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.

The Department of Health and Human Services Office of Inspector General (OIG) recently issued two advisory opinions related to proposed arrangements offering financial assistance to individuals who receive gene therapy treatments. These arrangements were specifically targeted to patients who may suffer from infertility as a result of the treatments’ required chemotherapy-based fully myeloablative conditioning (Conditioning).

While proposed arrangements for travel support (as discussed below and in a June 14, 2024 advisory opinion) appear to receive approval from OIG, other proposed financialsupports for infertility services have received unfavorable opinions primarily because of a lack of data available to OIG regarding whether the proposed assistance would improve the ability of patients to access the gene treatment therapies.

These unfavorable decisions effectively chill arrangements to provide additional financial support to individuals who are enrolled in federal and state health care programs and require gene therapy treatments, though OIG has indicated that it may issue favorable decisions in the future if it receives additional data.  

Continue Reading OIG Issues Opinions On Arrangements Involving Gene Therapy Treatments

In its recently released 2025 proposed Medicare Physician Fee Schedule (“MPFS”), the Centers for Medicare & Medicaid Services (“CMS”) proposed two important modifications to the Medicare 60-day overpayment refund rule—a new “identified overpayment” standard and codification of a 6-month timeframe to investigate and quantify an overpayment.

A product of the Affordable Care Act, the 60-day rule requires a person to report and return Part A and B overpayments within 60 days of identification. In 2016, CMS clarified that an overpayment is “identified” when a person, “through the exercise of reasonable diligence,” should have identified and quantified an overpayment. In the preamble to the 2016 rule, CMS established that “reasonable diligence” is demonstrated through a timely, good faith investigation, which is, at most, 6 months from the receipt of credible information of a potential overpayment.

Continue Reading CMS Revisits Medicare Overpayment Standards in 2025 Physician Fee Schedule

The Centers for Medicare & Medicaid Services (“CMS”) and the Office of the National Coordinator for Health Information Technology (“ONC”) have released a final rule establishing “disincentives” (i.e., penalties) for health care providers that participate in certain Medicare payment programs who have engaged in information blocking, as determined by the HHS Office of Inspector General (“OIG”).

The rule continues to signal the federal government’s commitment to encouraging permitted access to and exchange of electronic health information. The rule summarizes elements of the June 2023 OIG final rule, which established penalties for information blocking for certified health IT developers, health information networks, and health information exchanges. The rule also details the procedures that OIG will follow when investigating potential health care provider information blocking claims. There is a wide range of health care providers subject to the rule including, hospitals, physicians, nursing facilities, group practices, pharmacies, and certain eligible professionals participating in Medicare and Medicaid programs, among others, and disincentives are not limited to HIPAA-regulated entities or to healthcare providers who use ONC-certified health IT.

OIG investigation process

OIG investigations of potential information blocking will focus on activities that:

  • resulted in, are causing, or have the potential to cause patient harm;
  • significantly impacted a provider’s ability to care for patients;
  • persisted for a long time; and
  • caused financial loss to federal health care programs or other government or private entities.

If OIG finds that information blocking has occurred, OIG will send a referral report to the appropriate agency, and the health care provider may then be subject to each disincentive that is applicable to the health care provider. The agency must then give notice to the health care provider, and the notice must include (a) a description of the practice(s) that formed the basis of OIG’s information blocking determination; (b) the basis for the disincentive(s) being imposed; (c) the effect of each disincentive; and (d) any other information necessary for the health care provider to understand how the disincentives will be implemented.

After any available appeals have been completed and each applicable disincentive has been applied, ONC will publicly post information about health care providers who have committed information blocking in order to provide transparency into how and where information blocking is occurring within the nationwide health information technology infrastructure. This publicly-posted information will include (i) a description of the information blocking practice(s); (ii) the identity of the health care provider(s) who committed the actions; (iii) which disincentives were applied, and (iv) where to find any other relevant information about the OIG’s determination.

Disincentives that apply

The rule finalizes penalties for health care providers who engage in information blocking under three Medicare payment programs: the Medicare Promoting Interoperability Program; the Quality Payment Program; and the Medicare Shared Savings Program. The information blocking penalties will vary based on the provider type and payment system.

  • Under the Medicare Promoting Interoperability Program disincentive, hospitals that commit information blocking will not be considered meaningful electronic health record (“EHR”) users in the applicable reporting period and will lose 75% of the annual market basked increase (for critical access hospitals, payment would be reduced to 100% of reasonable costs instead of 101%). The Medicare Promoting Interoperability Program disincentive does not apply to rehabilitation hospitals, laboratories, psychiatric hospitals, and many long-term care hospitals. This penalty becomes effective July 31, 2024.
  • Under the Quality Payment Program, physicians, including a group practice, that commit information blocking will not be considered meaningful EHR users and will receive a zero score in the Promoting Interoperability performance category of the Merit-based Incentive Payment System (“MIPS”). Importantly, the rule clarifies that if an individual physician commits information blocking, the disincentive will only apply to the individual even if the individual reports as part of a group practice. This penalty becomes effective July 31, 2024.
  • Under the Medicare Shared Saving Program (“MSSP”), Accountable Care Organizations (“ACOs”), ACO participants, and ACO providers or suppliers that commit information blocking will be ineligible for the Medicare Shared Savings Program for at least one year and will not receive revenue that they earned. This penalty becomes effective January 1, 2025.

Before applying a penalty, OIG will consider relevant facts and circumstances, including the nature of the health care provider’s information blocking, the health care provider’s diligence in identifying and correcting the problem, the time since the information blocking occurred, and whether the health care provider was previously subject to a disincentive in another program. Of note, health care providers will not be penalized for information blocking conduct attributed to a health IT developer and there will be no double penalty for providers who participate in multiple CMS payment programs (i.e., MIPS and MSSP).

When the rule will take effect

OIG will begin investigating health care providers for information blocking beginning July 31, 2024, and OIG will exercise its enforcement discretion whether to make any determinations regarding conduct that occurred prior to July 31, 2024. Presently, the rule does not apply to healthcare providers that are not enrolled in Medicare or that do not participate in the Medicare payment programs specified above. As such, HHS also stated that it is open to establishing additional disincentives and that it will continue to consider new disincentives that would apply to all health care providers in future rulemaking.

Information blocking regulations have been effective since April 5, 2021, and HHS has emphasized its desire to begin enforcement without delay because providers have been given a significant phase-in period and adequate time to implement compliant information sharing practices. Presently, anyone can submit an information blocking complaint to the ONC Information Blocking Portal or the OIG Hotline.

In addition to HHS information blocking enforcement, information blocking litigation has also increased. For example, in a federal court case in Maryland (Real Time Medical Systems, Inc. v. PointClickCare Technologies, Inc., 8:24-cv-00313, D. Md.) a judge is set to rule on a request from an electronic medical records company to restrict a nursing home analytics company from automated access to its online repositories through the use of CAPTCHA tests that were solvable by humans but slowed the nursing home analytics company’s access to patient data.

As information blocking enforcement continues to increase, we will gather more evidence on what practices constitute information blocking. To prepare, health care providers should ensure that organizational policies and procedures are aligned with information blocking regulations, internal processes do not prevent or materially interfere with electronic health information access, exchange or use, and workforce members are educated on these policies and practices.

Reed Smith will continue to follow developments with regard to the HIPPA information blocking regulations. If you have questions please do not hesitate to reach out to the author or any of the health care lawyers at Reed Smith.

The fallout from last week’s Loper Bright/Relentless opinion by the U.S. Supreme Court that prospectively eliminated Chevron deference is still not fully clear, but Reed Smith has put together a Chevron Deference Resource Center where we will gather perspectives and events to help guide industry stakeholders through the new post-Chevron world.

The Resource Center will continue to build in the coming months, but right now it includes two major client alerts, one on the general impacts of the decision and one on the impacts of the decision on the complex regulatory regime overseen by the U.S. Food and Drug Administration (FDA). Additionally, there is an invitation to attend a webinar on the impacts of the decision which will be hosted next week by Reed Smith experts.

General impacts of the decision

To examine the ripple effects of the decision across regulated industries  Selina P. Coleman, David A. Bender and Matthew K. Loughran from the firm’s Life Sciences Health Industry Group, Jonathan T. Ammons from the Energy & Natural Resources Industry Group, Edward B. Schwartz of the Global Regulatory Enforcement Group, and Hadas A. Jacobi from the Financial Industry Group have penned a client alert detailing the expected challenges and opportunities facing industry stakeholders as a result of the decision.

Additionally, many of the same experts will be joined by Emily L. Hussey of the Life Sciences Health Industry Group, Kasey J. Curtis from the Appellate Group and Amanda E. Brown from the Labor & Employment Group in hosting a webinar on Wednesday, July 11 at 2:30 PM EDT. The focus of the webinar will be on expected impacts of the decision across multiple regulated industries.

FDA-specific impacts of the decision

Of particular interest is how the decision will impact the regulatory regime governed by the FDA. Within the firm’s Life Sciences Health Industry Group a group of experts who focus on FDA regulatory matters — Emily L. Hussey, Rebecca Jones McKnight, Rachael G. Pontikes, Cori Annapolen Goldberg, Sarah Thompson Schick, Sung W. Park, and Akosua Tuffuor — have written a client alert on the impacts of the decision on the FDA regulatory process. That process, which includes determinations of what types of products are even within the FDA’s jurisdiction and other statutory interpretations by the agency could be upended by the Court’s opinion.

Reed Smith will continue to track the fallout from the Loper Bright/Relentless opinion. If you have questions please check the Chevron Deference Resource Center and don’t hesitate to reach out to the lawyers at Reed Smith.

The Supreme Court’s decision last week in the companion cases of Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce overturned the Court’s prior precedent in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., and, in the process, upended 40 years of administrative law practice by requiring a court that is reviewing a challenged administrative rule to rely on its own judgment in resolving ambiguities in the governing statute instead of relying on a reasonable agency interpretation of the statute.

The end of Chevron deference as it is known will mean different things for different industries, but one thing is clear: all regulated industries will have to grapple with this new administrative law landscape.

Reed Smith is hosting a webinar featuring members of the firm focused on many of the highly regulated industries, such as Health Care and Life Sciences, Energy, and Banking. Registration for the webinar is available here.

The webinar, scheduled for July 11 at 2:30 pm EDT will have a panel consisting of: Selina P. Coleman, Emily L. Hussey, and David A. Bender from the firm’s Life Sciences Health Industry Group,  Hadas A. Jacobi from the Financial Industry Group, Kasey J. Curtis from the Appellate Group, Jonathan T. Ammons from the Energy & Natural Resources Industry Group, and  Amanda E. Brown from the Labor & Employment Group.

Reed Smith has also prepared a number of client alerts that will focus on the impact that the Loper Bright decision will have on various regulated industries. As those are released, their authors will share them with you on this blog.

Reed Smith will continue to follow developments in the new administrative law world that will emerge after the end of Chevron deference. If you have any questions, please don’t hesitate to reach out to the lawyers at Reed Smith.

The Department of Health and Human Services Office of Inspector General (“OIG”) recently issued a favorable advisory opinion that relates to whether two drug assistance programs would run afoul of the Federal anti-kickback statute (“AKS”).

In good news for the entity that requested the opinion, a United States corporate affiliate of a pharmaceutical manufacturer of the drug at issue (the “Requestor”), the OIG stated that it would not impose administrative sanctions for either program, despite the potential to generate prohibited remuneration under the AKS.  Although the advisory opinion is only applicable to the specific programs at issue and can be relied upon only by the Requestor, there are some potential considerations that could be applied more broadly to other arrangements.

Continue Reading OIG Issues Favorable Opinion on Drug Assistance Programs

This post was co-authored by Megan E. McWaters, a Reed Smith summer associate.

In a unanimous decision, the U.S. Supreme Court overturned a ruling by the U.S. Court of Appeals for the Fifth Circuit which had placed doubt on the continuing efforts by the U.S. Food and Drug Administration (FDA) to regulate the dispensing of mifepristone, one of the drugs used in a medication abortion.

The decision, written by Justice Kavanaugh, held that the doctors and associations who initially brought the challenge in the Northern District of Texas did not have sufficient standing to bring their claims before a federal court. The doctors involved in the suit do not prescribe or dispense mifepristone, and according to Justice Kavanaugh, nor would they be forced to provide even emergency abortion care to patients as a result of the FDA’s approval of the drug.

Continue Reading Supreme Court Decision Leaves FDA Approval of Mifepristone Untouched, But For How Long?

On June 17, 2024, the Department of Health and Human Services Office of Inspector General (OIG) issued an advisory opinion, approving a plan to provide assistance with travel, lodging, meals, and other associated expenses for qualifying patients receiving a gene therapy product.

OIG determined that it would exercise its enforcement discretion by declining to impose administrative sanctions on gene therapy product manufacturer under the Federal Anti-kickback Statute (AKS), despite finding that the arrangement would generate prohibited remuneration if the requisite intent were present. Additionally, OIG found that the arrangement satisfies the “Promote Access to Care” Exception to the Beneficiary Inducements Civil Monetary Penalties law.

Continue Reading OIG Approves Travel and Lodging Assistance for Patients Receiving Gene Therapy

As Reed Smith has previously covered, an issue before the Supreme Court that could be decided this week could bring a seismic shift in the balance of power between agencies and courts, upend regulatory certainty, and open new opportunities for regulated industries, including health care. 

The Supreme Court’s pending decision in a pair of cases governing Commerce Department regulations warrants attention because it may bring new uncertainty to the operating environment, and could change how all regulated industries interact with agencies, lawmakers and courts, as outlined below:

  1. Currently, Chevron deference, a core principle of administrative law for forty years, has told courts that where a statute is ambiguous, the court should defer to the agency on any reasonable reading of that statute, even if the court disagrees with the reading.  
  1. The Supreme Court will soon issue an opinion in two cases—Relentless v. Dep’t of Commerce, and Loper Bright Enters. v. Raimondo—in which the petitioners have asked the Court to overrule Chevron deference. 
  1. The Supreme Court seems to be seriously considering whether to overturn or modify Chevron deference, although there were vigorous questions about the effects of doing so during oral arguments.   A decision is expected in the coming weeks.
  1. If judges, not agencies, will have the final say in what ambiguous statutes mean, that will carry potential implications and opportunities for health care and other highly-regulated industries, which include:

Potential Implications

  • May chill agencies from more expansive coverage and other interpretations.
  • May lead to challenges of longstanding agency decision-making upon which the industry may be relying (e.g., FDA approvals).
  • May allow state regulations to fill the gaps, which would create more of a patchwork approach for purposes of compliance across states.
  • Will favor the use of clear and specific statutory language, to the extent achievable through the efforts of Congress and collaboration across parties.

Potential Opportunities

  • More opportunities to challenge rules and regulations from agencies that burden regulated industries.
  • More benefit from working with lawmakers on clear and specific language in legislative drafting.
  • More opportunities to support for approaches that benefit regulated industries, whether by submitting comments to proposed rules or through amicus briefs in litigation, which help persuade a court in any post-Chevron landscape. 

We are closely watching this and after the Supreme Court’s decision, plan to offer a webinar on the implications for the healthcare industry.

Hospitals and large healthcare organizations have increasingly become prime targets for cybercriminals. In response, the Department of Health and Human Services (HHS) has established a new initiative within the National Institutes of Health (NIH) aimed at enhancing cybersecurity measures for hospitals.

This initiative, called “Universal Patching and Remediation for Autonomous Defense” (UPGRADE), was launched on May 20. UPGRADE’s mission is to develop a tailored and scalable suite of software tools that will enable hospital IT teams to effectively combat ransomware attacks and reduce the time needed to patch vulnerable healthcare products from months to just days or weeks.

Continue Reading HHS Pledges $50 million to Empower Hospitals in the Battle Against Cyberattacks

Colorado recently passed a law creating consumer protections for interactions with artificial intelligence systems. The law specifically identifies high-risk systems, including in those that impact health care. The law requires risk mitigation, documentation and robust governance.

Monique N. Bhargava has written an in-depth article on the law and what it means for AI regulation in the U.S. As AI systems pervade more of society, their regulation will continue to be an issue that states and eventually the federal government will have to tackle.

Reed Smith will continue to follow developments in the regulation of AI, if you have any questions about this Colorado law or other efforts to regulate AI systems, please reach out to Monique or to the lawyers of Reed Smith.

On May 14, 2024, FDA hosted a webinar to provide an overview of its final rule “Medical Devices; Laboratory Developed Tests” as well as FDA’s phaseout of its general enforcement discretion approach to laboratory developed tests (LDTs).   

The October 2023 proposed rule sought to phase out enforcement discretion for LDTs more broadly. However, FDA seems to have considered some of the concerns commenters raised about access to LDTs and the cost of compliance. The final rule retains varying degrees of enforcement discretion for specific types of LDTs.

Continue Reading FDA LDT Rule Begins Enforcement Discretion Phaseout, But Some Discretion Remains

The Centers for Medicare & Medicaid Services (CMS) has finally published the minimum staffing rule for Long Term Care facilities in the Federal Register, which starts the clock for compliance with some provisions of the rule.

But what does the rule actually do? And what do facilities have to do in order to come into compliance? We wrote a client alert that details most of the more difficult portions of the rule and some advice on how to comply with it. Included is a chart that provides guidance on the exemptions and waivers that are available.

Reed Smith will continue to track developments with regard to the regulation of long term care facilities. If you have any questions about compliance with this rule or about regulation of long term care facilities, please reach out to the authors or the health care lawyers at Reed Smith.

On April 8, 2024, the Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinion No. 24-02, involving independent charity patient assistance programs (PAPs) associated with 12 specific diseases (the Disease Funds) operated by the Requestor. Each Disease Fund has a single donor–a pharmaceutical manufacturer that manufactures or markets a drug to treat the disease state associated with the fund.

Although the arrangement generates remuneration prohibited under the federal Anti-Kickback Statute (AKS) if the requisite intent were present, the OIG determined it would not impose sanctions on the Requestor. In exercising its enforcement discretion, the OIG acknowledged the public policy benefits of independent charity PAPs while highlighting the importance of a charity’s independence from pharmaceutical manufacturer influence. Additionally, the arrangement does not implicate the federal Beneficiary Inducements Civil Monetary Penalties (CMP) law.

The OIG set an effective period for the opinion that expires January 1, 2027 due to upcoming reductions in Medicare Part D cost sharing associated with the Inflation Reduction Act. The reduction in beneficiary out-of-pocket expenses could ease demand for PAP subsidies and alter the OIG’s assessment of the benefits and risks of the arrangement.

Continue Reading OIG Exercises Discretion in Independent Charity Patient Assistance Program

Elliott is a law clerk at the firm and his work is supervised by licensed attorneys. His admission to the New York bar is pending.

During a hearing before the Oversight Committee of the U.S. House of Representatives on April 11, Dr. Robert Califf, the commissioner of the U.S. Food and Drug Administration (FDA), requested congressional action to create a new pathway to regulate hemp-derived Cannabidiol (CBD) products, which the agency does not consider safe enough to be sold lawfully as a dietary supplement.

In a January 2023 statement by the prior Commissioner, Janet Woodcock the FDA declined to develop rules to allow CBD to be sold in dietary supplements or food, citing its belief that CBD does not fall under a particular regulatory scheme currently available to the agency.

Continue Reading The FDA’s Continued Search for a Legal Pathway for CBD Products

In a final rule published on April 26, the U.S. Department of Health and Human Services (“HHS”) amends the HIPAA Privacy Rule to bolster protections for individuals’ reproductive health information. This final rule comes almost exactly a year after HHS published its draft rule on the subject.

The rule is part of the Biden administration’s effort to address the Supreme Court’s 2022 decision in Dobbs v. Jackson Women’s Health Organization. Dobbs’ reversal of Roe v. Wade resulted in a patchwork of state laws governing abortion, some of which require or permit health care providers to release personal information about reproductive health care to state authorities for patients who sought an abortion.

The rule is scheduled to take effect on June 25, 2024 and most provisions will be enforceable as of December 23, 2024. Below, we summarize in more detail some of the notable changes to the HIPAA Privacy Rule. 

Continue Reading HHS Modifies HIPAA Privacy Rule to Shield Reproductive Health Information from Third Party Access

Making good on its promises to enhance oversight of Medicare Advantage (MA) and Medicare Part D plans, the Centers for Medicare and Medicaid Services (CMS) has submitted for public inspection its Contract Year 2025 Final Rule. The final rule, published in the Federal Register on April 23 and taking effect on June 3, 2024, codifies existing MA and Part D sub-regulatory guidance, adds a number of new policies for Contract Year 2025 and implements provisions of the Bipartisan Budget Act of 2018 (BBA) and the Consolidated Appropriations Act, 2023 (CAA 2023).

The rule contains many substantive changes to current MA and Part D requirements. The most impactful sections of the rule include: (1) changes to the Part D formulary, including substitutions of biosimilar biological products; (2) modification of agent and broker compensation requirements for MA plans; (3) codification of consent requirements within the MA regulations for the sharing of personal beneficiary data between third party marketing organizations (TPMOs); (4) standardization of the MA Risk Adjustment Data Validation Appeals Process; (5) changes to the Part D medication therapy management program eligibility criteria; (6) changes to contracting standards and limitations on dual-eligible special needs plans; and (7) changes to the network adequacy standards within MA to add a new facility-specialty type called “Outpatient Behavioral Health”.

Also notable is what CMS does not address in the rule – CMS declined to establish what qualifies as an identification of an overpayment that needs to be returned to avoid False Claims Act violations. That potential standard has been in the works since the Contract Year 2023 rule, but stakeholders have to keep waiting as CMS notes that it may be the subject of a future rulemaking.

Continue Reading Are you listening, Medicare Advantage and Medicare Part D Plans? It’s CMS (Again)