California lawmakers are once again considering legislation targeting private equity’s influence in health care. Senate Bill 351 (SB 351), introduced on February 12, 2025, seeks to limit the influence of management service organizations (MSOs) and dental service organizations (DSOs) backed by private equity (PE) groups and hedge funds over medical and dental practices.

SB 351 adopts certain provisions of last year’s vetoed Assembly Bill 3129 (AB 3129), which would have required PE groups and hedge funds to obtain California Attorney General (AG) approval before entering into certain health care transactions. In September 2024, Governor Gavin Newsom vetoed that bill, citing redundancy with the California Office of Health Care Affordability’s (OHCA) existing oversight of health care transactions. Our discussion of OHCA’s health care transaction notice requirements is available in an earlier Reed Smith in-depth piece.

Continue Reading California to Reconsider Restrictions on Private Equity Influence in Medicine and Dentistry

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.

Continue Reading OIG Issues Favorable Opinion on Dental Equipment Supplier’s Loyalty Program

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.

Continue Reading OIG Issues Voluntary Compliance Guidance for Nursing Facilities

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.

Continue Reading OCR Sets Precedent with Settlement Over Impermissible Disclosure of Reproductive Health Information

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