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James F. Hennessy

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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

On September 28, 2023, the Office of Inspector General of the Department of Health and Human Services (OIG) issued Advisory Opinion 23-06, involving a proposed services arrangement between a pathology laboratory (the Requestor) and third-party referring pathology laboratories. 

The OIG determined that, if the requisite intent were present, the proposed purchase of the technical component of anatomic pathology services from certain laboratories would generate prohibited remuneration under the federal Anti-Kickback Statute (AKS). In doing so, the OIG highlighted the proposal’s lack of commercial reasonableness and reaffirmed its longstanding suspicion over arrangements that “carve out” federal health care program business.Continue Reading OIG Issues Unfavorable Advisory Opinion Concerning Pathology Lab’s Proposed Purchased Services Arrangements

On April 27, 2023, Washington Governor Jay Inslee signed into law House Bill 1155, otherwise known as the My Health My Data Act.  Certain “geofencing” portions of the law became effective July 23, 2023.  Other provisions will become effective for “small businesses” on June 30, 2024, and for all other regulated entities on March 31, 2024. Below is a brief summary of the law’s following core components: (1) covered individuals and entities, (2) covered data, and (3) data collection and sharing requirements.Continue Reading Implementation Underway for Washington’s New Wide-Reaching Consumer Health Data Law

The Department of Health and Human Services’ Office of Inspector General (“OIG”) issued an unfavorable advisory opinion (the “Opinion”) last Friday in which it refused to bless a proposed arrangement involving an intraoperative neuromonitoring (“IONM”) company (the “Requestor”) and various surgeons who perform procedures for which IONM is used, desiring to form a physician-owned entity (“Newco”) that would arrange to provide both the technical and professional components of IONM services (the “Proposed Arrangement”).

The Proposed Arrangement would essentially create a “turn-key” entity owned by the surgeons (the “Surgeon Owners”) that would subcontract to the Requestor and its affiliated physician practice (the “Practice”) “virtually all of the day-to-day requirements of an IONM business.” The Surgeon Owners would be responsible for forming Newco, preparing Newco’s internal governance documents, and determining the methodology for distribution of Newco’s profits amongst themselves. However, the Surgeon Owners would be passive investors, with limited involvement in Newco’s day-to-day operations.Continue Reading OIG Issues Unfavorable Advisory Opinion, Upholding Longstanding Contractual Joint Venture Concerns

On May 3, New York Governor Kathy Hochul signed into law provisions that will require health care entities to submit a notification to the state Department of Health (DOH) providing information about any material transaction involving that health care entity.

The law, passed as part of the state’s budget, was originally crafted to give the DOH authority to review and approve those transactions. Ultimately, following several iterations during the legislative process, that approval power was stripped out by the state general assembly and replaced with the current notice requirement.

The law will take effect on August 1, 2023 and states on its face that it will apply to all “material transactions” involving health care entities that close on or after that date. That said, the requirements for transactions that close between August 1 and August 31 are a somewhat open question, given the 30-day notice requirement in the law. The DOH is tasked by the law with creating regulations that may address this situation.Continue Reading New York Passes Health Care Transaction Notice Requirements

The Department of Health and Human Services Office of Inspector General (HHS-OIG) recently published a Special Fraud Alert warning health care providers (e.g., prescribers, pharmacies, durable medical equipment providers, clinical laboratories) to steer clear of certain telemedicine arrangements and outlining seven “suspect” characteristics that may present heightened risk of fraud and abuse.

The alert coincides with a third round of criminal “telemedicine takedowns” announced by the Department of Justice (DOJ)  in the last several years, reflecting DOJ’s continued focus on identifying and dismantling fraudulent arrangements that exploit telemedicine technologies and related regulatory flexibilities in the wake of the COVID-19 pandemic.

Telemedicine technologies have created a multitude of opportunities for growth and innovation within the health care industry and are well-positioned to become an ongoing cornerstone of our health care delivery system. However, given the increased level of regulatory scrutiny of telemedicine arrangements, providers and telehealth technology companies, including drug and device manufacturers that offer telemedicine technologies (e.g., platforms, mobile applications) for prescribers and patients that facilitate virtual care,  should carefully plan and closely evaluate existing arrangements to ensure compliance with applicable state and federal laws and avoid implication amongst the recent uptick in enforcement.Continue Reading Telehealth Under Scrutiny: OIG Special Fraud Alert and DOJ Enforcement Highlights Suspect Characteristics Associated with High-Risk Telemedicine Arrangements

The No Surprises Act, effective as of January 1, 2022, aims to provide patients with accurate information regarding their expected health care spending. In many cases, the new law prevents health care providers from charging patients for costs not reimbursed by insurance. We previously covered the impact of these “balance billing” prohibitions on hospital contracting. However, for the 28 million people in the United States without health insurance coverage or for those seeking care that requires initial self-payment, such as most psychological counseling, these balance billing prohibitions lack relevance because the entire balance is payable by the patient or their representative. The No Surprises Act also includes a potential solution for this group–a mandate that “Good Faith Estimates” (GFEs) be provided to all uninsured or self-pay patients.

Unlike the balance billing restrictions addressed in our prior blog, GFE requirements apply to all health care providers in all settings.  Providers must now generate cost estimates when treating uninsured (including those with insurance who do not want a claim filed) and self-pay patients. Many providers will generate estimates using the same billing systems that existed prior to the No Surprises Act, but some changes may be necessary to meet new regulatory requirements. This post will highlight key provisions relating to GFE, including how to ensure that provider billing practices comply with the new mandate.Continue Reading No Surprises Act Good Faith Estimates: What they are and when you need them

Effective January 1, 2022, common prohibitions against “balance billing” under hospital professional service contracts will likely become moot due to certain superseding federal prohibitions under the federal No Surprises Act enacted December 27, 2020.  As detailed below, certain hospital-based physicians, including radiologists, anesthesiologists, and pathologists, should keep these new federal billing prohibitions in mind when entering into new hospital professional services agreements (“PSAs”) and revisit their existing agreements to determine whether any changes are appropriate.

“No Surprises Act” Background.

The federal government’s growing focus on surprise medical bills reached a new high on July 1, 2021, when the Department of Health and Human Services (“HHS“), along with the Department of Labor and Department of the Treasury, released a consumer-focused interim final rule with comment period taking aim at surprise billing and excessive cost-sharing practices.  The rule, which also cites an ineffective “patchwork” of consumer protections under existing state laws, represents the first implementing regulation under the No Surprises Act.  Both the rule and the statute become effective on or after January 1, 2022.

Balance Billing Prohibition.

This article discusses two distinct but interwoven billing procedures that deserve clarification: “surprise billing” and “balance billing.”Continue Reading No Surprises Act: Time to revisit balance billing prohibitions in hospital-based physician professional services agreements with hospitals?

The 2019 Novel Coronavirus pandemic (“COVID-19”) introduced several unfamiliar hardships adversely impacting the long-term care industry, especially for nursing homes.  Acknowledging these hardships, the Centers for Medicare & Medicaid Services (“CMS”) enacted several temporary emergency blanket waivers effective March 1, 2020, lending flexibility to nursing homes in their COVID-19 response efforts.  Since that time, according…

Effective January 14, 2021, the Internal Revenue Service (“IRS”) implemented a final rule (the “Final Rule”) concerning the tax deductibility of settlement payments made to the government.  This rulemaking followed a legislative update to the Internal Revenue Code of 1986 (“IRC”), which was implemented as part of the 2017 federal tax overhaul and specifically included…

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),…

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…

On June 1, 2020, the Centers for Medicare & Medicaid Services (CMS) unveiled new measures designed to enhance enforcement and oversight of nursing homes and related state survey agencies.  CMS announced the new policies concurrently with the release of federal data detailing the incidence of nursing home COVID-19 infections, which was also made available on…

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

Among the changes instituted by HHS are expanded Medicare coverage and payment for services, reduced or waived cost-sharing obligations for physicians, and loosening of the HIPAA enforcement policies for covered entities…

The U.S. Department of Health and Human Services filed a Notice of Enforcement Decision on Friday, April 26, 2019, announcing a new system of annual penalty limits for HIPAA violations based on an entity’s level of culpability. The agency revised its previous interpretation of the Health Information Technology for Economic and Clinical Health Act (HITECH…

In a transmittal issued last week, the Centers for Medicare & Medicaid Services (CMS) extended newly-revised supervision rules for certain diagnostic tests paid via the Medicare Physician Fee Schedule (MPFS) to services paid under the Outpatient Prospective Payment System (OPPS) for hospital outpatient departments. The transmittal relates to services performed by a registered radiologist assistant…