Department of Justice files statement of interest addressing the preemptive effect of the PREP Act

On the last full day of the Trump Administration, the Department of Justice (DOJ) submitted a statement of interest in litigation supporting the position that the Public Readiness and Emergency Preparedness (PREP) Act preempts legal claims relating to the administration or use of covered countermeasures with respect to a public health emergency and, therefore, makes such claims removable from state court. However, it remains to be seen whether the views expressed in the statement of interest, which was filed in Bolton v. Gallatin Center for Rehabilitation & Healing, LLC, Civil Action No. 3:20-cv-00683 (M.D. Tenn.), will continue to be the official position of DOJ following the recent change in presidential administration. Notably, the position advanced by DOJ’s statement of interest is consistent with guidance recently issued by the outgoing General Counsel of the Department of Health and Human Services, which concluded that the PREP Act is a “complete preemption” statute.

The PREP Act is a critical component of the concerted federal effort to promote the “[r]apid distribution and administration of medical countermeasures” in response to a public health emergency,” and vests the Secretary of Health and Human Services with the authority to determine the existence or credible future risk of a public health emergency, and to issue a declaration recommending administration of specified countermeasures. 42 U.S.C. § 300hh-1(b)(2). See also id. § 247d-6d(b). In light of the fact that successful distribution and administration of these countermeasures depends upon the cooperation of private-sector partners and state and local officials, Congress provided broad immunity to “covered persons” for claims relating to the administration to, or use by, an individual of countermeasures that aid in that response. See id. §§ 247d-6d(i)(2), 247d-6d(a).

Consistent with these principles, DOJ’s recent statement of interest notes that PREP Act immunity is sweeping, and that all damages actions for conduct relating to covered persons’ administration of countermeasures specified in a PREP Act declaration are preempted. DOJ contends that the PREP Act constitutes a complete-preemption statute with respect to the administration or use of covered countermeasures by covered persons under a declaration by the Secretary, relying on the immunity and exclusive alternative remedy provisions in support of this position.

First, the immunity provision provides for immunity “under Federal and State law with respect to all claims for loss caused by, arising out of, or resulting from the administration” of countermeasures specified by the Secretary. Id. § 247d-6d(a)(1). Second, the “sole exception” to the immunity grant is “an exclusive Federal cause of action” for claims of willful misconduct resulting in death or serious physical injury. Id. §247d-6d(a)(1). DOJ’s statement of interest contends that, together, these provisions show that Congress determined that state-court tort actions are not an appropriate means, in this emergency, to deter tortious conduct, except as provided in the “exclusive” federal cause of action created by the statute itself. See 42 U.S.C. § 247d-6d(d)(1).

In further support of its position, DOJ’s statement of interest relies on existing case law for the proposition that a reference in a statute to an “exclusive” remedy or cause of action is demonstrative of Congress’s intent for a completely preemptive reading of the statute.

Based on the foregoing, the statement of interest argues that the PREP Act provisions supersede state tort laws and create a federal remedy for certain claims of loss related to covered countermeasures that is exclusive, even when premised entirely on state law.

Congress’s approval of Competitive Health Insurance Reform Act (CHIRA) could mean significant antitrust changes for health insurers

The U.S. Senate recently voted unanimously to approve the Competitive Health Insurance Reform Act (Act), which the House of Representatives had already passed earlier in the fall. Currently, health insurers have federal antitrust immunity under the McCarran-Ferguson Act for state-regulated activity that constitutes the business of insurance. Should President Trump opt to sign CHIRA into law, however, that immunity would be largely repealed, although CHIRA does preserve some protections for health insurers.

For a deeper discussion on the potential impact of CHIRA, please read our full post on Reed Smith’s Antitrust and Competition Report blog.

Congress passes legislation impacting the Provider Relief Fund

In the evening of December 21, 2020, both Houses of Congress passed the Consolidated Appropriations Act, 2021, H.R. 133.  The sprawling, 5,593-page legislation includes the most significant health care-related provisions to be passed since the CARES Act.  The President is expected to sign the legislation shortly.  Of note, in the course of appropriating billions of additional dollars to combat COVID-19, division H, title II of the legislation alters certain requirements of the Provider Relief Fund (“PRF”) affecting health care providers and suppliers.

First, the legislation provides that if the recipient of PRF funds is a subsidiary of a parent organization, that parent organization may allocate all or any portion of such payment among any of its subsidiaries that are eligible for PRF funds. This includes any payments made by the Department of Health and Human Services (“HHS”) under so-called “Targeted Distributions,” which represents a change from the position taken in guidance issued by HHS.  The legislation expressly provides that the responsibility for reporting the reallocated payments remains with the original recipient of the funds.

Second, the legislation gives recipients of PRF funds greater flexibility in how they calculate lost revenue by referencing a since-superseded version of guidance issued by HHS in June 2020.

If enacted into law as expected, the above legislative changes could soon have a significant impact because the first reporting deadline for recipients of PRF funds is February 15, 2021. Should you have any questions related to this new legislation and how it may impact your organization, please do not hesitate to reach out to the health care attorneys at Reed Smith.

HHS proposes important changes to key aspects of HIPAA Privacy Rule

The U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR), the agency that enforces the Health Insurance Portability and Accountability Act of 1996 (HIPAA), is the latest federal agency to jump on the HHS rulemaking bandwagon issuing a Notice of Proposed Rulemaking (NPRM) on December 10, 2020, that proposes pivotal changes to key standards, definitions, and patient rights under the HIPAA Privacy Rule, which are geared toward promoting care coordination and value-based care, and empowering patients with greater access to their health information.

As we recently flagged, even amidst the chaos of a global pandemic, multiple HHS agencies, including the Office of the National Coordinator for Health Information Technology (ONC), the Centers for Medicare & Medicaid Services (CMS), and most recently, CMS and OIG, have focused their attention in 2020 on facilitating and enforcing patients’ rights to access their health information, encouraging interoperability among health information technology (IT) systems, prohibiting information blocking by key health industry stakeholders such as health care providers and health IT developers, and promoting value-based care.  OCR’s NPRM is no different.

Most notably, the NPRM –

  • Shortens response time for patient health record requests from 30 days to 15 days (with a 15 day extension under limited circumstances).
  • Reduces identity verification burdens on patients (or their personal representatives) exercising a right under the Privacy Rule.
  • Amends the definition of health care operations to permit disclosure of patient information for care coordination and case management activities, whether population-based or focused on particular individuals.
  • Clarifies the minimum necessary standard with respect to care coordination and case management activities.
  • Removes antiquated elements of Notice of Privacy Practices (NPP) requirements.
  • Amends the permissible fee structure for responding to patient health record requests and requires covered entities to post estimated fees on their website for access and for disclosures with a patient’s authorization.
  • Clarifies and facilitates family and caregiver involvement in the care of individuals experiencing emergencies or health crises.

If finalized, these proposals will require HIPAA-regulated entities to update their policies and procedures that impact daily business operations, train workforce members on updated processes, revise their Notice of Privacy Practices, renegotiate business associate agreements (BAAs) to comply with the new requirements, and coordinate compliance with the conglomerate of overlapping privacy, interoperability, information blocking, patient access, and value-based regulatory frameworks – each of which is actively transforming  the way in which the health care industry shares patient information.

Further Reed Smith analysis on the NPRM is forthcoming, particularly with respect to the implications of the proposed changes on the value-based rulemakings and the new interoperability, information blocking, and patient access rules.

In the meantime, please let us know if you have questions.

Open for business in 2021

With 2020 coming to a close, businesses are looking ahead to 2021 and evaluating how they can stay open while keeping their employees and patrons safe.  In an effort to resolve this seemingly open question, just this week, the National Institutes of Health (“NIH”) unveiled an innovative online mechanism that may give businesses the tools they need to choose a COVID-19 testing strategy for the year ahead.  This mechanism, developed by a branch of the NIH called the National Institute of Biomedical Imaging and Bioengineering (“NIBIB”), will act as a COVID-19 Testing Impact Calculator (the “Calculator”) and will show how different approaches to testing and other mitigation efforts (e.g., mask use, social distancing, and contact tracing) may curb the spread of COVID-19 within a particular organization.

The Calculator is the first online tool in the U.S. that will provide businesses with purportedly clear guidance on risk-reducing behaviors in an effort to help them re-open and stay open. And a special perk—the Calculator is free.

  • Where was the Calculator developed?

The Consortia for Improving Medicine with Innovation and Technology at Massachusetts General Hospital and researchers at the Massachusetts Institute of Technology created the Calculator to model the costs and benefits of COVID-19 testing strategies for individual businesses.

  • What can users expect?

Users of the Calculator will enter a few specifics about their business, such as which safety and prevention methods are already in place (e.g., whether mask wearing and social distancing are required, and whether contact tracing is or will be utilized).  Users can even adjust details such as whether mask-less meetings or dining will be allowed, or how big group settings are expected to be.

The Calculator then models four different COVID-19 testing methods, which include onsite and lab-based methods, and calculates the number of people that should be tested each day.  It will provide the estimated cost of each testing option and will outline the tradeoffs in the speed and accuracy of each kind of available test.  Each user will get a customized scenario for surveillance testing.

  • How to get started?

The Calculator is available now at

We hope tools like the Calculator will assist businesses in remaining resilient in the face of challenges posed by COVID-19.  As research institutes and regulators continue to adapt to these unprecedented times, we recommend that businesses continue to stay apprised of new technology and new guidance related to COVID-19.  Should you have any questions related to testing during COVID-19 or any of the issues raised in this article, please do not hesitate to reach out to the health care attorneys at Reed Smith.

Long-Awaited issuance of Section 340B ADR final rule

In 2010, the Affordable Care Act (ACA) directed the Secretary of Health and Human Services to issue regulations to establish an administrative dispute resolution (ADR) process for certain claims between Section 340B covered entities and pharmaceutical manufacturers (e.g., claims of overcharging by manufacturers and claims of covered entities taking duplicative discounts or diverting Section 340B discounted product). The ACA directed the Secretary to issue such regulations within 180 days of the ACA’s enactment.

The Secretary had long failed to issue such regulations, leading to recent and ongoing Administrative Procedure Act (APA) litigation by covered entities challenging the Secretary’s failure to do so in connection with the ongoing controversy between covered entities and certain manufacturers over covered entities’ use of contract pharmacies.

On December 10, 2020, the Secretary released a pre-publication version of his ADR final rule, which will be published in the Federal Register on December 14 and go into effect on January 13, 2021—one week before President-Elect Biden’s inauguration. Among other things, the ADR final rule:

  • Establishes a new six-member “340B Administrative Dispute Resolution Board” comprised of officials drawn from within HHS, which will sit in three-member “Administrative Dispute Resolution Panels”;
  • Provides for the initiation of claims by covered entities or manufacturers against each other seeking “monetary damages” and/or equitable relief (e.g., injunctions), which are forms of relief that may exceed the authority provided by the underlying statute;
  • Draws from certain aspects of the Federal Rules of Civil Procedure, particularly those rules involving pleadings and summary judgment;
  • Establishes that decisions of the ADR Panel are precedential and constitute final agency action subject to judicial review; and
  • Establishes a three-year limitations period for covered claims.

Because the ADR final rule will go into effect before the upcoming inauguration, the Biden Administration will likely have to engage in additional notice-and-comment rulemaking if it wants to alter the final rule’s contents. Issuance of the ADR final rule will also likely moot ongoing APA claims challenging the Secretary’s failure to issue regulations. However, that litigation also includes other claims for declaratory and injunctive relief more specifically associated with the ongoing contract-pharmacy controversy.

In any event, the existence of a formal ADR process will likely lead to covered entities initiating claims in the 340B ADR Board against certain manufacturers arising from the contract-pharmacy controversy as well as other overcharge matters.

Marketers Beware: As COVID-19 cases increase, FDA, FTC increase efforts to crack down on fraudulent and deceptive marketing and sales of purported ‘Virus Cures’

The Food and Drug Administration (“FDA”) and the Federal Trade Commission (“FTC”) have been fighting fraudulent and deceptive advertising of health care devices, household cleaners, nutrition supplements, and other health care products promising to protect or mitigate the effects of the virus for pandemic-wary consumers since March 2020. Despite these efforts, false and misleading marketing related to COVID-19 seems to be even more brazen this fall. Last month—on the heels of the first FDA-authorized COVID-19 at home testing kit and FDA’s announcement of its December 10, 2020 FDA Advisory Committee meeting concerning a COVID-19 vaccine candidate—the FDA and FTC began honing in on unapproved products and advertising offering not just virus protection or mitigation, but virus prevention and cures.

To date, the FDA and FTC have issued 135 COVID-19-related warning letters for unapproved drugs sold in violation of section 505(a) of the Federal Food, Drug, and Cosmetic Act (FD&C Act), 21 U.S.C. § 355(a), and for drugs misbranded in violation of section 502 of the FD&C Act, 21 U.S.C. § 352. These warning letters flagged products ranging from salt therapy solutions promising to “strengthen the lungs to fight against the novel Coronavirus” and essential oils that are “clinically proven to possess antiviral properties,” to an “umbilical cord derived cellular product” advertised during a Facebook chat as a “preventative treatment[] that can help boost the immune system and fortify lungs against viruses.”

Discussing the marked rise in mislabeling and fraudulent virus-related products, Jeff Shuren, director of FDA’s Center for Devices and Radiological Health, reminded marketers in a June 17, 2020 press release that “[p]roviding regulatory flexibility during this public health emergency never meant we would allow fraud.”

Perhaps as a result of “pandemic fatigue” triggering consumer demand for quick fixes or motivated by the booming COVID-19 mitigation product market, potentially fraudulent and deceptive virus-related marketing targeting prevention and treatment is even more prevalent this fall.  Just last month, the FTC sent letters warning 20 more marketers nationwide to stop making unsubstantiated claims that their products and therapies—ranging from copper water bottles to personal training, bead bracelets, and water filtration systems—can prevent or treat COVID-19. In September 2020, FDA’s Bad Ad Program issued a warning letter citing a pharmaceutical company for touting its budesonide generic asthma drug as a treatment for symptoms of COVID-19.  Other recent FDA enforcement actions combatted a new wave of at-home COVID-19 devices, including antibody testing kits and rapid results virus testing kits.

Despite the booming market and consumer demand, manufacturers and advertising agencies must remain vigilant and disciplined when incorporating COVID-19 into marketing campaigns.  There are ways to do this without triggering FDA or FTC action.

Takeaway:  Marketers should beware of heightened scrutiny over health care advertising related to COVID-19. Currently, there is no approved vaccine for COVID-19, so claims related to virus protection and mitigation (e.g., flagged claims include that a product is “effective against all types of pathogens, including a wide variety of viruses,” “anti-coronavirus and antimicrobial activity,” and “helps lower[] everything that is virus and inflammation”) must be carefully crafted in a way that achieves commercial goals while mitigating risk of a regulatory enforcement action.  Lastly, no platform or marketing medium is exempt from regulatory scrutiny, as several recent COVID-19 warning letters cited claims made via email accounts and on social media.

Final Rules Modernizing Stark Law and Anti-Kickback Statute Released

The Department of Health and Human Services (HHS) released complementary rules this past Friday, November 20, 2020, to modernize and clarify the regulations that interpret the Physician Self-Referral Law (the Stark Law) and the federal Anti-Kickback Statute.

As we wrote when the proposed rules were released last autumn (see client alerts here and here), the rules reflect HHS’s attempt to create exceptions and safe harbors that refine the Stark Law’s strict-liability-based civil penalties and the Anti-Kickback Statute’s criminal penalties. The goal is to prevent certain non-abusive and beneficial arrangements from finding themselves subject to enforcement activities. As HHS itself notes, the final rules are the result of its effort to address health care industry concerns that these laws, as well as the Civil Monetary Penalty (CMP) Law, function as barriers to the delivery of value-based care that would improve quality of care, health outcomes, and efficiency.

The final rules number over 1,600 pages in current form and incorporate and address over 650 comments industry stakeholders submitted in response to the proposed rules. For our overview and analysis of the final rules, please read our client alert.

CMS finalizes rule to ensure no-cost COVID-19 vaccine

On October 28, 2020, the Centers for Medicare & Medicaid Services (CMS) issued an interim final rule with comment period (IFR) in an effort to ensure that participants in CMS programs have no-cost access to any forthcoming Food and Drug Administration (FDA or Agency) authorized or approved COVID-19 vaccine.

The IFR governs any vaccine that is licensed by FDA under a Biologics License Application (BLA), or, significantly, receives an Emergency Use Authorization (EUA) from the Agency. While the CARES Act obligates Medicare to cover the costs of a vaccine formally approved through the BLA process, the Act does not explicitly provide for coverage of a vaccine that is alternatively authorized by FDA under an EUA. In implementing this IFR, however, CMS reasoned that an EUA is tantamount to a BLA based partly on the rigors of the process, as well as Congress’ intent to extend no-cost, rapid access to a vaccine – particularly with respect to seniors, a large population considered at high-risk to the effects of COVID-19 and which makes up the vast majority of Medicare beneficiaries.

Under the IFR, providers would be prohibited from charging for the administration of a vaccine as a condition for receiving it free from the federal government. In addition to eliminating cost, the wide-ranging IFR’s overarching goal is to remove administrative barriers and reduce potential delays to patient access to a vaccine. As such, the IFR also endeavors to create flexibilities:

  • For states maintaining Medicaid enrollment during the COVID‑19 public health emergency; and
  • In the public notice requirements and post-award public participation requirements for a State Innovation Waiver under Section 1332 of the Patient Protection and Affordable Care Act during the COVID-19 public health emergency.

Significantly, the IFR also provides:

  • Enhanced Medicare payments for new COVID-19 treatments;
  • Price transparency for COVID-19 tests; and
  • An extension of Performance Year 5 for the Comprehensive Care for Joint Replacement model.

Medicare Beneficiaries

 The IFR utilizes Section 3713 of the CARES Act in order to add FDA-authorized or approved vaccines to the list of preventative vaccines covered under Medicare Part B. In addition to covering the costs of administration, the IFR also eliminates any copayment/coinsurance or deductible.

The IFR extends the same coverage of costs to Medicare Advantage (MA) participants by paying directly for the administration of a vaccine to beneficiaries enrolled in MA plans. MA plans will directly cover the costs of administration for providers who administer the vaccine to MA beneficiaries during calendar years 2020 and 2021. Similar to traditional Medicare enrollees, any copayment/coinsurance and deductibles will be waived for MA beneficiaries.

As part of the IFR, CMS announced Medicare payment rates for single-dose and multi-dose immunizations, which can be adjusted in light of practical geographic considerations related to cost. Additionally, CMS intends to announce coding instructions through program memoranda as expediently as possible once FDA authorizes or approves a vaccine.

 Medicaid Beneficiaries and the Uninsured

 The IFR generally requires state Medicaid programs to provide vaccine administration at no cost to most beneficiaries. The IFR does so by invoking the Families First Coronavirus Response Act (FFCRA), Section 6008 of which ties a temporary 6.2 percentage point increase in the Federal Medical Assistance Percentage for the duration of the COVID-19 public health emergency. That increase in funding is conditional on states covering the costs of a vaccine and its administration for Medicaid enrollees without cost sharing during the duration of the public health emergency, with additional flexibility after its expiration. While the IFR supports this general principle it is not absolute and we thus encourage stakeholders in Medicaid and CHIP programs to consult the IFR directly to ensure compliance.

As for the uninsured, under the IFR providers will be able to seek reimbursement for administration of a vaccine through the FFCRA Relief Fund and the Provider Relief Fund, as managed by the Health Resources and Services Administration. While the lion’s share of the $175 billion appropriated to the Provider Relief Fun via the CARES Act and Paycheck Protection Program and Health Care Enhancement Act (PPPHCEA) has already been spent, the FFCRA Relief Fund is intended to make available an additional $2 billion through a combination of FFCRA and PPPHCEA funds.

What’s Next

The IFR became effective on November 2, 2020, even though it will not be published in the Federal Register until November 6, 2020. CMS will accept comments on the IFR if they are submitted on or before 5:00 PM EST on January 4, 2021.

HHS further delays compliance for Interoperability and Information Blocking Rule

Just two business days before the first of many critical components of the new 21st Century Cures Act Interoperability, Information Blocking, and ONC Health IT Certification Program Final Rule (the “Final Rule”) were set to take effect, the U.S. Department of Health and Human Services (HHS) Office of the National Coordinator for Health IT (ONC) issued an advanced copy of an interim final rule with comment period (the “Interim Final Rule”) extending the compliance dates and timeframes necessary to comply with the Final Rule. In doing so, ONC sought to provide additional flexibility for health care providers and developers of certified health IT in particular, given the sustained and unprecedented strain on the health care system due to the COVID-19 pandemic.

This is the second compliance extension since the ONC announced the Final Rule in March, also due to the pandemic.  Now, in addition to extending the compliance dates relating to information blocking, the 2015 Edition Cures Update certification criteria, and the Conditions and Maintenance of Certification requirements, ONC’s Interim Final Rule offers some technical corrections and clarifications of certain points in the Final Rule.  To the relief of many regulated actors, for instance, ONC clarifies that the information blocking provisions do not explicitly require regulated actors to purchase or update certified health IT.  Instead, regulated actors must leverage their existing health IT, certified or not, in a manner that does not interfere with appropriate requests to access, exchange, or use electronic health information.  By contrast, the 2015 Edition Cures Update certification criteria do establish new functional requirements intended to facilitate interoperability and deadlines for when such functionalities must be present for a health IT product to maintain its certification.

ONC considered several factors in determining the appropriate extension length for each requirement, establishing shorter extensions for requirements that do not require the implementation of new technology, such as the information blocking provisions.  Other requirements, such as the 2015 Edition Cures Update certification criteria, do require technological updates and, accordingly, received longer extensions.

We have outlined certain key changes to the ONC Final Rule compliance timeline below.

Information Blocking

  • General Prohibition – Information Blocking: April 5, 2021
  • Condition of Certification – Information Blocking: April 5, 2021
  • Assurances Condition of Certification – Information Blocking: April 5, 2021

Application Program Interfaces (APIs)

  • Condition of Certification – Existing API Technology: April 5, 2021
  • New Standard API Certification Criterion: December 31, 2022
  • Condition of Certification – New Standardized API: December 31, 2022

EHI Export

  • Assurances Condition of Certification – Existing Data Export Certification Criterion: April 5, 2021
  • New EHI Export Certification Criterion: December 31, 2023
  • Assurances Condition of Certification – New EHI Export Certification Criterion: December 31, 2023

For questions regarding the rules or this post, please contact Nancy Bonifant Halstead, Vicki Tankle, and Lauren Bentlage, or any Reed Smith attorney with whom you work.

New Executive Order seeks to address COVID-19 impact on mental health

On October 5, 2020, the White House issued President Trump’s Executive Order on Saving Lives Through Increased Support for Mental- and Behavioral-Health Needs (the “Executive Order”), which seeks to provide federal support to address mental and behavioral health concerns arising from the COVID-19 pandemic.

The Executive Order acknowledges the exacerbating effects that the COVID-19 pandemic has had on mental and behavioral health conditions due to “stress from prolonged lockdown orders, lost employment, and social isolation,” and emphasizes the importance of coordinating action across federal, state, local, and Tribal partners to effectively address these concerns. The Executive Order points to survey data issued by the Centers for Disease Control and Prevention, which indicates that during the last week of June 2020, 40.9 percent of Americans reported struggling with mental health or substance abuse issues, with 10.7 percent reporting seriously considering suicide. Accordingly, the Executive Order states that “[i]t is the policy of the United States to prevent suicides, drug-related deaths, and poor behavioral-health outcomes, particularly those that are induced or made worse by prolonged State and local COVID-19 shutdown orders.”

To address these concerns, the Executive Order focuses on the following strategies to be taken at a national level, among others:

  • Increased crisis intervention services;
  • Increased availability of and access to continuing care following an initial crisis;
  • Increased mentorship programs and support groups;
  • Increased availability of telehealth and online mental health and substance use tools and services; and
  • Public and private resources to address mental health, including factors that contribute to prolonged unemployment and social isolation.

Additionally, the Executive Order establishes a Coronavirus Mental Health Working Group (the “Working Group”) tasked with formulating an “all-of-government” collaborative response to address the mental health impacts of COVID-19. The Working Group will be co-chaired by the Secretary of Health and Human Services, Alex Azar, and the Acting Director of the Domestic Policy Council, Brooke Rollins, and will be further comprised of representatives from various federal agencies, including the Department of Justice, the Department of Housing and Urban Development, and the Office of National Drug Control Policy.

The Working Group is directed to consider the mental-and behavioral-health conditions of certain vulnerable populations who have been disproportionately impacted by the pandemic and evaluate existing protocols and evidence-based programs to identify potential strategies for improving support for these populations. Based on this review, the Working Group is further tasked with developing and submitting a plan to facilitate coordination between public and private stakeholders to improve service offerings and better assist individuals in crisis. The Working Group’s plan must be submitted to the President by November 19, 2020. Secretary Azar released a statement in support of the Executive Order, noting that it was a “welcome opportunity to increase efforts to address the mental health effects of the pandemic,” which has compounded mental health and behavioral health conditions by “adding new stresses and disrupting access to treatment.”

Finally, the Executive Order further directs the heads of agencies, in consultation with the Director of the Office of Management and Budget, to examine existing grant programs that fund mental health, medical, or related services and encourage grantees to consider adopting policies that have been shown to improve mental health and reduce suicide risk, with an emphasis on “safe in-person” services. As part of this initiative, the agencies are also encouraged to award contracts and grants to community organizations and other local entities to enhance mental health and suicide prevention services, including outreach, education, and case management services for vulnerable populations.

Patient access to health information at the forefront of government initiatives and scrutiny

Even amidst the chaos of a global pandemic, this year multiple U.S. Department of Health and Human Services (HHS) agencies have dialed in on promoting and enforcing patients’ rights to access their health information.

In just the past month, HHS’ Office for Civil Rights (OCR), the agency that enforces the Health Insurance Portability and Accountability Act of 1996 (HIPAA), settled five costly investigations with HIPAA-regulated parties for potential violations of the HIPAA right of access provision.  Under HIPAA, individuals have a legal, enforceable right to view and obtain copies, upon request, of the information in their medical and other health records maintained by a HIPAA covered entity, typically a health care provider or health plan, with limited exception.  Individuals generally have a right to access this information for as long as the information is maintained by a covered entity, or by a business associate on behalf of a covered entity, regardless of the date the information was created, whether the information is maintained in paper or electronic systems onsite, remotely, or is archived, or where the information originated (e.g., whether the covered entity, another provider, or the patient). Continue Reading

CMS releases roadmap for states to accelerate adoption of value-based care

On September 15, 2020, the Centers for Medicare & Medicaid Services (CMS) issued guidance to state Medicaid directors on how to advance value-based care (VBC) across their health care systems, with an emphasis on Medicaid populations, and how to share pathways for adoption­ of such approaches.  Within the 33-page letter, CMS highlights the merits of VBC; provides an assessment of key lessons learned from early state and federal experiences in implementing VBC reforms, as well as a comprehensive toolkit of available federal authorities for states to adopt for innovative payment-reform efforts within their Medicaid programs; and stresses the importance of multi-payer alignment in VBC to drive care transformation.  Notably, however, the guidance does not address prevalent concerns among providers and industry about what types of VBC arrangements could run afoul of federal and state fraud and abuse laws and/or which entities can participate in such arrangements.

Merits of Value-Based Care Arrangements

Under VBC arrangements, providers are rewarded—based on specific evidence of performance on negotiated quality measures—for helping patients improve their health, reduce the effects and incidence of chronic disease, and live healthier lives.  That is, VBC arrangements can hold providers accountable by tethering reimbursement to their ability to improve quality of care in a cost-effective manner or lower costs while maintaining standards of care, rather than the volume of care they provide.  Moreover, according to the guidance, VBC can be a part of the solution to reducing health disparities in the health care system and handling unexpected challenges, including those brought about by the COVID-19 pandemic.

Value-Based Payment as Key Driver

CMS points to value-based payment as the key driver of VBC.  Accordingly, the guidance highlights and explains critical elements of value-based payment design and operations, including:

  • Level and scope of financial risk;
  • Benchmarking; and
  • Payment operations.

Additionally, the guidance discusses in depth several key considerations for states pursuing value-based payment, including:

  • Multi-payer participation;
  • Assessment of delivery system readiness;
  • Robust health information exchange and technology;
  • Stakeholder engagements;
  • Quality measure selection; and

Availability of Alternative Payment and Delivery Models

To further facilitate the advancement of value-based payment methodologies in state Medicaid programs, the guidance outlines the key features and applicable Medicaid authorities for various payment and service delivery models, with examples of each, including:

  • Payment models built on fee-for-service architecture;
  • Payments for “episodes of care”; and
  • Payment models involving total cost of care accountability.

The guidance notes that these payment models are not mutually exclusive, and ultimately encourages states to consider the adoption of one or more of them—or, if need be, pursue other delivery system reforms via section 1115(a) waiver authority—depending on their individual program circumstances and reform goals.

Lack of Detail Surrounding What Types of Value-Based Care Arrangements are Impermissible and/or Which Entities Can Participate in Such Arrangements

Significantly, despite the strong push by CMS for state movement towards VBC, the guidance does not provide any discussion or detail about what types of VBC arrangements could run afoul of federal and state fraud and abuse laws and/or which entities can participate in such arrangements.  Without clear (or at least better) guideposts for providers and industry, active participation in VBC arrangements will continue to be stifled by ongoing concerns about the potential risk of liability.

Overall, the guidance represents a step in the right direction towards VBC at the state level.  According to CMS, although many states have made progress, there remain growth opportunities for more states to improve health outcomes and efficiency across payers through adoption of value-based payment models.  Should you have any questions related to VBC and navigating federal and state fraud and abuse laws, please do not hesitate to reach out to the health care attorneys at Reed Smith.

FDA issues draft guidance regarding principles for selecting, developing, modifying, and adapting patient-reported outcome instruments for use in medical device evaluation

On August 31, 2020, the Food and Drug Administration (FDA) issued draft guidance regarding principles for selecting, developing, modifying, and adapting patient-reported outcome instruments for use in medical device evaluation.[1]  Patient-reported outcome (PRO) instruments facilitate the systematic collection of how patients feel and function during a clinical trial.  FDA recognizes this information as important because by integrating patients’ voices throughout the total product lifecycle, concepts important to patients can be considered in the evaluation and surveillance of medical devices.

Goals of the Draft Guidance 

FDA recognizes there are many ways PRO instruments can be used during clinical studies.  As such, FDA issued the draft guidance with the following objectives:

  • Describing principles that may be considered when using PRO instruments in the evaluation of medical devices;
  • Providing recommendations about the importance of ensuring the PRO instruments are fit-for-purpose; and
  • Outlining best practices to help ensure relevant, reliable, and sufficiently robust PRO instruments are developed, modified, or adapted using the least burdensome approach.

Principles to be considered for PRO Instruments

FDA outlines the following principles that should be considered when using PRO instruments in the evaluation of the medical device:

  • Establish and define the concept of interest (COI) the PRO instrument is intended to capture;
  • Clearly identify the role of the PRO in the clinical study protocol and statistical analysis plan;
  • Provide evidence showing that the PRO instrument reliably assesses the concept of interest; and
  • Effectively and appropriately communicate the PRO-related results in the labeling to inform healthcare provider and patient decision making.

PRO Fit-For-Purpose Criteria

As it relates to the fit-for-purpose criteria, FDA outlines three overarching principles to determine if a PRO instrument is fit for its purpose:

  1. Is the concept being measured by the PRO instrument meaningful to patients and would a change in the concept of interest be meaningful to patients?
  2. What role will the PRO instrument serve in the clinical study protocol and statistical analysis plan?
  3. Does the evidence support its use in measuring the concept of interest as specified in the clinical study protocol and statistical analysis plan?

While these points seem straightforward and clear, they are important ones that should be considered when evaluating the PRO instrument will meet FDA’s expectations. Of note, the draft guidance does not provide what level of evidence is required for a PRO to be fit-for-purpose.

PRO Instrument Best Practices

Finally, the draft guidance provides other best practices for PRO development, which include measuring concepts important to patients, ensuring PRO instruments are understandable to patients, and being clear about the role of PRO instrument in the Clinical Study Protocol and Statistical Analysis Plan.

Overall, the draft guidance provides insight into FDA’s current thinking for use of PRO instruments in medical device clinical studies and should be analyzed by sponsors considering PRO instruments. Interested stakeholders can submit comments on this draft guidance for FDA’s consideration until October 30, 2020 to docket FDA-2020-D-1564 available at

[1] FDA Draft Guidance, “Principles for Selecting, Developing, Modifying, and Adapting Patient-Reported Outcome Instruments for Use in Medical Device Evaluation” (August 2020) (available at:

CMS issues proposed rule that would expedite approval of “breakthrough” devices and codify the standards for “reasonable and necessary” determinations

The October 3, 2019 Executive Order 13890 (“EO 13890”), entitled “Executive Order on Protecting and Improving Medicare for our Nation’s Seniors,” directs the Secretary of Health and Human Services to “propose regulatory and sub-regulatory changes to the Medicare program to encourage innovation for patients.”  EO 13890 explicitly requests that the Secretary make coverage of breakthrough medical devices widely available, and clarify the application of coverage standards.  In response, on September 1, 2020, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule (85 FR 54,327) that would establish an expedited Medicare coverage pathway for innovative medical devices, and codify, with some modification, the long-standing Program Integrity Manual standards to be used in making “reasonable and necessary” determinations under Section 1862(a)(1)(A) of the Social Security Act.

  1. MCIT Pathway

The proposed rule sets up the Medicare Coverage of Innovative Technology (MCIT) pathway, under which breakthrough devices, which are designated as part of the Food and Drug Administration’s (FDA) Breakthrough Devices Program, would be covered under Medicare from the moment the device receives FDA market authorization, either through receipt of FDA Premarket Approval, 510(k) clearance or the granting of a De Novo classification request. Under the MCIT proposal, an item or service that receives a breakthrough device designation from the FDA would be considered “reasonable and necessary” under section 1862(a)(1)(A) of the Act because breakthrough devices are innovative, serve unmet needs and have already met the FDA’s “unique breakthrough devices criteria.”

This coverage would continue for up to 4 years, allowing the manufacturer time to submit a National Coverage Determination (NCD) request.  Currently, Medicare coverage pathways include (among other things) local coverage determinations (LCDs) or case-by-case decisions of whether a device will be covered while CMS is processing the NCD, which can take 9-12 months.  The delay for NCDs and local coverage of immediately available coverage pathways under the LCDs result in inconsistent results nationwide. In contrast, the MCIT proposal would allow for immediate national Medicare coverage of any FDA-market authorized breakthrough device, subject to meeting the criteria under the program.  CMS proposes to work closely with the FDA through the regulatory process for these devices to ensure immediate Medicare coverage upon market authorization. The MCIT pathway would be voluntary, requiring device manufacturers to affirmatively opt in.  CMS proposes regulations codifying the MCIT pathway at 42 C.F.R. Part 405, Subpart F.

The FDA’s Breakthrough Device Program is targeted at streamlining approval of devices “that provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions.” Also, these devices must be either 1) a breakthrough technology; 2) a device for which there is no approved or cleared alternatives; 3) a device that offers significant advantages over existing approved or cleared alternatives; or 4) a device whose availability is in the best interest of patients.

  1. Defining “Reasonable and Necessary”

EO 13890 also directs the Secretary to “clarify the application of coverage standards.”  Accordingly, the proposed rule would codify the long-standing Program Integrity Manual definition of “reasonable and necessary” for items and services that are furnished under Medicare Parts A and B.  CMS has the authority to determine if a particular medical product or service is “reasonable and necessary” under § 1862(a)(1)(A) of the Social Security Act. To date, there have been no formal regulations on this term, yet the Medicare Program Integrity Manual does provide instructions for Medicare contractors in this regard.

We propose that an item or service would be considered ‘‘reasonable and necessary’’ if it is—(1) safe and effective; (2) not experimental or investigational; and (3) appropriate for Medicare patients, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it is—

  • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition or to improve the function of a malformed body member;
  • Furnished in a setting appropriate to the patient’s medical needs and condition;
  • Ordered and furnished by qualified personnel;
  • One that meets, but does not exceed, the patient’s medical need; and
  • At least as beneficial as an existing and available medically appropriate alternative.

We also propose that an item or service would be ‘‘appropriate for Medicare patients’’ under (3) if it is covered in the commercial insurance market, except where evidence supports that there are clinically relevant differences between Medicare beneficiaries and commercially insured individuals. An item or service deemed appropriate for Medicare coverage based on commercial coverage would be covered on that basis without also having to satisfy the bullets listed above.[1]

The comment period is open now and runs until November 2, 2020. Comments can be submitted electronically through  or by mail. Specifically, CMS is requesting comments on whether it should require or incentivize manufacturers to provide data about outcomes or should be obligated to enter into a clinical study. Additionally, CMS wishes commenters to provide feedback on whether the MCIT should also include diagnostics, drugs and/or biologics that utilize breakthrough approaches as they are not currently included in the MCIT pathway. A fact sheet on the proposed rule can also be found on CMS’s website at


[1] 85 FR 54,328 (emphasis added).  Codification of this proposal would revise 42 C.F.R. §  405.201.

CMS unveils additional COVID-19 LTC facility testing and reporting rules during public health emergency

On August 27, 2020, the Centers for Medicare & Medicaid Services (“CMS”) filed an interim final rule with comment period (“IFC”), detailing new long-term care (“LTC”) facility COVID-19 testing requirements and strengthening enforcement of existing related facility reporting requirements.  According to CMS, the IFC represents the agency’s latest effort in an ongoing initiative to control COVID-19 transmission during the continuing public health emergency (“PHE”).

New LTC Resident and Staff COVID-19 Testing Requirements

The IFC’s key LTC regulatory revision involves the amendment of existing infection control requirements to require COVID-19 testing for all facility residents and staff.  Applicable facilities must also electronically report COVID-19 information, including suspected and confirmed resident and staff infections, in a standardized format specified by the HHS Secretary.  Below are additional details regarding the IFC’s new testing requirements:

  • Individuals Subject to Testing. The new COVID-19 testing requirements apply to all residents and staff that physically work on-site at an applicable LTC factility.  “Staff,” for the purposes of the IFC, includes “any individuals employed by the facility, any individuals that have arrangements to provide services for the facility, and any individuals volunteering at the facility.”  CMS indicated that the new testing mandate may implicate individuals providing services for a facility “under arrangement,” including, for example, a hospice with an agreement to provide care for LTC facility residents.
  • Testing Parameters.  LTC facilities must conduct the newly required testing in accordance with forthcoming Secretary-implemented parameters, which may include testing frequency, result response timing, identification of symptoms, and asymptomatic testing guidelines.  CMS is also requiring all resident and staff COVID-19 testing to be conducted in a manner consistent with current professional standards of practice.  The IFC provides little guidance regarding what constitutes “professional standards of practice,” other than to confirm that the applicable standards are those that exist at the time the care or service is delivered.  CMS is soliciting comments regarding any other appropriate testing parameters that the Secretary should consider for implementation.
  • Testing Documentation and Policies.  CMS is also requiring that the completion and results of each resident and staff COVID-19 test be appropriately documented in staff personnel records, resident medical records, or other individual files, as applicable.  LTC facilities must also maintain appropriate policies and procedures, including those addressing instances where residents and staff refuse or are unable to be tested, access to and acquisition of testing supplies, and emergency staffing strategies.
  • Transmission Prevention.  CMS expects that LTC facilities will take action to prevent transmission when a resident or staff member presents with COVID-19 symptoms or a positive test result.  Specifically, CMS transmission prevention recommendations include restricting facility access for an affected staff member until the applicable individual is deemed safe to return to work, or, in the case of facility residents, the implementation of “cohorting” procedures, which involve the confinement of residents who are known or suspected to have COVID-19 to a specified area of the facility and not sharing staff beyond those residents’ “cohort.”

New CMPs for LTC Data Reporting Violations

The IFC also strengthens CMS’s ability to enforce recently imposed LTC facility reporting requirements, which were established on May 8, 2020, in an effort to support ongoing COVID-19 surveillance.  Specifically, these recently implemented reporting regulations require nursing homes to report COVID-19 and infection control data to the CDC National Healthcare Safety Network (“NHSN”) at least weekly.  The IFC’s enhanced enforcement mechanisms center on the imposition of civil monetary penalties (“CMPs”) for each week that a facility fails to electronically report required COVID-19 data through the NHSN system.

As set forth under the IFC, LTC facilities must pay a $1,000 CMP for the first instance of reporting noncompliance, a figure that will increase by $500 for each subsequent weekly reporting failure.  For example, an LTC that fails to meet the data reporting requirements will receive a $1,000 CMP for the first week of reporting violations, $1,500 for the second week, and $2,000 for the third week.  This weekly $500 penalty escalation process will continue until the penalty amount reaches a $6,500 cap after 12 weeks of noncompliance.  Subsequent violations occurring beyond that 12-week period will continue to be assessed at $6,500 per week.  If a facility is unable to meet reporting requirements and/or experiences financial hardship, that facility may dispute the findings under an independent informal dispute resolution process set forth under 42 C.F.R. Part 488.431, and the facility may submit a financial hardship request to CMS.  The foregoing CMP enforcement policies will continue in effect for up to one year beyond the end of the PHE.

The IFC’s changes become effective as of the rule’s anticipated September 2, 2020, Federal Register publication, and unless otherwise noted, the changes will remain in effect only for the duration of the PHE.  Any comments must be received within 60 days of the September 2 Federal Register publication to be considered.

Federal Court stays repeal of “On the Basis of Sex” definition in recent nondiscrimination final rule one day before regulations take effect

With only one day left before the final rule scaling back nondiscrimination regulations took effect, the U.S. District Court for the Eastern District of New York (EDNY) issued an order staying the repeal of certain parts of the former regulations. On June 19, 2020, the Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) and the Centers for Medicare & Medicaid Services (CMS) published a final rule scaling back nondiscrimination regulations first released in 2016 to implement Section 1557 of the Affordable Care Act (ACA). The 2016 regulations had imposed significant requirements on health care providers to ensure that all individuals were provided “meaningful access” to care. As part of the 2016 regulations, OCR banned discrimination “on the basis of sex,” which was defined broadly as “on the basis of pregnancy, false pregnancy, termination of pregnancy, or recovery therefrom, childbirth or related medical conditions, sex stereotyping, or gender identity.” The 2020 final rule revised the 2016 regulations significantly, however. In one of its most controversial changes, OCR removed the definition of “on the basis of sex” contending that “on the basis of sex” shall revert to the “plain meaning” of the term “sex” in Title IX of the Civil Rights Act – meaning not to encompass discrimination on the basis of sexual orientation or gender identity. OCR’s decision came on the heels of a Supreme Court ruling in Bostock v. Clayton County, Ga. four days prior which concluded that discrimination “on the basis of sex” encompasses claims based on gender identity and sexual orientation under Title VII of the Civil Rights Act. Accordingly, within the course of less than a week, the Supreme Court broadly interpreted the same term that OCR severely limited.

Shortly after OCR announced its reversal of the nondiscrimination requirement based on gender identity and sexual orientation, various interest groups began mounting legal challenges. With the order issued by EDNY on August 17, 2020, we are already seeing evidence of the legal battles likely to ensue over the definition of “on the basis of sex,” placing certain parts of OCR’s final rule in legal limbo. Continue Reading

“Contrary to the Public Interest”: CMS invokes retroactive-rulemaking authority to escape consequences of Allina

Earlier this month and with little fanfare, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would invoke CMS’s rarely used retroactive-rulemaking authority to essentially ensure that, despite the Supreme Court’s adverse rulemaking decision in Azar v. Allina Health Services, 139 S. Ct. 1804 (2019), CMS will apply the same Medicare payment methodology found procedurally improper in Allina. CMS’s invocation of its retroactive-rulemaking authority to effectively circumvent Allina sets a potentially dangerous precedent that should not go unnoticed by all Medicare stakeholders. Continue Reading

CMS Releases Proposed Physician Fee Schedule Rule for 2021

On August 4, 2020, the Centers for Medicare and Medicaid Services (“CMS”) posted for inspection the Proposed 2021 Payment Policies under the Physician Fee Schedule and Other Changes to Part B Payment Policies.  The proposed rule is scheduled for publication in the Federal Register on Wednesday, August 17, 2020, and among its many proposals, would update and revise: (1) the physician fee schedule relative value units; (2) practice expense relative value units; (3) telehealth service approval and reimbursement policies; (4) the direct supervision requirement; (5) payment for teaching physicians; (6) medical records documentation policies; and (7) policies regarding opioid treatment programs.

Comments to this proposed rule must be received by CMS no later than 5 p.m. on October 5, 2020. Continue Reading

Proposed Outpatient Prospective Payment System Rule for CY 2021

Includes proposed changes to the OPPS and ASC payment rates and Stark Law exemptions.

On August 4, 2020, CMS posted for inspection the Proposed Outpatient Prospective Payment System (“OPPS”) Rule for 2021.  The proposed rule is scheduled for publication in the Federal Register on Wednesday, August 12, 2020 and would revise the Medicare hospital OPPS and the Medicare Ambulatory Surgical Center (“ASC”) payment systems for calendar year (“CY”) 2021.  The proposed rule would also update the requirements for the Hospital Outpatient Quality Reporting (“OQR”) and the ASC Quality Reporting (“ASCQR”) programs.  In addition, the proposed rule would establish the overall Hospital Quality Star Rating beginning with CY 2021, remove certain restrictions on the expansion of physician-owned hospitals that qualify as “high Medicaid facilities,” and clarify that certain beds are included in a hospital’s baseline number of operating rooms, procedure rooms, and beds.  Comments to this proposed rule must be received by CMS no later than 5 p.m. on October 5, 2020.

OPPS Payment Rates:

The proposed rule would increase the payment rates under the OPPS by an OPD fee schedule increase factor of 2.6%, based on the proposed inpatient market basket increase of 3% under the inpatient payment schedule minus the multifactor productivity (“MFP”) adjustment required by the Affordable Care Act of .4%.  The proposed rule would continue to implement the statutory 2% reduction in payments for hospitals failing to meet the hospital OQR requirements.

Inpatient Only List:

The proposed rule would implement changes to the inpatient only (“IPO”) list for CY 2021.  CMS intends to eliminate the IPO list over the course of 3 years beginning with the removal of approximately 300 musculoskeletal-related services.  CMS is seeking comment specifically regarding the proposed 3-year timeline, additional services for deletion in 2021 and the sequences with which to remove services in the future.

Device Pass-Through Payments:

Devices that are eligible for pass-through payment under the OPPS are separately paid under the ASC payment system and are contractor-priced.  In the proposed rule, CMS discusses five specific applications for device pass-through payments, two of which have received preliminary approval under the fast-track application system.  CMS is soliciting comments on these devices and a final decision on all five devices will appear in the final rule.

Continued Additional Payments to Cancer Hospitals:

CMS proposes to continue providing additional payments to cancer hospitals so that a cancer hospital’s payment to cost ratio (“PCR”) is equal to the weighted average PCR for other OPPS hospitals.  The 21st Century Cures Act, however, requires that the weighted average PCR be reduced by 1%.  Accordingly, CMS proposes a target PCR of .89 would be used to determine the CY 2021 cancer hospital payment.  In other words, the payment adjustments will be the additional payments needed to result in a PCR equal to .89 for each cancer hospital.

ASC Payment Rates and Additional Procedures:

For CY 2019 through 2023, CMS adopted a policy to update the ASC payment system using the hospital market basket updates.  Accordingly for CY 2021, CMS proposes to increase the payment under the ASC payment system by 2.6% for ASCs that meet ASCQR requirements.  The proposed rule would also add eleven procedures to the ASC covered procedures list, including total hip arthroplasty.

Quality Reporting:

The proposed rule would revise and codify certain administrative procedures, and create and expanded review and corrective process.  According to CMS, the proposed rule would not add or remove any quality measures.  Among other measures, the proposed rule would codify the policy requiring that Hospitals sharing the same CMS Certification Number must combine data collection and submission across their multiple campuses for all clinical measures for public reporting purposes.  The proposed rule would also codify certain, previously finalized, quality data validation policies.

Overall Hospital Star Rating:

CMS proposes a methodology to calculate the Overall Hospital Star Rating, utilizing data collected on hospital inpatient and outpatient measures that are publicly reported on a CMS website including data from the Hospital OCR Program.  CMS is also proposing to include Veterans’ Health Administration Hospitals and Critical Access Hospitals in the Overall Hospital Star Rating.  The Overall Hospital Star rating is proposed to be codified at 42 C.F.R. § 412.190.

Physician-Owned Hospitals:

The proposed rule includes two proposals related to physician-owned hospitals and the rural providers and “whole hospital” exceptions to Section 1877 of the Social Security Act, also known as the prohibition on physician self-referral or the Stark Law.

  1. The removal of unnecessary regulatory restrictions on high-Medicaid facilities:

Certain types of physician ownership, including rural providers or “whole hospital” ownership are exempt from the Stark Law’s prohibitions, provided that certain conditions are met.  Absent an exception, which may be requested only once every two years, hospitals utilizing these exemptions may not increase the number of operating rooms, procedure rooms, and beds beyond that for which the hospital was licensed on March 23, 2010.  The proposed rule would revise section 42 C.F.R. § 411.362(c)(1) to permit “high-Medicaid” facilities to request an exception to the prohibition on expansion of facility capacity more frequently than once every two years.  A “high-Medicaid” facility, under the proposed rule, could request an exception to the prohibition on expansion of facility capacity at any time, provided that the “high-Medicaid” facility has not already submitted another request for exception on which CMS has not yet issued a decision.

  1. Including beds in a physician-owned hospital’s baseline consistent with state law:

As noted above, to qualify for the rural provider or “whole hospital” exemption to the Stark Law’s prohibitions, a hospital may not increase capacity beyond that for which the hospital was licensed on March 23, 2010 (with certain exceptions).  The statute and regulations refer to this number as the hospital’s “baseline” number of operating rooms, procedure rooms, and beds.  CMS states that in interpreting and applying the physician self-referral law, CMS defers to state law with respect to whether a bed is licensed at a certain date.   Accordingly, CMS proposes to revise the definition of “baseline number of operating rooms, procedure rooms, and beds,” at 42 C.F.R. § 411.362(a) to include the following language: “For purposes of determining the number of beds in a hospital’s baseline number of operating rooms, procedure rooms, and beds, a bed is included if the bed is considered licensed for purposes of State licensure, regardless of the specific number of beds identified on the physical license issued to the hospital by the State.”  In other words, CMS will consider a bed to be “licensed” if it is within the hospital’s State-approved “bed complement.”

The inspection copy of the proposed rule is posted on the Federal Register website and is available at:

Meeting: Advisory Panel on Hospital Outpatient Payment

On August 10, 2020, CMS published a meeting notice announcing a virtual meeting of the Advisory Panel on Hospital Outpatient Payment for 2020 (the “Panel”).  Advice provided by the Panel is considered by CMS when preparing updates to the OPPS.

The virtual meeting is scheduled for Monday, August 31, 2020 from 9:30 a.m. to 5 p.m. EDT.  Presentations and comment letters must be received by 5 pm on Friday, August 14, 2020 to be considered at the meeting.

More information on comment submission and registration, as well as the meeting agenda, is available in the Federal Register notice, available at: