million providers may be eligible, including pediatricians, obstetrician-gynecologists, dentists, opioid treatment and behavioral health providers, assisted living facilities and other home and community-based services providers.

Eligibility requirements include:

The provider must not have received payment from the General Distribution, regardless of the size of the distribution received. However, payment under another Targeted Distribution (like High Impact Area, Rural, Indian Health Service, and Skilled Nursing Facility targeted distributions) will not affect eligibility under the Medicaid/CHIP distribution. Those providers who rejected their General Distribution payment are ineligible to receive this targeted distribution.
The provider must have directly billed for Medicaid/CHIP programs or Medicaid managed care plans for healthcare-related services between January 1, 2018 and December 31, 2019.
The provider must have filed an income tax return for 2017, 2018, or 2019 or be an entity exempt from filing.
The provider must have provided patient care after January 31, 2020, not have permanently ceased provided patient care directly.

In connection with this distribution, HHS has retooled the Provider Relief Fund Portal to allow Medicaid and CHIP programs and/or Medicaid and CHIP managed care organizations to submit their annual patient revenue information. This information will be used by HHS to determine the final amount of payment the provider will receive.

Like recipients of the General Distribution, those receiving the Medicaid/CHIP disbursement will have to complete the attestation process and accept the Terms and Conditions within 90 days of payment. Terms and conditions include restrictions on the use of funds, certifications on the part of the recipient, an agreement to submit reports showing compliance with the terms, and agreement that HHS may publicly disclose the payment the recipient receives.

Applications are now available and must be completed by July 20, 2020.

Safety Net Hospitals

An additional $10 billion in funds will be sent directly by direct deposit to those eligible hospitals serving low-income and vulnerable populations. In his remarks announcing this new distribution, Eric D. Hargan, Deputy Secretary of HHS, noted that directing these funds to these providers was critical “because they operate on thin margins and may be struggling more than other providers during this crisis.” He also noted that these safety net providers serve more low income and minority Americans, who have been disproportionately affected by COVID-19. In doing so, he cited a CDC report that black Americans suffering from COVID-19 are being hospitalized at a rate of 4.5 times of white Americans; Hispanic Americans at a rate of 3.5 times that of non-Hispanic whites; and American Indians and Alaska Natives at a rate of 5 times that of whites. Eligibility requirements include:

A Medicare Disproportionate Payment Percentage (DPP) of 20.2 percent or greater;
Average Uncompensated Care per bed of $25,000 or more (as an example, a hospital with 100 beds would need to provide $2,500,000 in Uncompensated Care per year);
Probability of 3 percent or less, as reported to CMS in its most recently filed Cost Report.

HHS believes this round of payments will reach many more qualifying safety net hospitals than earlier distributions. The distribution amounts will range from $5 million to $50 million and will be based partly on the individual facility score (number of facility beds multiplied by DPP) as compared to the cumulative facility scores for all safety net hospitals.

As with other distributions, recipients will have to complete the attestation process and agree to the Terms and Conditions similar to those in the Medicaid/CHIP distribution program.

Both the Medicaid/CHIP distribution and the Safety Net distribution appear to be in response to criticism of congressional leaders regarding HHS’ lack of meaningful allocations to institutions that rely heavily on Medicaid funds. Reed Smith will continue to monitor developments in these targeted disbursement programs as well as other CARES Act related funding. Please contact us, or the Reed Smith lawyer with whom you frequently work, to ensure compliance with applicable laws in applying for and utilizing CARES Act funds.

CMS announces increased penalties and oversight for states and nursing homes during COVID-19 emergency

By James F. Hennessy and Taylor Grant on 5 June 2020 Posted in Centers for Medicare & Medicaid Services Regulations

On June 1, 2020, the Centers for Medicare & Medicaid Services (CMS) unveiled new measures designed to enhance enforcement and oversight of nursing homes and related state survey agencies. CMS announced the new policies concurrently with the release of federal data detailing the incidence of nursing home COVID-19 infections, which was also made available on the agency’s Nursing Home Compare website on June 4, 2020. The new policies include potential civil monetary penalties (CMPs) for nursing homes that fail to comply with federal infection control requirements, along with potential financial penalties for state survey agencies tasked with nursing home inspections.

Increased Penalties for Nursing Homes

CMS’s new policy expands enforcement against individual nursing homes that demonstrate federal infection control requirement deficiencies. Specifically, in each instance of at least “Substantial” non-compliance (Level D or above, based on CMS’s letter ratings for state nursing home surveys) by a recently cited nursing home, CMS will impose Directed Plans of Correction (DPOCs) and Discretionary Denials of Payment for New Admissions (DPNAs). The timeframe for remediation and extent of additional penalties depend on the nature of the non-compliance and the nursing home’s infection control compliance history, as follows:

For “Substantial” non-compliance by a nursing home that has incurred one infection control deficiency citation in the last year, the facility will face up to $5,000 per citation if the latest non-compliance is not widespread (Levels D & E), or up to $10,000 per citation if the latest non-compliance is widespread (Level F).
For “Substantial” non-compliance by a nursing home that has incurred two or more infection control deficiency citations in the last two years, the facility will face CMPs of up to $15,000 per citation if the latest non-compliance is not widespread (Levels D & E), or up to $20,000 if the latest non-compliance is widespread (Level F).
For “Harm” level non-compliance (Levels G, H, I), regardless of the nursing home’s history, the facility will face CMPs at the highest amount option within the appropriate range under the CMP Analytic Tool.
For “Immediate Jeopardy” level non-compliance (Levels J, K, L), regardless of the nursing home’s history, the facility will face termination and CMPs at the highest amount option within the appropriate range under the CMP Analytic Tool.

Expanded State Survey Guidance and Penalties

CMS’s new policy also ties $80 million of supplemental Coronavirus Aid, Relief, and Economic Security (CARES) Act funding to a state’s progress on completing focused infection control nursing home surveys, as follows:

States that have not completed 100% of required focused infection control surveys by July 31, 2020, must submit a corrective action plan to CMS outlining their strategy for completion.
If 100% of the required surveys are still not achieved 30 days after the state submits that corrective action plan, the state’s CARES Act fiscal year 2021 allocation may be reduced by up to 10%, and subsequent 30-day extensions may result in additional reductions up to 5%.
The foregoing reductions would be redistributed to states that completed 100% of their focused infection control surveys by July 31, 2020.

CMS is also requiring states to use CARES Act funding to implement certain additional COVID-19 survey activities. A state’s failure to timely implement the following activities may result in the forfeiture of up to 5% of annual CARES Act allocations:

Perform on-site surveys of nursing homes with previous COVID-19 outbreaks by the end of June 2020;
Perform on-site surveys within 3 to 5 days of identification of any nursing home with: (a) 3 or more new COVID-19 suspected and confirmed cases, or (b) 1 confirmed resident case in a facility that was previously COVID-19 free; or
Starting in fiscal year 2021, perform annual focused infection control surveys of 20% of nursing homes based on state discretion or additional data that identifies facility and community risks.

CMS is also encouraging states to expand survey activities for facilities that have entered “Phase 3” of the agency’s Nursing Home Re-opening guidance, including those that: (a) have had no new nursing home COVID-19 cases for 28 days, (b) are not experiencing staffing shortages, and (c) have adequate supplies of personal protective equipment (PPE) and access to COVID-19 testing. CMS also indicated that it will deploy its network of Quality Improvement Organizations (QIOs) to focus on assisting states and certain nursing homes with additional support and technical assistance, including through weekly “National Infection Control Trainings” and direct assistance to small and rural nursing homes.

CMS published a joint open letter with CDC, dated May 31, 2020, notifying state governors of the latest changes and penalties concerning nursing home inspections and compliance. The new policies became effective immediately on June 1, 2020, and will cease to be in effect when the Secretary determines there is no longer a COVID-19 Public Health Emergency.

OIG releases strategic plan for oversight of COVID-19 response

By Vicki Tankle on 1 June 2020 Posted in Office of Inspector General Regulations

Following the distribution of billions of relief aid to healthcare providers and amidst the guidance issued around reopening of nursing homes throughout the country, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) unveiled a COVID-19 Response Strategic Plan on May 26, 2020 after updating its Workplan a few days earlier.

The 2020 OIG Workplan has been updated to account for an audit of the $50 billion in payments to healthcare providers to ensure that the payments were correctly calculated and disbursed to eligible providers. The Workplan also includes audits of nursing home infection prevention and control program deficiencies.

Following this trend, the Strategic Plan will allow OIG to identify, monitor, and target potential fraud, waste, and abuse affecting HHS programs and beneficiaries that may arise out of COVID-19 response and recovery programs – both during the current public health emergency and after it ends.

The Strategic Plan organizes itself under four goals that, according to OIG, drive its strategic planning and mission execution with respect to HHS’s COVID-19 response and recovery. These goals are to (1) protect people, (2) protect funds, (3) protect infrastructure, and (4) promote effectiveness of HHS programs—now and into the future. Each of these goals are supported by enumerated objectives and action items that ensure providers will see increased monitoring, guidance, and reviews of their response to the COVID-19 global pandemic.

OIG’s key actions to implement its Strategic Plan and achieve each of its four goals are summarized below.

Goal 1: Protect People. OIG enumerated a number of key actions under this goal that ranged from issuing guidance to enforcement authorities to support patient care, deploying law enforcement personnel as needed, conducting rapid-cycle reviews of benefits, and investigating potential fraud schemes including testing and identity theft. The OIG also indicated it would be dedicating resources to evaluate the safety of beneficiaries in certain vulnerable settings, such as nursing homes, and evaluating the distribution of resources.

Goal 2: Protect Funds. Pursuant to this goal, OIG indicated it will ensure accurate payments are made and that HHS funds are protected by auditing and investigating waste or misspending of COVID-19 response and recovery funds. In addition, OIG will be investigating suspected fraud and abuse that diverts COVID-19 funding from intended purposes or exploits emergency flexibilities granted to health and human services providers.

Goal 3: Protect Infrastructure. OIG intends to protect the security and integrity of IT systems and health technology infrastructures by investigating and mitigating cybersecurity vulnerabilities and threats, including those related to networked medical devices, telehealth platforms, and other technologies being used in COVID-19 response.

Goal 4: Promote Effectiveness. Lastly, OIG’s Strategic Plan outlines a number of action items intended to increase the effectiveness of ongoing COVID-19 response and recovery programs at the Federal, State, and local levels. In particular, OIG will identify successful practices and lessons learned from the COVID-19 response and make recommendations to strengthen future emergency and pandemic preparedness. Importantly, OIG will also evaluate the emergency flexibility offered in various programs. For example, OIG will consider the impacts of expanded telehealth in Medicare during the emergency to assess future Medicare policies.

In summary, it is clear that HHS intends to put significant resources into the audit, investigation and evaluation of the resources and funds that have been distributed throughout the COIVD-19 crisis and well as healthcare provider’s response to COVID-19 outbreaks in their communities. Together, the new Strategic Plan and Workplan updates provide context for how OIG intends to do so. Additional information about OIG’s guidance related to COVID-19 is available on the OIG COVID-19 Portal.

CARES Act Relief Funds: HHS continues rolling updates to FAQs and extends attestation deadline by another 45 days

By Daniel Fundakowski on 26 May 2020 Posted in Department of Health and Human Services

On May 21, 2020, the U.S. Department of Health and Human Services (HHS) issued additional guidance, by again updating its FAQs, for Medicare providers and suppliers (collectively, providers) receiving relief from the Public Health and Social Services Emergency Fund. Of the $175 billion appropriated by Congress, HHS has allocated $50 billion for general distribution to providers impacted by COVID-19, $12 billion for hospitals in COVID-19 high-impact areas, $10 billion for rural providers, and $4.9 billion for skilled nursing facilities. HHS has continued rolling updates to its FAQs since our May 15 post and the key updates since that time are set forth below. On May 22, HHS also announced another 45-day extension for Provider Relief Fund recipients to attest to payments received and accept the Terms and Conditions governing the use of those funds. However, the interplay of that extended deadline with a previously stated deadline of June 3 to submit revenue information remains uncertain.

Uncertainty regarding June 3 deadline

In a May 20 press release, HHS advised providers that they have until June 3 to accept the Terms and Conditions and submit their revenue information in the General Distribution Portal to support receiving an additional payment from the $50 billion general distribution. HHS instructed that all providers who automatically received an additional general distribution payment prior to 5:00 p.m. EST on April 24 must provide HHS with an accounting of annual revenues by submitting tax forms or financial statements and agree to the Terms and Conditions. In addition, for those providers that have not already received an additional general distribution payment, the submission of tax forms or financial statements serves as an application for additional funding. Providers that do not submit revenue information by June 3 will no longer be eligible to receive additional funding from the $50 billion general distribution. HHS has instructed providers to follow these steps:

Confirm receipt of previous funds through the Provider Relief Fund payment Attestation Portal, including agreeing to the Terms and Conditions; and
Submit revenue information through the General Distribution Portal for consideration to receive additional general distribution funds.

Although the interplay between the June 3 deadline and the new 90-days-from-receipt deadline remains unclear at this time, it appears that the June 3 deadline remains in place, at least for providers that did not automatically receive an additional general distribution payment. We expect HHS to release additional guidance on this issue. Continue Reading

HHS Office of General Counsel advises that the PREP Act preempts state and local requirements that prevent pharmacists from testing for COVID-19

By Megan Engel and Jessica Christensen on 21 May 2020 Posted in Other OIG Developments

Earlier this week, the Department of Health and Human Services (HHS) Office of General Counsel issued Advisory Opinion 20-02, which declared that the Public Readiness and Emergency Preparedness Act (PREP Act), combined with the HHS Secretary’s March 10, 2020 declaration, preempts state or local requirements that would prevent pharmacists from ordering or administering COVID-19 tests approved for diagnostic purposes by the Food and Drug Administration (FDA).

The Advisory Opinion concluded that the PREP Act makes clear that state and local governments cannot prevent “qualified persons” from ordering or administering covered countermeasures, including COVID-19 tests, because:

The Secretary’s March 10, 2020 declaration allows the Secretary to designate a “qualified person” to order or administer COVID-19 tests even when such individuals are not licensed to do so under state law;
The PREP Act expressly preempts state and local requirements that would prevent a “qualified person” from ordering or administering a COVID-19 test; and
The PREP Act explicitly provides that courts do not have subject matter jurisdiction to review the Secretary’s decision identifying certain individuals as “qualified persons” pursuant to the Secretary’s March 10, 2020 declaration.

As a result, any action by state or local authorities that would prevent licensed pharmacists from ordering or administering a diagnostic COVID-19 test that has been approved by the FDA is expressly preempted by federal law.

We suspect that, in putting this Advisory Opinion into effect, HHS will promptly direct state Boards of Pharmacy from taking any action that would prevent local pharmacies from suspending COVID-19 testing on the basis that pharmacists are not authorized to order or administer such tests, as HHS will take the position those local requirements are preempted by federal law. Because pharmacists are often the easiest and first point-of-contact for many individuals, providing all pharmacists nationwide with the ability to order and administer COVID-19 tests may help ease the access and time delays that have been seen with COVID-19 testing.

To review the entirety of Advisory Opinion 20-02, click here.

Nursing homes face increased scrutiny by attorneys general during COVID-19

By Divonne Smoyer, Paul Connell and Christine Cogbill Noonan on 20 May 2020 Posted in DOJ Developments, Fraud and Abuse Developments

Pennsylvania Attorney General Josh Shapiro announced on May 12, 2020, that his office is investigating several nursing homes in the Commonwealth for neglect of patients and residents: “We will hold nursing facilities and caretakers criminally accountable if they fail to properly provide care to our loved ones … we will not tolerate those who mistreat our seniors and break the law.” Shapiro has also launched a public portal for citizens to email reports of neglect in nursing home communities. As is the case in many states, nursing home patients make up the majority of the deaths associated with COVID-19 in Pennsylvania. Just over 2,611 nursing home residents and staff have died from COVID-19 in Pennsylvania, comprising nearly 70 percent of the 3,800 total deaths reported in the Commonwealth as of the date of the press release.

Attorney General Shapiro is not alone in his effort to take a closer look at nursing home facilities and caregivers, even while lobbying groups for health care providers and nursing homes push for broad immunity from coronavirus-related lawsuits. In late April, New York Attorney General Letitia James released a statement saying that her office’s Medicaid Fraud Control Unit continues to investigate allegations of abuse and neglect in nursing homes. James’ office similarly launched a nursing home abuse hotline for residents, families, and members of the public to report alleged complaints at the facilities. Specifically, Attorney General James is investigating a Queens adult care facility that allegedly failed to protect residents from COVID-19 and misled families about its spread. Residents of that same facility are now suing in federal court over similar allegations. State attorneys general are increasingly active on this issue and will be pursuing nursing homes and long-term care facilities through various angles including Medicaid fraud, consumer protection, and false advertising.

CMS issues nursing home reopening recommendations for state and local officials

By Megan Engel and Jessica Christensen on 20 May 2020 Posted in Centers for Medicare & Medicaid Services Regulations

With portions of the country beginning to reopen, on May 18, 2020, the Centers for Medicare & Medicaid Services (CMS) issued its recommendations to state and local officials for best practices regarding the reopening of nursing homes. Because nursing homes have been severely impacted by COVID-19, CMS issued a memorandum to state officials regarding the “level of mitigation needed to prevent the transmission of COVID-19 in nursing homes.”

The recommendations cover a phased approach for three main topics:

Criteria for relaxing nursing home restrictions and mitigating the risk of resurgence of COVID-19 cases;
Visitation and services; and
Restoration of survey activities.

Because COVID-19 is affecting communities differently, CMS recognizes that each state and locality will need to individually evaluate how to implement the recommendations. CMS encourages state and local officials to work with their state survey agencies to determine how to implement the phased reopening of nursing homes – whether to require all facilities to go through each phase simultaneously; to group certain regions together as they go through the phases; or to allow individual facilities to move through the phases as they meet the criteria.

Some factors to inform the decisions about relaxing nursing home restrictions include, but are not limited to:

The case status in the community (whether cases are increasing or declining);
Whether the nursing home has access to adequate testing for residents and staff (and laboratory processing of tests);
Whether the nursing home has adequate protocols for screening all persons who enter the facility and for addressing residents or staff who refuse testing; and
Whether the nursing home has adequate control measures – masks, social distancing, and handwashing/sanitizing – along with access to Personal Protective Equipment for staff.

Similar to the federal government’s guidance to state leaders for reopening the economy, CMS’s guidelines for nursing home are not binding on the states. They are, however, prepared with a focus toward keeping residents of nursing homes and their caregivers safe from any further outbreaks of the COVID-19 virus.

CMS releases additional COVID-19 blanket waivers for health care providers

By Daniel Fundakowski on 18 May 2020 Posted in Centers for Medicare & Medicaid Services Regulations, Regulatory Developments

On May 11, 2020, the Centers for Medicare & Medicaid Services (CMS) released a new suite of blanket waivers for hospitals and other health care providers in response to the COVID-19 public health emergency.[1] The blanket waivers have a retroactive effective date of March 1, which extends through the end of the public health emergency declaration and, in CMS’s view, “provide the flexibilities needed to take care of patients during the COVID-19 public health emergency.” The new blanket waivers relate to the following: Continue Reading

CARES Act Relief Funds: HHS updates General Distribution Fund FAQs and extends attestation deadline from 30 days to 45 days

By Daniel Fundakowski and Sonia Nguyen on 15 May 2020 Posted in Centers for Medicare & Medicaid Services Regulations, Regulatory Developments

On May 6, 2020, the U.S. Department of Health and Human Services (HHS) issued additional guidance, by way of updated FAQs, for providers receiving relief from the $50 billion general allocation of the Public Health and Social Services Emergency Fund (known as the Provider Relief Fund) that was appropriated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. And on May 7, HHS announced a 15-day extension for Provider Relief Fund recipients to attest to payments received and accept the Terms and Conditions governing the use of those funds. This extension comes just days prior to the initial deadline that many providers were facing for submitting attestations.

U.S. Department of Education releases higher education grants under CARES Act, but also invokes False Claims Act

By Rick Robinson, Lesley Reynolds, James Segroves and Daniel Fundakowski on 7 May 2020 Posted in Regulatory Developments

Academic medical centers and other health care entities operating within institutes of higher education need to be aware of the compliance risks surrounding the recent release of higher education grants under the CARES Act. On April 21, 2020, the U.S. Department of Education (Department of Education) announced the release of $6.2 billion in connection with the Higher Education Emergency Relief Fund, part of nearly $31 billion in grant funding to the education sector appropriated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The newly released funds will go to institutions of higher education to cover so-called “recipient institutional costs” associated with the significant changes to the delivery of instruction due to the COVID-19 outbreak. In an April 21 press release, Education Secretary Betsy DeVos commented that “the additional funds made available today can be used to expand remote learning programs, build IT capacity, and train faculty and staff to operate in a remote learning environment so that at any moment institutions can pivot quickly.” This release of funds comes just weeks after the Department of Education’s April 9 announcement releasing over $6 billion in funds to colleges and universities to provide direct emergency cash grants to college students whose lives and educations have been disrupted by the coronavirus outbreak.

Similar to how health-care providers must agree to the Terms and Conditions provided by the U.S. Department of Health and Human Services as a condition of receiving CARES Act funds (covered in our prior Client Alert) institutions of higher education are required to sign a Certification and Agreement from the Department of Education to gain access to CARES Act funds. Among other things, the Certification and Agreement includes mandatory reporting requirements, stipulates that the costs to which the funds are directed must have been first incurred on or after March 13, 2020 (the date President Trump declared a national emergency), and contains an acknowledgment that a recipient’s “failure to comply with this Certification and Agreement, its terms and conditions, and/or all relevant provisions and requirements of the CARES Act or any other applicable law may result in Recipient’s liability under the False Claims Act, 31 U.S.C. § 3729” (FCA), among other laws and regulations.

While the CARES Act provides vital funding for institutions of higher education and their students who are forced to manage disruptions caused by the COVID-19 pandemic, it is crucial that these institutions fully understand and are prepared to meet the various conditions and requirements associated with receiving those funds. Access to CARES Act funds comes with significant compliance and reporting obligations and institutions will be expected to demonstrate that funds were used only for the intended purposes, and the failure to comply with these requirements may result in significant liability under the FCA as well as under other statutes and regulations. In fact, given the Department of Education’s deliberate reference to FCA liability in the Certification and Agreement, it is highly likely that federal enforcement agencies will be devoting substantial resources to auditing and monitoring when it comes to the disbursement and expenditure of CARES Act funds, and institutions of higher education should assume that their handling of these funds will receive ongoing scrutiny.

We have prepared a general overview of the CARES Act provisions, including the education provisions, in a prior Client Alert and we have specifically covered the fraud and abuse implications associated with the receipt and expenditure of CARES Act funds in prior Client Alerts located here and here. The Department of Education has also released a detailed set of FAQs to assist institutions of higher education in applying for and using these funds.

Please contact us, or the Reed Smith lawyer with whom you frequently work, to ensure compliance with applicable laws in applying for and utilizing funds under federal programs to avoid enforcement in the future.

HHS Delays Compliance for Sweeping Interoperability and Information Blocking Rules

By Nancy Halstead, Nicole Aiken-Shaban, Vicki Tankle and Lauren Bentlage on 23 April 2020 Posted in Department of Health & Human Services Regulations, Department of Health and Human Services

Following more than a month of silence from the U.S. Department of Health and Human Services (HHS) on the publication of its widely anticipated companion interoperability and information blocking final rules to the Federal Register, HHS’s Office of the National Coordinator for Health Information Technology (ONC) and the Centers for Medicare & Medicaid Services (CMS), in conjunction with the Office of the Inspector General (OIG), issued a joint statement announcing a policy of enforcement discretion to allow compliance flexibilities regarding the implementation of the final rules in response to the COVID-19 public health emergency. The agencies indicated that they would continue to monitor the developing public health emergency to determine if further action is necessary.

OIG Proposed Rule

OIG issued an unpublished proposed rule amending the civil monetary penalty (CMP) regulations to include new CMP authorities for violations of ONC’s information blocking final rule. OIG is seeking comment on when information blocking enforcement should begin, but has proposed to delay enforcement until 60 days after publication of the OIG’s final rule. At a minimum, enforcement would not begin sooner than the compliance date for the ONC final rule established in 45 CFR § 171.101(b), which is November 2, 2020.

CMS Final Rule

CMS announced that the agency is extending the implementation timeline by an additional six months for certain components of its interoperability rule, including, for example, the admission, discharge, and transfer notification Conditions of Participation (CoPs). In the unpublished version of CMS’ final rule, the agency initially stated these CoPs would be effective six months after the publication of the final rule. Now, they will be effective one year after the final rule is published in the Federal Register – a date that is still to be determined. CMS will implement and enforce other policies contained in the final rule on schedule.

ONC Final Rule

Earlier this week, ONC reissued the unpublished version of its final rule, which is now set for publication on May 1, 2020, with an effective date of June 30, 2020. While the publication date triggers multiple compliance dates for various components of the interoperability and information blocking provisions (set at 60 days, 6 months, and 24 months following publication), the agency is changing that timeline for certain requirements in light of the COVID-19 crisis. ONC has published new enforcement discretion dates and timeframes on its website. We have summarized some key changes to the ONC final rule compliance timeline below.

Sweeping “CARES Act” Legislation Will Have Wide Impact on Health Care, Life Sciences Companies

By Debra A. McCurdy on 2 April 2020 Posted in Legislative Developments

The recently passed “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) is sweeping legislation that will have widespread impact on companies in the health care and life sciences space. In addition to expanding coverage of COVID-19 testing and preventive services, the Act includes provisions to address health care workforce needs, eases restrictions surrounding telehealth services during the crisis period, updates the FDA’s over-the-counter drug review process, and authorizes $100 billion for eligible health care providers, among many other things.

Our health care team has drafted a white paper that provides in-depth analysis of major policy and funding provisions in the Act that affect health care and life sciences companies. The white paper, available here, was written by Scot T. Hasselman, Robert J. Hill, Carol Colborn Loepere, Kevin M. Madagan, Paul W. Pitts, James F. Segroves, Nicole J. Aiken-Shaban, Julia Krebs-Markrich, Debra A. McCurdy, John D. Kendzior, Jamie Knauer, Arielle R. Lusardi, Rahul Narula, Sonia T. Nguyen, Sung W. Park, and Ryan M. Pate.

In addition, Reed Smith has published a CARES Act Overview, which covers all portions of the Act, and is compiling additional thought leadership at our CARES Act Resource Center.

HHS expands access to telehealth services in response to COVID-19

By Paul W. Pitts, Rebecca E. Dittrich, James F. Hennessy, Sonia Nguyen and Jamie Knauer on 25 March 2020 Posted in Centers for Medicare & Medicaid Services Regulations, Department of Health and Human Services

As discussed in our client alert, recent legal developments have greatly expanded funding for and access to telehealth services during the COVID-19 crisis.

Among the changes instituted by HHS are expanded Medicare coverage and payment for services, reduced or waived cost-sharing obligations for physicians, and loosening of the HIPAA enforcement policies for covered entities (which can now use any non-public facing platform, e.g. Skype, to deliver telehealth services).

In addition, CMS released new guidance to help state Medicaid agencies better understand how to cover and pay for telehealth services, as well as waived a number of billing rules to allow providers to be reimbursed for services provided. This was accompanied by commercial payors opting to lessen or waive out of pocket costs for COVID-19-related telehealth services.

While these are significant changes impacting the delivery of telehealth services, it’s likely that there will be additional legislative and regulatory changes as the COVID-19 pandemic evolves.

CMS Offers Guidance to Health Care Providers on Limiting Elective Surgeries, Other Nonessential Procedures During Coronavirus Outbreak

By Lesley Reynolds and Janine Tougas on 24 March 2020 Posted in Other CMS Developments

In a recent guidance, the Centers for Medicare & Medicaid Services (CMS) encouraged health care providers (HCPs) to limit elective surgeries and nonessential procedures during the 2019 novel coronavirus (COVID-19) outbreak.

CMS offered a number of recommendations to help HCPs decide how to best serve patients requiring emergent or urgent attention. In addition to clinical evaluation, CMS asked HCPs to consider factors like current and projected COVID-19 cases in their area; current and projected supply of personal protective equipment; availability of staff, ventilators, and hospital beds; the patient’s health and age, and risk of contracting COVID-19 during recovery; and the urgency of the procedure.

For further analysis on this guidance, please see our client alert, “CMS urges providers to conserve resources by limiting elective surgeries, and nonessential medical, surgical, and dental procedures.”

MedPAC recommends Medicare payment updates for 2021 – but all rate bets are off in light of COVID-19

By Debra A. McCurdy on 24 March 2020 Posted in Other Health Policy Developments

The Medicare Payment Advisory Commission (MedPAC) released its 2021 Medicare provider rate update recommendations on March 13, 2020 – the same day President Trump declared a national emergency due to COVID-19. MedPAC’s recommendations were based on an assessment of various Medicare “payment adequacy indicators” that are unlikely to reflect the state of the health care industry in 2021, given the tremendous strain COVID-19 is placing on hospitals, nursing homes, clinicians, and other provider types nationwide. Furthermore, as part of the pending stimulus legislation packages, Congress is likely to legislate 2021 Medicare payment updates and/or other funding policies that recognize the unique costs the health system has incurred during the COVID-19 crisis. Nevertheless, we highlight below key MedPAC recommendations that may help guide the Congressional Medicare policy debate once the public health situation normalizes.

Inpatient and outpatient hospital services: MedPAC recommends that Congress update acute care hospital base rates by 2%. Additional payment would be available through a proposed hospital value incentive program that would replace current hospital quality programs (which is expected to raise aggregate Medicare payments by 3.3% compared to the 2.8% update projected under current law).
Physicians: MedPAC recommends no change to Medicare physician fee schedule rates in 2021. Current law provides no conversion factor update for 2021, although performance-based adjustments may be made under the Quality Payment Program. Note that the Centers for Medicare & Medicaid Services (CMS) announced on March 22, 2020 that it is granting various exceptions and extensions related to Medicare quality reporting requirements as part of its COVID-19 response.
Post-acute care providers: MedPAC reiterated its prior recommendation that Congress implement a unified PPS for post-acute care (PAC) providers, including skilled nursing facilities (SNFs), home health agencies (HHAs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs). In the meantime, MedPAC recommends the following payment updates for 2021:
- A 7% reduction in base payment rates for HHAs.
- A 5% reduction in base payment rates for IRFs.
- Elimination of the SNF rate update.
- A 2% increase in base payment rates for LTCHs.

Hospices: MedPAC recommends no update to hospice rates in 2021. Furthermore, MedPAC calls for wage adjusting the hospice aggregate cap and reducing it by 20%. The report includes a discussion of preliminary results of MedPAC’s Congressionally mandated review of the expansion of the hospital PAC transfer policy to hospice.
Ambulatory surgical centers (ASCs): MedPAC recommends no ASC update for 2021. MedPAC also recommends that CMS require ASCs to submit cost data.
Outpatient dialysis services. MedPAC recommends that Congress update the Medicare end-stage renal disease prospective payment system base rate by the amount determined under current law (projected to be 2.0%).

MedPAC also assesses the status of Medicare Advantage and the Medicare prescription drug benefit. Finally, MedPAC includes Congressionally mandated reports on health care provider consolidation and the potential impact of the 340B Drug Pricing Program on drug spending.

HHS waives requirements for health care providers under section 1135 in response to COVID-19

By Carol Loepere, Scot Hasselman, Nicole Aiken-Shaban, Rebecca E. Dittrich, Arielle Lusardi, Shaylynn Veeder and Kristin Parker on 23 March 2020 Posted in Centers for Medicare & Medicaid Services Regulations, Department of Health and Human Services

Shortly after President Trump declared a national emergency related to COVID-19, CMS issued blanket waivers under section 1135 of the Social Security Act that are intended to ensure there are sufficient health care items and services available to meet the increased need, as well as reduce related administrative burdens on health care providers.

Our comprehensive client alert on this topic discusses:

the 11 categories of blanket waivers issued by CMS – which significantly impact skilled nursing facilities, acute care hospitals, DMEPOS suppliers, long-term care acute care hospitals, and home health agencies;
the process for seeking case-by-case section 1135 waivers;
HIPAA waivers; and
changes to reimbursement requirements for telehealth services.