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: https://www.federalregister.gov/documents/2020/08/12/2020-17086/medicare-program-changes-to-hospital-outpatient-prospective-payment-and-ambulatory-surgical-center

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:  https://www.govinfo.gov/content/pkg/FR-2020-08-10/pdf/2020-17398.pdf


New developments in False Claims Act litigation: Ninth Circuit rules that denial of government motion to dismiss is not immediately appealable as of right

On August 4, 2020, the Ninth Circuit, in a decision authored by Judge Wardlaw, dismissed for lack of jurisdiction an atypical appeal filed by the Federal Government from a district court’s order denying the Government’s motion to dismiss a qui tam case filed under the False Claims Act (“FCA”).  See United States v. United States ex rel. Thrower, No. 18-16408 (9th Cir. Aug. 4, 2020).  Stay tuned, however, as the Ninth Circuit’s decision is unlikely to be the last appellate decision to address the issue.

In the underlying case, the Government, after declining to intervene in an action brought by a relator in the Northern District of California, later sought dismissal under 31 U.S.C. § 3730(c)(2)(A).  Section 3730(c)(2)(A) provides that “[t]he Government may dismiss [a qui tam] action notwithstanding the objections of the [relator] if the [relator] has been notified by the Government of the filing of the motion and the court has provided the [relator] with an opportunity for a hearing on the motion.”

This case is one of several in which the Government has moved to dismiss qui tam actions consistent with principles enumerated in the so-called Granston Memo, named for its author, then-Department of Justice (“DOJ”) Civil Fraud Director Michael Granston, in January 2018.  The Granston Memo encouraged DOJ attorneys to seek the dismissal of meritless qui tam actions that do not serve the Government’s interests due to concerns including the resources required to monitor meritless FCA cases and the potential for those cases to generate adverse decisions that negatively affect government enforcement.  The memo further outlined a non-exhaustive list of factors that DOJ should use to determine whether to seek dismissal when it has otherwise declined to intervene, including: (1) curbing meritless qui tam cases; (2) preventing parasitic or opportunistic qui tam cases; (3) preventing interference with agency policies and programs; (4) controlling litigation brought on behalf of the United States; (5) safeguarding against classified information and national security interest; (6) preserving government resources; and (7) addressing egregious procedural errors.

The district court, however, denied the Government’s motion after concluding that the Government failed to meet its burden (established under earlier Ninth Circuit precedent) of demonstrating a valid governmental purpose related to the dismissal and because it failed to fully investigate the allegations of the amended complaint.  Thereafter, the Government sought immediate appellate review of the district court’s denial under the collateral order doctrine, which is a narrow exception to the final judgment rule that otherwise requires parties to wait for a final judgment before appealing any district court ruling.  However, in its recent decision, the Ninth Circuit dismissed the appeal and held that: (1) the jurisdictional question was an issue of first impression that had not been resolved by the Supreme Court; (2) the collateral order doctrine did not apply because the district court’s order did not decide important issues separate from the merits; and (3) where the Government has declined to intervene in an FCA case, the interest implicated by an erroneous denial of a government motion to dismiss is not sufficiently important to justify an immediate appeal under the collateral order doctrine.

As noted above, the Ninth Circuit is unlikely to be the last circuit court of appeals to address this unique jurisdictional issue. Another federal appellate court (the Seventh Circuit) is currently considering the same question in an appeal argued earlier this year.  See United States v. CIMZNHCA, LLC, No. 19-2273 (7th Cir.).  In the meantime, defendants faced with such qui tam actions are well advised to keep lines of communication with the Government open and advocate for such motions to dismiss when the facts and circumstances so warrant.

Final rules modernizing Anti-Kickback Statute and Stark Law under review by OMB: anticipating the future of value-based care

The much-anticipated final rules modernizing the safe harbors under the Anti-Kickback Statute (AKS) and the physician self-referral exceptions under the Stark Law are officially under review by the Office of Management and Budget (OMB). The Department of Health and Human Services (HHS) anticipates publishing the final rules in August 2020, although that target date is subject to change. The final rules represent HHS’s efforts to remove barriers to effective care coordination and management as part of its “Regulatory Sprint to Coordinated Care” initiative. While the proposed rules made a sweeping effort to promote a value-based health care delivery system, they left notable and significant room for public comment on the various options under consideration by HHS’s Centers for Medicare & Medicaid Services (CMS) and Office of Inspector General (OIG) to achieve their goals. As a result, health care providers eager to benefit from the protections of these potential value-based changes to AKS and Stark will be interested in CMS’s and OIG’s final decisions in the following key areas.

  1. What Qualifies as a Value-Based Activity?

In their proposed rules, OIG and CMS developed three new tiered safe harbors and exceptions that offer increasing flexibility to value-based arrangements based on the level of financial risk accepted by each participant. As a gatekeeping matter, to be protected, any value-based arrangement must be for the provision of at least one value-based activity for a target patient population that is reasonably designed to achieve a value-based purpose and must be between a value-based enterprise and one of its participants, or between participants in the same value-based enterprise. As summarized in Reed Smith’s three-part series analyzing the proposed rules, this means two or more persons or entities must collaborate, and be accountable, to achieve improved care coordination, quality, or efficiency for a defined patient population by taking, or refraining from taking, an action tailored to that improvement.

The value-based arrangement safe harbors proposed by OIG required that the value-based activities directly further coordination and management of care for the target patient population. CMS did not similarly limit the scope of value-based activities in its proposed rule, and did not define the “coordinating and managing care” concept (but sought comment on whether it should). Instead, CMS only required that the value-based activities be reasonably designed to achieve a value-based purpose. Many commenters will be interested to find out whether CMS narrows its scope—or, alternatively, OIG broadens its scope—with respect to what will be considered a value-based activity protected under a value-based arrangement.

  1. Who Qualifies as a Value-Based Enterprise Participant?

The proposed rules sought to exclude pharmaceutical manufacturers; durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) manufacturers, distributors, and suppliers; and laboratories from qualifying as value-based enterprise participants—and considered adding pharmacy benefit managers (PBMs), medical device manufacturers, and other wholesalers and distributors to the list of excluded entities. If those exclusions are maintained in the final rules, they have the potential to significantly limit value-based care and activities that would otherwise benefit from the proposed safe harbors and exceptions.

For example, despite excluding DMEPOS manufacturers, distributors, and suppliers as potential value-based enterprise participants, OIG included health technology companies. Oftentimes, however, those two entities can be one in the same. Many medical device manufacturers and DMEPOS distributors, manufacturers, and suppliers have led the digital health era by creating technologies that give patients and providers real-time insight into the data collected by the products those patients use or wear. The care coordination efforts supported by these technologies could be hindered by taking away the device or DMEPOS manufacturer’s seat at the value-based participant table. While these manufacturers, distributors, and suppliers could still sell their products to other value-based enterprise participants at fair market value, the exclusion of those entities could have a chilling effect that prevents participants from wanting to buy. How OIG ultimately handles the list of qualified value-based enterprise participants in its final rule might foreshadow the extent to which digital health technologies will play a role in value-based arrangements and care coordination moving forward.

  1. Whether the Care Coordination and Value-Based Arrangement Protections Are Limited to In-Kind Remuneration.

In their proposed rules, OIG and CMS considered limiting their care coordination safe harbor and value-based arrangement exceptions to in-kind remuneration only. If finalized, these protections would be limited to items and services only, and would not be available for any monetary remuneration, such as shared savings.

This restriction could also extend to OIG’s proposed patient engagement safe harbor, which OIG proposed to only protect in-kind patient engagement tools, such as health-related technology, patient health-related monitoring tools and services, or supports and services designed to identify and address a patient’s social determinants of health. The safe harbor would exclude monetary remuneration such as gift cards, cash, and cash equivalents. That said, OIG solicited comment in its proposed rule about whether to include vouchers under the in-kind designation, and it floated whether to allow cash or cash equivalents, but with a cap. Accordingly, it remains to be seen how far the protections for remuneration will go in the interest of value-based care.

* * *

The final rules, if published, are likely to have a significant impact on nearly every facet of the health care industry seeking to engage in value-based arrangements. Given their importance and the broad scope of considerations left open for public comment, industry stakeholders should keep in mind the three key areas discussed above when considering the ways in which the final rules could impact their organizations.

For additional information on the proposed rules, please refer to Reed Smith’s three-part client alert series.

HHS releases final rule and fact sheet to clarify Part 2: Standards for Substance Use Disorder Record Protection, Disclosure, and Registry

After nearly a full year of public comment consideration, last week, the U.S. Department of Health and Human Services (HHS) Substance Abuse and Mental Health Services Administration (SAMHSA) announced and published a Final Rule and Fact Sheet addressing 42 C.F.R. Part 2 (Part 2). Generally speaking, Part 2 affords privacy protections to patient records pertaining to federally assisted substance use disorder (SUD) treatment programs. The Proposed Rule, released in August 2019, sought to balance the privacy protections of SUD patients with the need for updated coordinated care regulations. Specifically, the Proposed Rule focused on: updating protection protocol for both Part 2 and non-Part 2 records; clarifying federal standards for obtaining patient consent to disclose SUD records to various entities; and preventing duplicative SUD program enrollments and prescriptions.

The recent Final Rule implements these changes in the following ways:

  1. The Final Rule updates standards for the protection and management of Part 2 and non-Part 2 records.

The Final Rule seeks to facilitate improved coordination of care between Part 2 and non-Part 2 providers by clarifying the applicability of Part 2 requirements to non-Part 2 providers. First, the Final Rule updates the definition of “records” in 42 C.F.R. § 2.11. Under the previous definition, there was concern as to whether non-Part 2 providers could inadvertently render their own records subject to Part 2 when treating SUD patients by using patient records received from Part 2 providers to inform their own subsequent clinical encounters with and record-keeping on those patients. Under the new definition, non-Part 2 providers may receive oral disclosures from a Part 2 provider, with consent of the patient, for treatment purposes and reduce that disclosure to writing without the disclosed information thereby becoming a Part 2 record. This allows non-Part 2 providers to receive and record important information regarding the SUDs and treatment of patients with whom they have clinical encounters, without subjecting their own records to the rigors of Part 2.

Second, the Final Rule revises 42 C.F.R. § 2.12 to clarify that records generated by non-Part 2 providers based on their own patient encounters are generally not covered by Part 2 protections, even to the extent the records include information about a SUD and its treatment. However, if any SUD records from a Part 2 program are incorporated into non-Part 2 provider records, then the entire record would become subject to Part 2. To avoid the application of Part 2 requirements to non-Part 2 provider records, the Final Rule advises that the respective records should be “segregated.” Segregating the received Part 2 record from the non-Part 2 provider’s own record will allow the provider to ensure that the non-Part 2 records can be distinguished from the received record and, thus, not become subject to Part 2 requirements.

Importantly, the revisions to § 2.11 and § 2.12 work in concert to permit a Part 2 Program to make a disclosure with the patient’s consent, orally or in writing, to a recipient non-Part 2 provider and allow the non-Part 2 provider to subsequently have her own encounter with the patient and create her own patient record, which will not be subject to Part 2, even to the extent the non-Part 2 provider records information about the patient’s SUD and its treatment within that record. Notably, the requirement remains for received Part 2 records to be segregated from non-Part 2 providers’ own created records in order to insulate the latter from Part 2 regulations. Together, these changes are intended to promote secure SUD record management and facilitate care coordination among Part 2 and non-Part 2 providers.

2. The Final Rule clarifies parameters for patient consent to disclose Part 2 treatment records.

The Final Rule also revises the patient consent requirements under Part 2 in an effort to remove barriers to care coordination and expand patients’ ability to consent to disclosure of their own information.

Previously, in order for a Part 2 program or other lawful holder to disclose patient information to an entity that (1) did not have a treating provider relationship with the patient and (2) was not a third-party payor, Part 2 required the written consent document to designate both the name of the recipient entity and the name of a specific individual designated to receive the information. The Final Rule revises the consent requirements to remove the distinction between entities with a treating provider relationship and entities without a treating provider relationship, and to permit the consent to merely designate the name of the individuals or entities to whom a disclosure may be made. For instance, with this update, a patient now may simply name “Social Security Administration” as the recipient entity, without needing to also designate a specific individual at the agency to receive the information. These changes will allow patients to more easily disclose their own information to entities with which they do not have a treating provider relationship. Notably, however, the Final Rule preserves certain treating provider relationship distinctions for recipient entities that are research institutions or those that facilitate the exchange of health information.

Additionally, the Final Rule clarifies the scope of permitted disclosures with patient consent for “payment and health care operations” under 42 C.F.R. § 2.33(b) by incorporating a list of 19 illustrative (but not exhaustive) examples of permissible activities into the regulatory text. Notably, these examples include the same examples provided by SAMHSA in the preamble to the 2018 Final Rule. Additionally, we note that although SAMHSA indicated in the Proposed Rule that “health care operations” do not include disclosures for care coordination and case management, SAMHSA revised this position in the Final Rule based on public comments and the passage of the CARES Act, which expressly permits disclosure of Part 2 information for these purposes. As such, the Final Rule specifically includes care coordination and case management services in the list of permissible activities under § 2.33(b). Further, although this list of permissible activities will provide some clarity to Part 2 providers, SAMHSA also included language that permits disclosures for “other payment/health care operations activities not expressly prohibited,” which leaves the restriction on disclosures subject to interpretation.

3. The Final Rule provides methods for programs and providers to track SUD program enrollments and activities.

Finally, the Final Rule also seeks to remove barriers to the exchange of information among Part 2 and non-Part 2 providers in an effort to ensure the appropriate use of opioid therapies and reduce the risk of diversion and adverse events. First, the Final Rule expands § 2.34, relating to central registries containing information about individuals applying for withdrawal management or maintenance therapy for SUDs. This expansion permits non-Part 2 providers with a treating provider relationship with a patient to query central registries to determine whether the patient is receiving opioid treatment through an opioid treatment program (OTP). Queries can be used to prevent duplicative enrollments and/or to inform the provider’s decision making regarding the prescription of opioid medications. Second, the Final Rule adds a new section, § 2.36, which explicitly permits Part 2 programs, including OTPs, to enroll in prescription drug monitoring programs (PDMPs) in their respective states and report to the PDMP when prescribing or dispensing medications. These changes will help improve care coordination among providers treating patients with SUDs and will improve access to complete patient information, which will in turn enable providers to make more informed decisions regarding patient care.

These revisions to Part 2 were intended to clarify the parameters of patient consent for SUD disclosure and increase the ease of coordinated care among Part 2 and non-Part 2 providers. HHS asserts the Final Rule will also improve the quality of care for those with SUDs as well as further align Part 2 standards with HIPAA regulations. As both Part 2 and non-Part 2 providers are affected by the Final Rule, it will be important for all impacted entities to revisit their policies on maintaining and disclosing SUD patient records in order to achieve compliance with SAMHSA standards.

Reed Smith will soon issue a Client Alert to describe the Final Rule in greater detail, and advise on the implications of this agency action.

Bipartisan bill proposes to leverage CFIUS in assessing pharmaceutical supply chain

On June 30, 2020, United States Senators Elizabeth Warren (D-Mass.) and Marco Rubio (R-Fla.) introduced legislation proposing the Committee on Foreign Investment in the United States (CFIUS), an interagency committee authorized to review certain transactions involving foreign investment in the United States for national security concerns, assist the Federal Trade Commission (FTC) in “conduct[ing] a study on the United States’ overreliance on foreign countries and the impact of foreign direct investment in the U.S. pharmaceutical industry.” In the last decade, CFIUS reviewed a number of mergers and acquisitions in the healthcare industry that resulted in a foreign person obtaining control of a U.S. pharmaceutical supplier, among other pharma entities. More recently, CFIUS jurisdiction was expanded to include not only the review of transactions that result in foreign control of a U.S. business, but also certain non-controlling foreign investments as well, including investments in biotech and companies working with genetic information of U.S. citizens.

The United States Pharmaceutical Supply Chain Review Act (full text available here),  comes on the heels of another bipartisan initiative sponsored by Senators Rubio and Warren earlier this year, the Strengthening America’s Supply Chain Act and National Security Act, which focuses on combating U.S. supply chain dependence on Chinese medical supplies. Both Acts build on Senator Rubio’s plan to protect U.S. business interests from what he describes as China’s quest for “global dominance” through China’s government-backed manufacturing and innovation initiative, Made in China 2025. In a broader context, these bipartisan Acts are consistent with the U.S. Government and CFIUS’s continued focus on China-related transactions as well as those involving other foreign parties, with particular emphasis on transactions impacting U.S. critical infrastructure (see, e.g., May 1, 2020 Executive Order on Securing the United States Bulk-Power System).

In this case, the United States Pharmaceutical Supply Chain Review Act would require the FTC and the Secretary of the Treasury, acting through CFIUS, to provide Congress with a report on the following:

  1. An assessment of: (A) the supply chain of the pharmaceutical industry of the United States and the effect of concentration and reliance on foreign manufacturing within that industry; (B) the effect of foreign investment in the pharmaceutical industry of the United States on domestic capacity to produce drugs and active and inactive ingredients of drugs; and (C) the effect of foreign investment in technologies or other products for sequencing or storage of DNA, including genome and exome analysis, in the United States, including the effect of such investment on the capacity to sequence or store DNA in the United States.
  2. The number of reviews and investigations conducted by the Committee, in each of the 10 fiscal years preceding the year in which the study is conducted, with respect to covered transactions (as defined in section 721(a) of the Defense Production Act of 1950 (50 U.S.C. 4565(a))—(A) in the pharmaceutical industry of the United States; or (B) relating to the sequencing or storage of DNA in the United States.
  3. A short description of each such review or investigation, including whether the transaction was approved or prohibited. See United States Pharmaceutical Supply Chain Review Act.

The Act intends to leverage certain CFIUS data in order to increase transparency and identify vulnerabilities in the U.S. pharmaceutical supply chain. As a practical matter, however, the utility of such data may be limited. For example, most CFIUS reviews related to U.S. pharmaceuticals in the last ten years arose from parties who voluntarily notified CFIUS of the transaction. Any data provided by CFIUS pursuant to the Act would not capture unreported (i.e., ‘non-notified’) transactions that avoided CFIUS review and therefore the proposed report may not be indicative of overall investment or industry trends.  In addition, the Act directs CFIUS to provide “a short description of each such review or investigation, including whether the transaction was approved or prohibited” but does not address whether the report to Congress would be classified.  CFIUS is generally bound by statute to maintain strict confidentiality of such information and ordinarily would not be authorized to release transaction details or results publicly.

Notwithstanding those practical limitations, the Act reflects an intensifying scrutiny by U.S. government on the role foreign parties serve in the domestic healthcare industry, particularly after COVID-19 illuminated vulnerabilities in the domestic medical supply chain capacity. For example, earlier this year, formerly reliable trade partners such as India significantly restricted exports of certain critical active pharmaceutical ingredients (APIs), the requisite components used in generic drugs. Similarly, as recently as May, as U.S. health care workers faced a dire shortage of personal protective equipment (PPE), the Food and Drug Administration (FDA) banned 65 of the 80 authorized manufacturers for N95-style face masks that were later determined to be ineffective at blocking COVID-19. With respect to pharmaceuticals, the global pandemic has left legislators, medical professionals, and policy analysts alike struggling to protect Americans’ access to critical drugs (including those to assist COVID-19 patients), as an estimated 80 percent of APIs are imported from abroad.

If signed into law, the U.S. Pharmaceutical Supply Chain Review Act would provide critical data on medical supply trade patterns as well as domestic manufacturing capacity. The Act may also prompt legislation requiring significant changes to upstream and downstream supply chains of U.S. pharmaceutical companies importing APIs.

Reliance on telehealth ramps up during COVID-19, and may be here to stay

As technology has advanced over the years, there has been a corresponding push for virtual visits with health care providers.  In fact, many state boards of medicine and other regulatory agencies have sought to amend regulations and guidances to make telehealth a reality for patients across the U.S.  However, despite the technical allowance for telehealth, many regulatory, privacy, and financial barriers have stood in the way of allowing telehealth to be the norm — that is, until the COVID-19 pandemic.

Once shelter-in-place orders went into effect across the country, there was great appeal to patients in being able to still get medical treatment and advice without leaving the safety of their homes.  Thus, federal and state regulators acted quickly to amend regulations, issue temporary waivers, and publish guidance documents setting out ways patients could communicate with, and be treated by, their providers virtually.  Many regulators even relaxed certain licensing requirements to allow providers a broader reach so that they could treat patients located in other states via telehealth.

The outcome of this quick call to action was a huge boom in telehealth — a week before the shelter-in-place orders went into effect, Medicare reported there were 11,000 telehealth visits in one week.  One month later, this number skyrocketed to 1.3 million in a single week.  The apparent success of telehealth thus far has left many wondering why this mechanism was not widely utilized before the pandemic, and the answer likely comes down to data protection and insurance.

Specifically, first, the Health Insurance Portability and Accountability Act (HIPAA) requires health care providers and insurers to protect patient data and the electronic transmission of the same.  Without the assistance of regulatory legal counsel to advise on how best to navigate privacy laws in an arguably new and nuanced space, many health care providers opted away from telehealth rather than run the risk of violating HIPAA.  Second, until the pandemic, Medicare and Medicaid would not cover telehealth services unless, for example, the patient was in a rural area or suffered a rare condition.  Now, during COVID-19, the U.S. Department of Health and Human Services (HHS) has eased many of the rules that previously made telehealth visits financially difficult.

Although many of the regulation amendments, waivers, and guidances are allegedly temporary and only in effect during the COVID-19 crisis, many industry stakeholders are wondering if they might outlast the HHS’s lift of the public health emergency.  As the state boards and federal agencies continue to adapt to these unprecedented times, we recommend that health care providers stay attuned to the laws of the states in which both they, and their patients, are located, as well as public postings and guidance documents released by federal agencies, such as the U.S. Food & Drug Administration.  Should you have any questions related to telehealth during COVID-19 and in the future, please do not hesitate to reach out to the health care attorneys at Reed Smith.

Office for Civil Rights issues final rule scaling back nondiscrimination requirements for health care covered entities as Supreme Court broadens discrimination protections

A final rule published by the Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) and the Centers for Medicare & Medicaid Services (CMS) significantly scales back nondiscrimination regulations first released in 2016. The final rule, which was published in the Federal Register on June 19, 2020, implements Section 1557 of the Affordable Care Act (ACA) and pares back numerous nondiscrimination regulations applicable to covered health care entities in an effort to reduce regulatory costs and eliminate duplicative legal obligations.

In doing so, the final rule drastically changes the interpretation of  Section 1557’s scope, waters down stringent requirements designed to promote universal access to covered programs and providers, and alters enforcement provisions. Despite these notable changes, certain core nondiscrimination provisions remain, such as communication and access standards for disabled and limited English proficiency (LEP) individuals. As a result, covered entities will need to understand how their obligations under the final rule change, what remains the same, and what to look out for moving forward when it becomes effective on August 18, 2020. Below are the new rule’s main takeaways.

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FDA issued guidance on statistical considerations for clinical trials during the COVID-19 public health emergency

On June 17, the Food and Drug Administration (FDA) continued its efforts to mitigate COVID-19’s disrupting impact on clinical trials by issuing guidance on statistical considerations for changes to trial conduct (FDA previously relaxed restrictions on protocol modifications). As expected, public health measures designed to control COVID-19’s rapid emergence as a global pandemic—social distancing, travel restrictions, site closures, etc.—have impeded drug and device industry innovation. Many clinical trials have been delayed; others cannot get up and running. Meanwhile, participant enrollment continues to present a challenge due to fear of infection, and logistics firms are working tirelessly to smooth unprecedented supply chain interruptions. The expected downstream effect is delayed access to important medical products. FDA’s latest guidance therefore aims to protect the continuity of clinical trials and equip sponsors to adapt to these challenging circumstances without compromising trial integrity and safety. Likewise, the guidance is not limited to trials for the development of COVID-19 treatments; the recommendations apply equally to other diseases

FDA’s statistical considerations for modifying clinical trials to address the impact of COVID-19 begin with three guiding principles:

  • Proactive planning: Sponsors should update statistical analysis plans prior to modifying primary or secondary endpoints.
  • Bias avoidance: Sponsors should not propose trial modifications that have the potential to bias the interpretation of findings and should implement safeguards such as a data monitoring committee.
  • Appropriate data selection: While making trial modifications, sponsors should focus on summaries of participant-specific data, such as null values, treatment discontinuation, treatment interruptions, trial withdrawal, and endpoints.

FDA’s guidance concludes by applying the above principles to scenarios that sponsors commonly encounter in the COVID-19 context. In each case, FDA offers detailed statistical considerations for trial design and analysis strategies. For example, FDA stresses the importance of performing sensitivity analyses to evaluate the impact of any change in endpoint definition or ascertainment.

HHS announces another round of CARES Act funding for Medicaid and CHIP providers as well as Safety Net Hospitals

On June 9, 2020, the U.S. Department of Health and Human Services (HHS) announced additional distributions from the CARES Act Provider Relief Fund to several groups of providers, totaling approximately $25 billion. $15 billion of these funds is targeted towards eligible Medicaid and Children’s Health Insurance Program (CHIP) providers participating in state Medicaid and CHIP programs. Another $10 billion is allocated to “safety net hospitals,” serving more vulnerable individuals and can come as soon as this week. In connection with these new disbursements, HHS is launching a newly enhanced Provider Relief Fund Payment Portal to allow reporting of annual patient revenues.

Medicaid and CHIP Distribution

HHS will disburse a payment that, at a minimum, is equal to 2 percent of reported gross revenue from patient care to eligible providers serving Medicaid and CHIP beneficiaries. Providers who have not yet received a disbursement from the initial General Distribution on June 3, 2020 are eligible for this new distribution. The initial General Distribution was authorized under the CARES Act and reached about 62 percent of all providers participating in Medicaid/CHIP. This new, targeted distribution is aimed at reaching the remaining 38 percent of those providers. HHS believes almost one million providers may be eligible, including pediatricians, obstetrician-gynecologists, dentists, opioid treatment and behavioral health providers, assisted living facilities and other home and community-based services providers.

Eligibility requirements include:

  • The provider must not have received payment from the General Distribution, regardless of the size of the distribution received. However, payment under another Targeted Distribution (like High Impact Area, Rural, Indian Health Service, and Skilled Nursing Facility targeted distributions) will not affect eligibility under the Medicaid/CHIP distribution. Those providers who rejected their General Distribution payment are ineligible to receive this targeted distribution.
  • The provider must have directly billed for Medicaid/CHIP programs or Medicaid managed care plans for healthcare-related services between January 1, 2018 and December 31, 2019.
  • The provider must have filed an income tax return for 2017, 2018, or 2019 or be an entity exempt from filing.
  • The provider must have provided patient care after January 31, 2020, not have permanently ceased provided patient care directly.

In connection with this distribution, HHS has retooled the Provider Relief Fund Portal to allow Medicaid and CHIP programs and/or Medicaid and CHIP managed care organizations to submit their annual patient revenue information. This information will be used by HHS to determine the final amount of payment the provider will receive.

Like recipients of the General Distribution, those receiving the Medicaid/CHIP disbursement will have to complete the attestation process and accept the Terms and Conditions within 90 days of payment. Terms and conditions include restrictions on the use of funds, certifications on the part of the recipient, an agreement to submit reports showing compliance with the terms, and agreement that HHS may publicly disclose the payment the recipient receives.

Applications are now available and must be completed by July 20, 2020.

Safety Net Hospitals

An additional $10 billion in funds will be sent directly by direct deposit to those eligible hospitals serving low-income and vulnerable populations. In his remarks announcing this new distribution, Eric D. Hargan, Deputy Secretary of HHS, noted that directing these funds to these providers was critical “because they operate on thin margins and may be struggling more than other providers during this crisis.”   He also noted that these safety net providers serve more low income and minority Americans, who have been disproportionately affected by COVID-19.  In doing so, he cited a CDC report that black Americans suffering from COVID-19 are being hospitalized at a rate of 4.5 times of white Americans; Hispanic Americans at a rate of 3.5 times that of non-Hispanic whites; and American Indians and Alaska Natives at a rate of 5 times that of whites. Eligibility requirements include:

  • A Medicare Disproportionate Payment Percentage (DPP) of 20.2 percent or greater;
  • Average Uncompensated Care per bed of $25,000 or more (as an example, a hospital with 100 beds would need to provide $2,500,000 in Uncompensated Care per year);
  • Probability of 3 percent or less, as reported to CMS in its most recently filed Cost Report.

HHS believes this round of payments will reach many more qualifying safety net hospitals than earlier distributions. The distribution amounts will range from $5 million to $50 million and will be based partly on the individual facility score (number of facility beds multiplied by DPP) as compared to the cumulative facility scores for all safety net hospitals.

As with other distributions, recipients will have to complete the attestation process and agree to the Terms and Conditions similar to those in the Medicaid/CHIP distribution program.

Both the Medicaid/CHIP distribution and the Safety Net distribution appear to be in response to criticism of congressional leaders regarding HHS’ lack of meaningful allocations to institutions that rely heavily on Medicaid funds. Reed Smith will continue to monitor developments in these targeted disbursement programs as well as other CARES Act related funding. Please contact us, or the Reed Smith lawyer with whom you frequently work, to ensure compliance with applicable laws in applying for and utilizing CARES Act funds.

CMS announces increased penalties and oversight for states and nursing homes during COVID-19 emergency

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 the agency’s Nursing Home Compare website on June 4, 2020.  The new policies include potential civil monetary penalties (CMPs) for nursing homes that fail to comply with federal infection control requirements, along with potential financial penalties for state survey agencies tasked with nursing home inspections.

Increased Penalties for Nursing Homes

CMS’s new policy expands enforcement against individual nursing homes that demonstrate federal infection control requirement deficiencies.  Specifically, in each instance of at least “Substantial” non-compliance (Level D or above, based on CMS’s letter ratings for state nursing home surveys) by a recently cited nursing home, CMS will impose Directed Plans of Correction (DPOCs) and Discretionary Denials of Payment for New Admissions (DPNAs).  The timeframe for remediation and extent of additional penalties depend on the nature of the non-compliance and the nursing home’s infection control compliance history, as follows:

  • For “Substantial” non-compliance by a nursing home that has incurred one infection control deficiency citation in the last year, the facility will face up to $5,000 per citation if the latest non-compliance is not widespread (Levels D & E), or up to $10,000 per citation if the latest non-compliance is widespread (Level F).
  • For “Substantial” non-compliance by a nursing home that has incurred two or more infection control deficiency citations in the last two years, the facility will face CMPs of up to $15,000 per citation if the latest non-compliance is not widespread (Levels D & E), or up to $20,000 if the latest non-compliance is widespread (Level F).
  • For “Harm” level non-compliance (Levels G, H, I), regardless of the nursing home’s history, the facility will face CMPs at the highest amount option within the appropriate range under the CMP Analytic Tool.
  • For “Immediate Jeopardy” level non-compliance (Levels J, K, L), regardless of the nursing home’s history, the facility will face termination and CMPs at the highest amount option within the appropriate range under the CMP Analytic Tool.

Expanded State Survey Guidance and Penalties

CMS’s new policy also ties $80 million of supplemental Coronavirus Aid, Relief, and Economic Security (CARES) Act funding to a state’s progress on completing focused infection control nursing home surveys, as follows:

  • States that have not completed 100% of required focused infection control surveys by July 31, 2020, must submit a corrective action plan to CMS outlining their strategy for completion.
  • If 100% of the required surveys are still not achieved 30 days after the state submits that corrective action plan, the state’s CARES Act fiscal year 2021 allocation may be reduced by up to 10%, and subsequent 30-day extensions may result in additional reductions up to 5%.
  • The foregoing reductions would be redistributed to states that completed 100% of their focused infection control surveys by July 31, 2020.

CMS is also requiring states to use CARES Act funding to implement certain additional COVID-19 survey activities.  A state’s failure to timely implement the following activities may result in the forfeiture of up to 5% of annual CARES Act allocations:

  • Perform on-site surveys of nursing homes with previous COVID-19 outbreaks by the end of June 2020;
  • Perform on-site surveys within 3 to 5 days of identification of any nursing home with: (a) 3 or more new COVID-19 suspected and confirmed cases, or (b) 1 confirmed resident case in a facility that was previously COVID-19 free; or
  • Starting in fiscal year 2021, perform annual focused infection control surveys of 20% of nursing homes based on state discretion or additional data that identifies facility and community risks.

CMS is also encouraging states to expand survey activities for facilities that have entered “Phase 3” of the agency’s Nursing Home Re-opening guidance, including those that: (a) have had no new nursing home COVID-19 cases for 28 days, (b) are not experiencing staffing shortages, and (c) have adequate supplies of personal protective equipment (PPE) and access to COVID-19 testing.  CMS also indicated that it will deploy its network of Quality Improvement Organizations (QIOs) to focus on assisting states and certain nursing homes with additional support and technical assistance, including through weekly “National Infection Control Trainings” and direct assistance to small and rural nursing homes.

CMS published a joint open letter with CDC, dated May 31, 2020, notifying state governors of the latest changes and penalties concerning nursing home inspections and compliance.  The new policies became effective immediately on June 1, 2020, and will cease to be in effect when the Secretary determines there is no longer a COVID-19 Public Health Emergency.

OIG releases strategic plan for oversight of COVID-19 response

Following the distribution of billions of relief aid to healthcare providers and amidst the guidance issued around reopening of nursing homes throughout the country, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) unveiled a COVID-19 Response Strategic Plan on May 26, 2020 after updating its Workplan a few days earlier.

The 2020 OIG Workplan has been updated to account for an audit of the $50 billion in payments to healthcare providers to ensure that the payments were correctly calculated and disbursed to eligible providers.  The Workplan also includes audits of nursing home infection prevention and control program deficiencies.

Following this trend, the Strategic Plan will allow OIG to identify, monitor, and target potential fraud, waste, and abuse affecting HHS programs and beneficiaries that may arise out of COVID-19 response and recovery programs – both during the current public health emergency and after it ends.

The Strategic Plan organizes itself under four goals that, according to OIG, drive its strategic planning and mission execution with respect to HHS’s COVID-19 response and recovery.  These goals are to (1) protect people, (2) protect funds, (3) protect infrastructure, and (4) promote effectiveness of HHS programs—now and into the future.  Each of these goals are supported by enumerated objectives and action items that ensure providers will see increased monitoring, guidance, and reviews of their response to the COVID-19 global pandemic.

OIG’s key actions to implement its Strategic Plan and achieve each of its four goals are summarized below.

Goal 1: Protect People.  OIG enumerated a number of key actions under this goal that ranged from issuing guidance to enforcement authorities to support patient care, deploying law enforcement personnel as needed, conducting rapid-cycle reviews of benefits, and investigating potential fraud schemes including testing and identity theft.  The OIG also indicated it would be dedicating resources to evaluate the safety of beneficiaries in certain vulnerable settings, such as nursing homes, and evaluating the distribution of resources.

Goal 2: Protect Funds.  Pursuant to this goal, OIG indicated it will ensure accurate payments are made and that HHS funds are protected by auditing and investigating waste or misspending of COVID-19 response and recovery funds.  In addition, OIG will be investigating suspected fraud and abuse that diverts COVID-19 funding from intended purposes or exploits emergency flexibilities granted to health and human services providers.

Goal 3: Protect Infrastructure.  OIG intends to protect the security and integrity of IT systems and health technology infrastructures by investigating and mitigating cybersecurity vulnerabilities and threats, including those related to networked medical devices, telehealth platforms, and other technologies being used in COVID-19 response.

Goal 4: Promote Effectiveness.  Lastly, OIG’s Strategic Plan outlines a number of action items intended to increase the effectiveness of ongoing COVID-19 response and recovery programs at the Federal, State, and local levels.  In particular, OIG will identify successful practices and lessons learned from the COVID-19 response and make recommendations to strengthen future emergency and pandemic preparedness.  Importantly, OIG will also evaluate the emergency flexibility offered in various programs.  For example, OIG will consider the impacts of expanded telehealth in Medicare during the emergency to assess future Medicare policies.

In summary, it is clear that HHS intends to put significant resources into the audit, investigation and evaluation of the resources and funds that have been distributed throughout the COIVD-19 crisis and well as healthcare provider’s response to COVID-19 outbreaks in their communities.  Together, the new Strategic Plan and Workplan updates provide context for how OIG intends to do so.  Additional information about OIG’s guidance related to COVID-19 is available on the OIG COVID-19 Portal.

CARES Act Relief Funds: HHS continues rolling updates to FAQs and extends attestation deadline by another 45 days

On May 21, 2020, the U.S. Department of Health and Human Services (HHS) issued additional guidance, by again updating its FAQs, for Medicare providers and suppliers (collectively, providers) receiving relief from the Public Health and Social Services Emergency Fund. Of the $175 billion appropriated by Congress, HHS has allocated $50 billion for general distribution to providers impacted by COVID-19, $12 billion for hospitals in COVID-19 high-impact areas, $10 billion for rural providers, and $4.9 billion for skilled nursing facilities. HHS has continued rolling updates to its FAQs since our May 15 post and the key updates since that time are set forth below. On May 22, HHS also announced another 45-day extension for Provider Relief Fund recipients to attest to payments received and accept the Terms and Conditions governing the use of those funds. However, the interplay of that extended deadline with a previously stated deadline of June 3 to submit revenue information remains uncertain.

Uncertainty regarding June 3 deadline

In a May 20 press release, HHS advised providers that they have until June 3 to accept the Terms and Conditions and submit their revenue information in the General Distribution Portal to support receiving an additional payment from the $50 billion general distribution. HHS instructed that all providers who automatically received an additional general distribution payment prior to 5:00 p.m. EST on April 24 must provide HHS with an accounting of annual revenues by submitting tax forms or financial statements and agree to the Terms and Conditions. In addition, for those providers that have not already received an additional general distribution payment, the submission of tax forms or financial statements serves as an application for additional funding. Providers that do not submit revenue information by June 3 will no longer be eligible to receive additional funding from the $50 billion general distribution. HHS has instructed providers to follow these steps:

  • Confirm receipt of previous funds through the Provider Relief Fund payment Attestation Portal, including agreeing to the Terms and Conditions; and
  • Submit revenue information through the General Distribution Portal for consideration to receive additional general distribution funds.

Although the interplay between the June 3 deadline and the new 90-days-from-receipt deadline remains unclear at this time, it appears that the June 3 deadline remains in place, at least for providers that did not automatically receive an additional general distribution payment. We expect HHS to release additional guidance on this issue. Continue Reading

HHS Office of General Counsel advises that the PREP Act preempts state and local requirements that prevent pharmacists from testing for COVID-19

Earlier this week, the Department of Health and Human Services (HHS) Office of General Counsel issued Advisory Opinion 20-02, which declared that the Public Readiness and Emergency Preparedness Act (PREP Act), combined with the HHS Secretary’s March 10, 2020 declaration, preempts state or local requirements that would prevent pharmacists from ordering or administering COVID-19 tests approved for diagnostic purposes by the Food and Drug Administration (FDA).

The Advisory Opinion concluded that the PREP Act makes clear that state and local governments cannot prevent “qualified persons” from ordering or administering covered countermeasures, including COVID-19 tests, because:

  1. The Secretary’s March 10, 2020 declaration allows the Secretary to designate a “qualified person” to order or administer COVID-19 tests even when such individuals are not licensed to do so under state law;
  2. The PREP Act expressly preempts state and local requirements that would prevent a “qualified person” from ordering or administering a COVID-19 test; and
  3. The PREP Act explicitly provides that courts do not have subject matter jurisdiction to review the Secretary’s decision identifying certain individuals as “qualified persons” pursuant to the Secretary’s March 10, 2020 declaration.

As a result, any action by state or local authorities that would prevent licensed pharmacists from ordering or administering a diagnostic COVID-19 test that has been approved by the FDA is expressly preempted by federal law.

We suspect that, in putting this Advisory Opinion into effect, HHS will promptly direct state Boards of Pharmacy from taking any action that would prevent local pharmacies from suspending COVID-19 testing on the basis that pharmacists are not authorized to order or administer such tests, as HHS will take the position those local requirements are preempted by federal law.  Because pharmacists are often the easiest and first point-of-contact for many individuals, providing all pharmacists nationwide with the ability to order and administer COVID-19 tests may help ease the access and time delays that have been seen with COVID-19 testing.

To review the entirety of Advisory Opinion 20-02, click here.

Nursing homes face increased scrutiny by attorneys general during COVID-19

Pennsylvania Attorney General Josh Shapiro announced on May 12, 2020, that his office is investigating several nursing homes in the Commonwealth for neglect of patients and residents: “We will hold nursing facilities and caretakers criminally accountable if they fail to properly provide care to our loved ones … we will not tolerate those who mistreat our seniors and break the law.” Shapiro has also launched a public portal for citizens to email reports of neglect in nursing home communities. As is the case in many states, nursing home patients make up the majority of the deaths associated with COVID-19 in Pennsylvania. Just over 2,611 nursing home residents and staff have died from COVID-19 in Pennsylvania, comprising nearly 70 percent of the 3,800 total deaths reported in the Commonwealth as of the date of the press release.

Attorney General Shapiro is not alone in his effort to take a closer look at nursing home facilities and caregivers, even while lobbying groups for health care providers and nursing homes push for broad immunity from coronavirus-related lawsuits. In late April, New York Attorney General Letitia James released a statement saying that her office’s Medicaid Fraud Control Unit continues to investigate allegations of abuse and neglect in nursing homes. James’ office similarly launched a nursing home abuse hotline for residents, families, and members of the public to report alleged complaints at the facilities. Specifically, Attorney General James is investigating a Queens adult care facility that allegedly failed to protect residents from COVID-19 and misled families about its spread. Residents of that same facility are now suing in federal court over similar allegations. State attorneys general are increasingly active on this issue and will be pursuing nursing homes and long-term care facilities through various angles including Medicaid fraud, consumer protection, and false advertising.

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CMS issues nursing home reopening recommendations for state and local officials

With portions of the country beginning to reopen, on May 18, 2020, the Centers for Medicare & Medicaid Services (CMS) issued its recommendations to state and local officials for best practices regarding the reopening of nursing homes. Because nursing homes have been severely impacted by COVID-19, CMS issued a memorandum to state officials regarding the “level of mitigation needed to prevent the transmission of COVID-19 in nursing homes.”

The recommendations cover a phased approach for three main topics:

  • Criteria for relaxing nursing home restrictions and mitigating the risk of resurgence of COVID-19 cases;
  • Visitation and services; and
  • Restoration of survey activities.

Because COVID-19 is affecting communities differently, CMS recognizes that each state and locality will need to individually evaluate how to implement the recommendations.  CMS encourages state and local officials to work with their state survey agencies to determine how to implement the phased reopening of nursing homes – whether to require all facilities to go through each phase simultaneously; to group certain regions together as they go through the phases; or to allow individual facilities to move through the phases as they meet the criteria.

Some factors to inform the decisions about relaxing nursing home restrictions include, but are not limited to:

  • The case status in the community (whether cases are increasing or declining);
  • Whether the nursing home has access to adequate testing for residents and staff (and laboratory processing of tests);
  • Whether the nursing home has adequate protocols for screening all persons who enter the facility and for addressing residents or staff who refuse testing; and
  • Whether the nursing home has adequate control measures – masks, social distancing, and handwashing/sanitizing – along with access to Personal Protective Equipment for staff.

Similar to the federal government’s guidance to state leaders for reopening the economy, CMS’s guidelines for nursing home are not binding on the states.  They are, however, prepared with a focus toward keeping residents of nursing homes and their caregivers safe from any further outbreaks of the COVID-19 virus.

CMS releases additional COVID-19 blanket waivers for health care providers

On May 11, 2020, the Centers for Medicare & Medicaid Services (CMS) released a new suite of blanket waivers for hospitals and other health care providers in response to the COVID-19 public health emergency.[1] The blanket waivers have a retroactive effective date of March 1, which extends through the end of the public health emergency declaration and, in CMS’s view, “provide the flexibilities needed to take care of patients during the COVID-19 public health emergency.” The new blanket waivers relate to the following: Continue Reading

CARES Act Relief Funds: HHS updates General Distribution Fund FAQs and extends attestation deadline from 30 days to 45 days

On May 6, 2020, the U.S. Department of Health and Human Services (HHS) issued additional guidance, by way of updated FAQs, for providers receiving relief from the $50 billion general allocation of the Public Health and Social Services Emergency Fund (known as the Provider Relief Fund) that was appropriated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. And on May 7, HHS announced a 15-day extension for Provider Relief Fund recipients to attest to payments received and accept the Terms and Conditions governing the use of those funds. This extension comes just days prior to the initial deadline that many providers were facing for submitting attestations.

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