At the Federal Bar Association’s (FBA) Annual Qui Tam Conference on February 20, 2025, Department of Justice (DOJ) representatives Michael Granston (Deputy Assistant Attorney General for Commercial Litigation) and Jamie Yavelberg (Director of the Fraud Section in the Civil Division) discussed enforcement priorities for the False Claims Act (FCA), including Medicare Advantage, cybersecurity, and pandemic fraud, and emphasized the continuing focus on FCA enforcement. Despite the Trump administration hitting “pause” on FCPA enforcement, FCA enforcement is here to stay.

We lay out the impacts of their comments at the conference and what it means for enforcement priorities by the DOJ in this Reed Smith Client Alert.

The California Attorney General’s Office (AG) unsurprisingly takes an expansive view of how the development, sale, and use of artificial intelligence technology (AI) in healthcare could lead to potential violations of existing California laws. In a recent legal advisory the AG highlights specific areas healthcare organizations should focus on as they develop, train, improve, and deploy AI in connection with patients, plan members, and their data.

In particular, the advisory identifies AI risk hot spots that may trigger certain state consumer protection, anti-discrimination, and privacy/autonomy laws, as described further below.

Continue Reading California AG Explains How Laws May Apply to AI in Healthcare

On January 17, 2025, the Drug Enforcement Administration (DEA) announced a proposed rule to establish a special registration framework for prescribing controlled substance medications via telemedicine in the post-COVID era (the 2025 Proposed Rule).  The DEA  had, in an earlier proposed rule from March 2023 (the 2023 Proposed Rule), rejected the same framework as too burdensome for both prospective telemedicine providers and patients.

In its simplest form, the 2025 Proposed Rule seeks to impose separate special registrations with highlighted regulations on both clinician and platform practitioners who prescribe or dispense Schedule II-V narcotic and non-narcotic controlled substances via telemedicine without an in-person medical evaluation.  The rule is complex, more restrictive than the telemedicine flexibilities allowed during the COVID-19 era, and, more importantly, presents a significant departure from the regulations put forth in the 2023 Proposed Rule.

Considering the uncertainty surrounding the priorities and perspectives of the Trump administration regarding telemedicine prescribing of controlled substances, it remains unclear whether the 2025 Proposed Rule will be finalized as-is or if a different overhaul is forthcoming.

Continue Reading What Does DEA’s Proposed Special Registration Framework for Tele-prescribing Controlled Substances Mean?

The U.S. Department of Health and Human Services (“HHS”), through its Office for Civil Rights (“OCR”), recently issued a “Dear Colleague” letter, Ensuring Nondiscrimination Through the Use of Artificial Intelligence (“AI”) and Other Emerging Technologies, which emphasizes the importance of fairness and equity in AI use in patient care decision support tools (e.g., clinical algorithms and predictive analytics) in connection with certain health programs and activities. While not the law, HHS continues to provide its views about using AI in health care.  See our prior post about another HHS publication that organizations can use as guidance. Specifically, the letter emphasizes the importance of complying with the federal nondiscrimination requirements of Section 1557 of the Affordable Care Act (“Section 1557”).

OCR’s letter confirms that it will enforce Section 1557’s nondiscrimination protections to the use of AI (effective from July 5, 2024) and it will require organizations that participate in certain regulated programs and activities to identify and mitigate risks of unlawful discrimination when using AI (effective on May 1, 2025). We highlight OCR’s guidance on these two enforcement objectives related to Section 1557 below.

Continue Reading HHS Recent Guidance on AI Use in Health Care

On January 15, the Department of Justice (DOJ) reported that False Claims Act (FCA) recoveries for civil cases in fiscal year 2024 totaled approximately $2.9 billion, representing about a $200 million increase from 2023. And these numbers do not account for two major settlements that were reached shortly after the close of the fiscal year that would have added an additional $830 million to the total. Of the total recovered by DOJ in 2024, approximately $1.67 billion (58%) related to matters involving the health care sector. Although a lower percentage of these recoveries related to health care than prior years, the health care sector remains the primary industry under scrutiny.  

For the second year in a row, the total number of qui tam lawsuits increased, demonstrating continued fraud enforcement by the agency and an active environment for private whistleblowers. The 979 qui tam cases filed in 2024 is a new record, blowing past the prior record of 757 cases in 2013 and far exceeding last year’s total of 713. And while the number of government-initiated cases dropped from last year’s record pace, the 423 non qui tam cases filed in 2024 is an order of magnitude higher than any other year since 1986.

This increase in FCA activity comes at a time of uncertainty for the law. As Reed Smith covered last fall, a federal judge in Florida ruled that the qui tam provisions of the FCA violated the Appointments Clause of the Constitution by investing core executive powers into unappointed whistleblowers. That decision followed reasoning in a Supreme Court dissent and is on appeal to the U.S. Court of Appeals for the Eleventh Circuit. Incoming Attorney General Pam Bondi assured senators during her confirmation hearing that she would defend the constitutionality of the provisions.

Continue Reading DOJ exceeds $2.9 billion in FCA recoveries in 2024 and reports a record number of qui tams

In its first advisory opinion of the year, the Department of Health and Human Services Office of Inspector General (OIG) issued a favorable advisory opinion on January 15, 2025 that addressed an arrangement by a pharmaceutical manufacturer to offer certain patients free access to a pharmaceutical product that has limited coverage by Federal health care programs.

The opinion, offers guidance to pharmaceutical companies and administering providers about the mechanics of free or discount programs for their products or services that present low risk of fraud and abuse. The opinion aligns with the OIG’s recent assessment of a supplier’s loyalty program issued in December 2024.

Continue Reading OIG Issues Favorable Opinion on Free Access to Pharmaceutical Products

In an era where cyberattacks on the health care industry have become alarmingly frequent and catastrophic, the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) has taken a bold step forward. The recently issued Notice of Proposed Rulemaking (NPRM) is OCR’s direct response to the escalation of cyber threats and harm paired with perceived pervasive noncompliance with the HIPAA Security Rule across the health care sector. The NPRM introduces many detailed security requirements that far surpass all previous legal mandates from OCR and may set the highest bar in the United States for securing electronic data.

The proposed amendments are not merely incremental updates; they represent a seismic shift in the regulatory landscape. If these changes are finalized as drafted, compliance for many HIPAA-regulated organizations will be a resource-intensive endeavor and may be operationally impossible in such an interconnected industry with a wide range in the sophistication level of stakeholders. In this client alert, we detail what HIPAA-regulated organizations can expect if the rule is finalized later this year.

Reed Smith will continue to follow developments related to the HIPAA Security Rule. If you have any questions about this rule or would like to submit a comment on it, please do not hesitate to reach out to the authors of this post or to your health care attorneys at Reed Smith.

The Department of Health and Human Services Office of Inspector General (OIG) recently issued an advisory opinion related to a proposed arrangement offering discounts to dental providers. This favorable advisory opinion, issued on December 9, 2024, offers fresh guidance and reminders to dental professionals and dental services organizations (DSOs) about how to structure discount programs.

The request for the advisory opinion was submitted by a dental supplies distributor that owns a separate entity (the “Dental Division”) which provides supplies, equipment, and business support services to customers, including dentists, dental specialists, dental laboratories, and DSOs. The requestor currently maintains a customer loyalty program whereby customers earn points on purchases of Dental Division items and services. Customers are eligible for benefits that are established through various tiers, with benefits increasing in value as the customer purchases more items or services.

Opinion focused on expansion of program

The request for the advisory opinion focused on a proposed expansion of this loyalty program, which would:

  • Allow customers to earn points (each worth approximately $0.005) by purchasing items and services from the Dental Division or the requestor’s other subsidiaries (“Participating Entities”);
  • Allow customers to redeem points for discounts on a wide range of dental products (“Redeemable Items and Services”) manufactured and supplied by Participating Entities, so long as the customer is not in the lowest tier of the program; and
  • Establish tiers to the program, based on the customer’s spending history over the 12-month period prior to the customer’s redemption of the points. The tiers would include benefits including priority servicing for in-office equipment, and discounts for in-office service labor rates and education events.

Importantly, each point would be worth a redemption value of $0.005, none of the Redeemable Items and Services would be offered at or below cost, and the points would have no value if not redeemed for Redeemable Items and Services.

Why OIG issued a favorable opinion of the expansion

The OIG explained that the proposed arrangement “would result in two remuneration streams that would implicate the Federal anti-kickback statute,” namely (1) the points given to customers that could be redeemed to reduce the dollar amount paid for Redeemable Items and Services, and (2) providing benefits to customer based on the amount of the customer’s purchases.

The OIG also determined that neither would qualify as a “discount” under the discount exception and safe harbor to the anti-kickback statute. The points would not meet the definition of a “discount” because the points are “other remuneration” and would not reduce the purchase price of Redeemable Items and Services.  Likewise, the tiered benefits based on volume of purchases would not fit the definition of a “discount” because they also include “other remuneration”, like priority services and extended warranties, in addition to discounted support items and services.

Nonetheless, the OIG concluded that the proposed expansion of the loyalty program contained certain features mitigating against administrative sanctions under the federal anti-kickback statute:

  • The current dollar value of each point ($0.005) was low enough that it would “somewhat mitigate” the risk of steering customers generally.
  • Points could be used toward the discounted purchase of approximately 200,000 items offered.
  • The program would not permit the points to be redeemed for free items or services, as nothing is offered below cost or for free.
  • The rewards offered within the tiered benefits are not independently valuable and are tied specifically to the products or services purchased by the customer (and therefore, inherently different from more problematic incentives such as concert or sports tickets, travel, or personal gifts, “which encourage improper steering or foment unfair competition”).
  • The tiers would not provide new, independently valuable rewards when moving up a tier, but rather “simply provide a more thorough array of customer support services.”

While OIG’s advisory opinions are binding only on the requestor, given the OIG’s analysis and opinion, entities interested in implementing similar discount or membership programs would be wise carefully to assess the proposed loyalty program. Among other things, if the program does not squarely fit within the discount safe harbor, it would be important to avoid the clearly noted problematic practices, such as offering independently valuable rewards in a tiered benefit program, offering items and services for free or for below cost, or offering points redeemable for only certain products or services or in return for lavish rewards.

Red Smith will continue to follow developments in health care fraud and abuse enforcement. If you have any questions about this advisory opinion or have an arrangement that you would like to seek an advisory opinion on, please do not hesitate to reach out to the health care attorneys at Reed Smith.

A year after issuing its General Compliance Program Guidance, the Department of Health and Human Services Office of Inspector General (“OIG”) has published the first industry-specific compliance guidance with  “Industry Segment-Specific Compliance Guidance for Skilled Nursing Facilities and Nursing Facilities” (the “Nursing Facility ICPG”). 

Notably, it has been more than 16 years since the OIG last offered a comprehensive update in this space as the last major update was in 2008. This new update is intended to address the significant changes in the nursing facility industry since 2008, including changes in business practices and the way that nursing facilities receive reimbursement for services.

Overview of OIG’s Guidance

Unlike the broader General Compliance Program Guidance (“GCPG”), which applies to all individuals and entities in the health care industry, the Nursing Facility ICPG is specifically tailored to nursing facilities. The OIG has emphasized that both the Nursing Facility ICPG and the GCPG are voluntary and nonbinding andare separate from and meant to complement the Centers for Medicare & Medicaid Services (CMS) Compliance Program Requirements of Participation, which are mandatory for any facilities participating in those federal health care programs.

The Nursing Facility ICPG identifies and provides risk mitigation recommendations for four potential compliance risk areas for skilled nursing facilities (“SNFs”) and nursing facilities (“NFs”): (1) quality of care and quality of life; (2) Medicare and Medicaid billing requirements; (3) federal Anti-Kickback Statute (“AKS”) considerations; and (4) other risk areas, such as related-party transactions, the physician self-referral law, and Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).  We discuss each area below.

Compliance Risk Areas for SNFs and NFs

Quality of Care and Quality of Life

Because nursing facilities serve as both the location where residents receive medically necessary care and a home where they reside while receiving care, it is essential for nursing facilities to provide quality of care and quality of life for residents.  To even participate in Medicare and Medicaid, nursing facilities must expressly agree to comply with regulations related to standards of care and must certify that services are provided in compliance with applicable rules. If a facility does not provide care that meets the professional standards of quality or does not render services in an environment that promotes quality of life, then those claims for reimbursement may be considered false. Therefore, failure to provide quality care and promote quality of life poses a risk of submitting a false claim to Medicare or Medicaid, which could result in substantial civil and criminal penalties for the provider.  The OIG and DOJ have increasingly used substandard quality of care as the basis for investigations and enforcement actions, with the OIG imposing Quality of Care Corporate Integrity Agreements (“CIAs”).

OIG’s Material Recommendations:

  • Increase registered nurse and overall nurse staffing.  Consider hiring a qualified director of nursing, regularly recognizing staff members’ outstanding performances, and investing in necessary technologies to improve efficiencies.
  • Develop and implement individualized resident care plans and creating enriching activities. Develop policies that encourage open communication in care planning meetings and provide the activity director with discretion to develop creative activities.
  • Manage changing resident demographics.  Develop a system of clear admissions standards and, before admitting each potential new resident, ensure that the facility has the resources to provide services to the potential resident.
  • Facilitate medication management safety. Offer training to familiarize all staff involved in resident care with proper medication management practices and documentation requirements.
  • Mitigate the risk of inappropriate use of medications and minimizing the potential for conflicts of interest to impact pharmaceutical decisions.  Require consistent documentation of the appropriate use of medication and consider having separate contracts for consultant pharmacist services and for long-term pharmacy services.
  • Mitigate resident safety risks.  Consider adopting a Resident Safety Program consisting of continual monitoring of adverse events and quality of care issues.

Medicare and Medicaid Billing Requirements

Ensuring compliance with Medicare and Medicaid billing requirements allows for continued participation in the programs and safeguards individuals and entities from criminal prosecution under the False Claims Act or civil liability under the Civil Monetary Penalties Law.

Material recommendations from OIG include:

  • Address risks associated with claim preparation and submission under the SNF Prospective Payment System (PPS).  Invest in training to ensure clinical and billing staff fully understand the new requirements for billing Medicare under the SNF PPS. Conduct reviews and audits to confirm that coding accurately reflects residents’ characteristics and comorbidities.
  • Emphasize the importance of data accuracy for value-based payment models and programs (including the SNF Value-Based Purchasing Program).
  • Ensure nursing facilities do not bill Medicare Advantage Prescription Drug plans or Part D Prescription Drug Plans for prescriptions covered by part D when an individual is in a covered Part A stay.
  • Mitigate risks when educating residents regarding health plan enrollment decisions to ensure efforts do not lead to inappropriate steering towards a particular plan.

Federal Anti-Kickback Statute

Because nursing facilities are in a position to obtain and make referrals of federal health care program business from other providers (such as hospices, physicians, laboratories, other health care professionals, and other nursing facilities), nursing facilities must comply with the federal Anti-Kickback Statute (“AKS”).  Therefore, nursing facility arrangements must materially satisfy an AKS safe harbor to be protected.  Examples of applicable safe harbors for nursing facilities may include, but are not limited to, the following:

  • Investment interests (42 C.F.R. § 1001.952(a))
  • Space rental (42 C.F.R. § 1001.952(b))
  • Equipment rental (42 C.F.R. § 1001.952(c))
  • Discounts (42 C.F.R. § 1001.952(h))
  • See pg. 34 of the Nursing Facility ICPG for more examples

Material recommendations from OIG include:

  • Whenever possible, nursing facilities should structure their arrangements to meet all conditions set forth in a safe harbor, which would protect the applicable arrangement from sanctions under the AKS. Consider not only the written arrangement documenting the agreement (if any) but how the arrangement is actually conducted as the AKS is an intent-based statute.
  • Document factors that mitigate the fraud and abuse risk in the arrangement before payment to the provider of supplies or services. For example, maintain documentation regarding formal fair market valuations conducted or other factors used to informally determine compensation is at fair market value (“FMV”) (e.g., compensation for similar arrangements involving nursing facilities of similar size).
  • Monitor arrangements to ensure they continue to be consistent with any features intended to mitigate fraud and abuse.
  • Scrutinize goods and services arrangements provided for free (or FMV) between nursing facilities and referral sources because these arrangements could be interpreted as vehicles to disguise an unlawful payment for referrals of federal health care program business.
  • Structure discount arrangements to meet the discounts safe harbor.  To qualify for the safe harbor, the discount must be a reduction in the amount the nursing facility is charged for an item or service based on an arm’s-length transaction.
  • Do not accept free (or below FMV) goods or services from a long-term care pharmacy.
  • Carefully monitor any remuneration exchanged with hospitals and hospices to ensure the renumeration is not intended to induce or reward referrals. 
  • Exercise caution when considering and entering into joint ventures, and where possible, structure joint ventures to meet an AKS safe harbor (e.g., small entity investments, care coordination arrangements, value-based arrangements with substantial downside financial risk or full financial risk).

Other Risk Areas

OIG briefly touches on other compliance risk areas, which are discussed briefly below.

  • Related-Party Transactions: OIG is particularly concerned about “tunneling” – the practice of misrepresenting or hiding profitability by overstating payments for operational expenses that are funneled to related parties. Tunneling in the nursing facility industry appears in (1) real estate transactions when a nursing facility sells its building and land to a commonly owned company and then leases the property back at higher than FMV; and (2) management or administrative services arrangements with commonly owned companies where the nursing facility pays higher than FMV for those services.
  • Physician Self-Referral Law (the “Stark law”):  SNF services covered by Medicare Part A PPS payment are not considered designated health services (“DHS”) under the Stark law, but nursing facilities may perform and bill services other than SNF services covered by the Medicare Part A PPS payment. These services could include laboratory services, physical therapy, occupational therapy, and outpatient speech-language pathology services, which are DHS and thus making the nursing facility a DHS entity.  OIG recommends that DHS entities should review all financial relationships with physicians who may refer DHS and the immediate family members of such referring physicians and ensure that these relationships satisfy all elements of an applicable Stark law exception in order to be protected.
  • Anti-Supplementation: Nursing facilities must accept the applicable Medicare or Medicaid payment for covered items and services as payment in full and may not charge the enrollee any amount in addition to what is otherwise required.
  • HIPAA Privacy, Security, and Breach Notification Rules: Most nursing facilities are considered “covered entities” under HIPAA because they are health care providers that conduct certain health care transactions electronically.  Therefore, most nursing facilities must comply with HIPAA.
  • Civil rights: Nursing facilities must comply with applicable civil rights laws, which prohibit discrimination.

Main Takeaways from the Nursing Facility ICPG

While Compliance Program ROPs represent a mandatory floor for nursing facility compliance, the Nursing Facility ICPG provides suggestions to reach a voluntary ceiling.  For nursing facilities looking to assess current compliance practices or implement new programs, the Nursing Facility ICPG is a useful starting point that provides a framework upon which facilities may build.

Reed Smith will continue to track developments with the OIG expected release of further Industry-Specific guidance if you have any questions about this topic, please reach out to the Health Care Lawyers at Reed Smith.

The U.S. Department of Health and Human Services Office for Civil Rights (“OCR”) will start to enforce compliance later this month with new special protections for individuals’ reproductive health information as required by a recently finalized HIPAA Privacy Rule, as we noted in an earlier blog post. While the incoming Trump Administration may change enforcement priorities or even rescind that rule, a settlement from OCR that pre-dated implementation of that rule indicates that OCR already affords this information protection.

The settlement marks OCR’s first enforcement action and settlement against a health care provider centered around, and specific to, an impermissible disclosure of an individual’s reproductive health information under the existing Privacy Rule standards. In other words, regardless of whether the incoming administration rescinds or revises the new protections for reproductive health information, OCR has demonstrated that it considers reproductive health information as highly sensitive and will take enforcement action accordingly under the HIPAA Privacy Rule as it is today.

Organizations would be well advised to take the remaining time before the December 23 compliance date to update existing policies to define the scope of reproductive health care-related protected health information (PHI) within the organization and set forth standards and procedures for how the organization will implement compliance with the new requirements including, for example, how the organization will assess and respond to third-party requests for reproductive health care-related PHI, including situations in which an attestation is required.

Details of the Settlement

In September 2023, OCR received a complaint alleging that a Pennsylvania hospital disclosed a female patient’s PHI, including information related to reproductive health care, to the patient’s prospective employer without her authorization. The information disclosed included, among other things, the patient’s surgical history, gynecological history, and obstetric history. In a complaint to OCR, the patient alleged that she had requested that the hospital send one specific test result, unrelated to her reproductive health, to a prospective employer. However, OCR’s investigation determined that the hospital (1) disclosed the patient’s full medical record, including reproductive health information, to the patient’s prospective employer; (2) did not have the patient’s authorization to disclose her full medical record; and (3) did not meet any applicable requirement or permission under the Privacy Rule that would permit such a broad disclosure.

As a result of its investigation, OCR reached a $35,581 settlement with the hospital, which requires the hospital to implement a corrective action plan that will be monitored by OCR for two years. The corrective action plan includes specific steps that the hospital must take to comply with HIPAA (such as developing and revising policies and procedures, training all personnel) and protect patient privacy to prevent this from happening again.

What it Means

As this settlement predates the new HIPAA protections for reproductive health information, it reinforces the importance for organizations to ensure that it is in compliance both with currently existing HIPAA rules as well as the new protections for reproductive health information.

Be cautious when reviewing “all records” requests to ensure compliance with the new reproductive health information standards.

Reed Smith will continue to follow developments with regard to reproductive health care and privacy. If you have any questions about how the updated Privacy Rule applies to your business, please reach out to the authors of this article or the health care lawyers at Reed Smith

In the final 2025 Medicare Physician Fee Schedule, which is set to be published in the Federal Register on December 9, the Centers for Medicare and Medicaid Services (CMS) included substantive changes to the regulations governing when a provider must report and return a Medicare overpayment in order to avoid liability under the False Claims Act (FCA).

In a recent client alert, we detail the changes to the overpayment regulations. These include bringing the definition of an overpayment into line with the FCA knowledge standard and codifying a suspension of the required 60 day refund period for initial findings of an overpayment obligation during an up to a six-month period of good-faith investigation that will allow Medicare Part A and Part B providers to examine their records and determine if they received any related overpayments that will also need to be addressed.

The rule, which takes effect on January 1, 2025, is within the window of rules that could be examined by the new Congress or rescinded by the incoming administration. However, we think that the nature of the changes and reasons for those changes would make that unlikely.

Reed Smith will continue to follow developments with regard to the False Claims Act and Medicare regulations. If you have any questions, please do not hesitate to reach out to the health care lawyers at Reed Smith.

On October 21, 2024, the U.S. Department of Health and Human Services, Labor Department, and the Treasury Department (collectively “the Departments”) jointly released a proposed rule that would require insurers to expand coverage of and eliminate cost sharing on certain preventative services, including over-the-counter (“OTC”) contraceptive items and certain Food and Drug Administration (“FDA”) approved prescription birth control medications. The rule would require private health plans to provide new disclosures to beneficiaries regarding coverage of these services with no cost-sharing obligations.

According to the fact sheet issued by the White House, the rule if finalized would expand free birth control coverage for 52 million American women of reproductive age who are covered by private health insurance and would reduce barriers to coverage of contraceptive services, including OTC contraceptives.

However, there is some complexity to the finalization of this rule. The incoming Trump administration could follow the recommendations of Project 2025 and rescind this rule in whole or in part. Additionally, if the rule is finalized, it currently falls within the Congressional Review Act look-back period and that could result in a Republican-controlled Congress disapproving the rule in its entirety next year.

Continue Reading Proposed Rule Could Enhance Contraceptive Coverage If It Survives New Administration

The 2024 elections created a bit of a mixed result for reproductive rights in the United States. A number of states passed ballot initiatives designed to increase access to abortion and reproductive health services. However, at the same time, Donald Trump was elected back into the office of the President and Republicans appear to have been able to secure a majority in both houses of Congress. As a result, 2025 could quickly mean that many of those advancements in reproductive rights could face significant restrictions or at least strong headwinds from the federal government.

We have composed a client alert detailing many of the ways that the 2024 election results could impact reproductive rights. The alert details the state ballot initiatives that were passed as well as aspects of federal law that could be used to restrict access even in states that have voted to increase access to abortion and other reproductive health services. This can include restrictions on the prescription and dispensing of the pharmaceuticals required for medication abortion as well as uses of existing federal laws to further restrict access to reproductive health services.

Reed Smith will continue to follow developments in both the federal and state regulation of reproductive rights. If you have any questions, please do not hesitate to reach out to the health care lawyers at Reed Smith.

California’s new law, SB 1120, set to take effect on January 1, 2025, regulates how health care service plans (HCSPs) and disability insurers use automated decision-making tools, such as artificial intelligence, to analyze medical necessity in utilization reviews affecting California enrollees. Compared to federal guidelines, this law is more prescriptive, requiring HCSPs and disability insurers that use automated decision-making tools to base decisions on individual clinical data, and ensure only health care professionals – not the tools – deny, delay, or modify provision of health care based on medical necessity determinations, among other requirements.

In this Reed Smith Client Alert, we highlight the new California law’s requirements, potential risks, and considerations for health plans and disability insurers. Compliance may take time, pose significant challenges, and be subject to periodic audits or compliance reviews by regulators.

Reed Smith will continue to track developments in the regulation of AI in health care. If you have any questions about the contents of this client alert or about the use of AI in your business, do not hesitate to reach out to us.

This month, the Centers for Medicare & Medicaid Services (CMS) has begun an off-cycle revalidation process directed at all Medicare-participating skilled nursing facilities (SNFs). The process is designed to implement provisions of the Affordable Care Act (ACA) that require facilities to detail their ownership structures and key managerial personnel.

CMS is seeking information about ownership of SNFs by private equity firms and real estate investment trusts (REITs). In September, CMS revised Form 855A to require a SNF to report those types of ownership interests. The agency has also released a guidance document detailing the requirements and how a SNF should go about filling out the form.

CMS indicated that it would seek this off-cycle revalidation process as part of its effort to implement the disclosure requirements of Section 1124(c) of the Social Security Act (42 U.S.C. § 1320a-3(c)) in a Final Rule issued in November 2023 (88 Fed. Reg. 80,141).

Continue Reading CMS Ramps up Process for Identifying Private-Equity Ownership of SNFs

Are the qui tam provisions of the False Claims Act an unconstitutional delegation of authority to private citizens? One federal court, accepting an invitation from a Supreme Court dissent, ruled the answer is yes.

In an opinion issued yesterday dismissing a False Claims Act case, Judge Kathryn Kimball Mizelle of the U.S. District Court for the Middle District of Florida ruled that the statute’s provisions that permit a private citizen to bring a claim for a violation of the False Claims Act in the absence of intervention by the Federal Government are an unconstitutional delegation of executive authority that violated the Appointments Clause of Article II of the Constitution.

According to the court, the qui tam provisions, as strengthened by the False Claims Act Amendments Act of 1986 (Pub. L. No. 99-562), established a mechanism whereby “unaccountable, unsworn, private actors” are permitted “to exercise core executive power with substantial consequences to members of the public.” The court ruled that such a provision was unconstitutional as it permitted a private citizen to stand in as the “avatar in litigation” in which the interest of the United States is in issue.

Continue Reading Are False Claims Act Whistleblower Cases Unconstitutional?

The Office of Inspector General of the Department of Health and Human Services (OIG) has published an unfavorable advisory opinion involving a proposal by a Medicare Advantage Organization (MAO) offering Employer Group Waiver Plans (EGWPs) to share a percentage of its savings with certain groups to which it provides coverage.

With this advisory opinion (AO 24-08) OIG highlighted how it analyzes certain risk-sharing arrangements for managed care organizations and found that this particular arrangement did not present a sufficiently low enough fraud and abuse risk under the federal Anti-Kickback Statute (AKS).

Continue Reading OIG Issues Unfavorable Opinion on Medicare Advantage Gainsharing Arrangements

The U.S. Department of Health and Human Services (HHS) has published its Plan for Promoting Responsible Use of Artificial Intelligence in Automated and Algorithmic Systems by State, Local, Tribal, and Territorial Governments in the Administration of Public Benefits (AI Plan for State and Local Governments). It shows the agency’s current thinking on managing risk from AI use and explains how HHS allocates various AI use cases into risk categories and recommends steps that can be taken to mitigate potential harm from their use.

In this Reed Smith Client Alert, we highlight how private organizations can use the AI Plan for State and Local Governments as a source of guidance on what the regulator considers responsible implementation of AI. Organizations that deferred the creation or full implementation of an AI governance program until they received clear requirements or expectations issued by HHS may now have what they need.

Reed Smith will continue to track developments in the regulation of AI in health care. If you have any questions about the contents of this client alert or about the use of AI in your business, do not hesitate to reach out to the attorneys at Reed Smith, LLP.

The Department of Health and Human Services Office of Inspector General (“OIG”) recently issued a favorable advisory opinion regarding whether a proposed patient assistance program (“PAP”) would run afoul of Federal antifraud statutes.

Under the proposed PAP, a nonprofit organization would subsidize certain cost-sharing obligations for low-income Medicare enrollees who have diabetes and reside in a specified rural area. Although the PAP displayed the potential for the generation of prohibited remuneration and did not fall under a safe harbor for either the Federal Anti-kickback Statute (AKS) or the beneficiary inducement provisions of the Civil Monetary Penalties statute (CMP), OIG stated that it would not impose administrative sanctions on the requesting entity.

While this advisory opinion is only applicable to the specific program at issue and can only be relied upon by the requestor, there are some potential considerations that could be applied more broadly to other arrangements.

Continue Reading HHS OIG won’t enforce antifraud statutes against patient assistance program

The use of artificial intelligence (AI) in research and development and the research and development of AI solutions themselves create far reaching legal and policy questions in the clinical research context.

In one of the latest installments of Reed Smith’s video series “AI explained”, Reed Smith attorneys Nancy Bonifant Halstead and Sarah Thompson Schick provide an overview of the important legal and policy considerations raised by (1) research and development of AI solutions that require access to patient data and (2) AI used in the design and implementation of clinical trials.

The video covers how existing aspects of U.S. law, particularly HIPAA and the Common Rule, have historically balanced individual privacy rights with public health goals. They also discuss whether the introduction of AI requires a change to this balancing act. In addition, both discuss FDA and industry efforts to navigate how, and to what extent, AI can or should be used in life sciences research and development activities and highlight key areas of opportunity and concern.

To watch the full video on YouTube, please click here.