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

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

Academic medical centers and other health care entities operating within institutes of higher education need to be aware of the compliance risks surrounding the recent release of higher education grants under the CARES Act. On April 21, 2020, the U.S. Department of Education (Department of Education) announced the release of $6.2 billion in connection with

On December 20, 2019, the Federal appeals court panel that heard U.S. ex rel. Bookwalter v. UPMC, No. 18-1693 (3d Cir.), amended its September 2019 opinion by removing a controversial interpretation of the “volume or value” standard under the Stark Law.  The September opinion had adopted a “correlation theory,” holding that a physician’s compensation “varies with” the volume or value of referrals if the physician is paid based on his personally performed services, such as on a work relative value unit (wRVU) basis, and there is a “correlation” between the physician’s referrals and those personally performed services.  The court relied on this correlation theory to support its finding that the physicians had an indirect compensation arrangement with the hospitals to which they referred, thereby allowing the case to proceed and shifting the burden to the defendants to prove the availability of a Stark Law exception.  Although the amended December opinion removed the correlation theory rationale, the court maintained its September holding to allow the case to proceed based on alternative reasoning that there were adequate allegations that the physicians’ compensation “took into account” their referrals.

Background

The Stark Law prohibits a physician’s Medicare referrals for “designated health services,” including hospital services, to an entity with which the physician has a direct or indirect financial relationship, unless the requirements of an applicable exception are satisfied.  One element of the Stark Law’s test to determine whether a physician has an indirect compensation arrangement with an entity is whether the physician’s aggregate compensation “varies with, or takes into account, the volume or value of referrals” to the entity.  For these reasons, a critical component in a Stark Law analysis is frequently whether a referring physician is compensated in a manner that “varies with” or “takes into account” the volume or value of his referrals.
Continue Reading Federal Appeals Court Amends Stark Law Opinion to Remove Controversial “Volume or Value” Interpretation, but Uncertainty Remains

Reed Smith is hosting its 6th Annual Washington Health Care Conference on December 4, 2019 at The Almas Center in Washington, D.C., and is pleased to welcome another impressive line-up of speakers this year.

Our keynote speaker is Dr. John Whyte, Chief Medical Officer of WebMD, who will be discussing “Artificial Intelligence in Health Care: Disrupt but Don’t Be Disruptive.”

The conference also includes a particularly timely panel on the proposed rules to modernize Stark Law and the Anti-Kickback Statute. Our presenters include: Lisa Wilson, Senior Technical Advisor to the Centers for Medicare and Medicaid Services; David Gregory, Principal, Healthcare Practice, Baker Tilly Virchow Krause; Nancy Bonifant Halstead, Partner, Reed Smith; and moderator Nicole Aiken-Shaban, Senior Associate, Reed Smith.

We’re also pleased to be offering a session with representatives from major associations on how the industry is preparing for the next major shift in the health delivery continuum. Our presenters include: Terry Chang, MD, JD, Vice President, Assistant General Counsel, and Director, Legal & Medical Affairs, AdvaMed; Clif Porter, Senior Vice President, Government Relations, AHCA; Julie Wagner, Senior Assistant General Counsel, PhRMA; Katie Mahoney, Vice President, Health Policy at the U.S. Chamber of Commerce; and moderator Elizabeth Carder-Thompson, Senior Counsel, Reed Smith.

Additional conference sessions include:
Continue Reading Speakers from WebMD, CMS, PhRMA, AdvaMed, AHCA, and More to Present at Reed Smith’s Dec. 4 Washington Health Care Conference

A top Department of Justice (DOJ) official has recently issued a much-anticipated memo explaining the factors DOJ will consider when deciding whether to dismiss FCA suits brought by relators in qui tam cases. Specifically, the memo by Michael Granston, Director of the Commercial Litigation Branch within the DOJ Fraud Section sets forth seven non-exhaustive factors

The Department of Justice (DOJ) obtained $3.7 billion in False Claims Act (FCA) settlements and judgments in fiscal year (FY) 2017, with $2.4 billion coming from health care industry cases. The $2.4 billion amount includes only federal recoveries; additional funds were recovered for state Medicaid programs.  The largest health care industry recoveries in FY 2017–

A recent False Claims Act (“FCA”) settlement involving an allegedly overpaid Florida medical practice reaffirms the interplay between the 60-Day Overpayment Statute and the FCA, but also highlights the importance for all providers and suppliers to report and return overpayments, regardless of the source of federal funds.

According to the Department of Justice (“DOJ”), First Coast Cardiovascular Institute (“FCCI”) allowed credit balances from various federal health care programs to accrue despite multiple internal warnings that the balances should be paid back. DOJ alleged that FCCI’s failure to return those credit balances within 60 days violated the FCA. DOJ’s comments are notable, however, because the credit balances not only involved Medicare and Medicaid, but also TRICARE and the Department of Veterans Affairs, both of which are outside the scope of the 60-Day Overpayment Statute. DOJ and FCCI resolved the alleged $175,000 in unreturned overpayments for a $448,821.58 price.
Continue Reading DOJ Settles Second 60-Day Overpayment Case, Highlights Broader Reach of the FCA’s Reverse False Claims Provision

The Department of Health and Human Services (HHS) is once again applying an inflation increase to maximum civil monetary penalty (CMP) amounts for HHS agencies and programs – less than five months after the last inflation hike and notwithstanding the Trump Administration’s recently-announced regulatory freeze.  Specifically, in a final rule to be published on

The HHS Office of Inspector General’s (OIG) latest Semiannual Report to Congress highlights top audits, investigations, and enforcement activities for the period of April 1 to September 30, 2016 and summarizes overall accomplishments for fiscal year (FY) 2016. Notably, the OIG reports:

  • Expected FY 2016 recoveries will exceed $5.66 billion, including nearly $1.2 billion in

Observers are digesting what the Trump Administration will mean for the health care and life sciences industry.  Forecasting is more challenging for this incoming Administration than most given the relatively sparse policy details released during the campaign and the lack of a government service record to examine for clues.  Today President-elect Trump’s transition team released a one-page statement on health care policy, but many questions remain.  Nevertheless, we offer below our initial observations and issues to watch in the months to come.

  • Potential Sea Change. Uncertainty is, as some like to say, the “obvious comment” that characterizes the whole prospective Trump Administration.  Other than an intended “repeal and replacement” of the Affordable Care Act (ACA), President-elect Trump has provided relatively few details on a proposed health care agenda.  Until these policies are fleshed-out, expect an environment where some business decisions and investments may be delayed, with a resulting impact on merger and acquisition activity. That said, other transactions may become more likely, as the threat of new restrictions under a Clinton administration are removed, along with the prospect of potential regulatory relief under a Republican-controlled federal government.
  • Affordable Care Act Repeal and Replacement.  Trump has repeatedly indicated his desire to repeal and replace the ACA, including a vow to summon Congress into a special session for this task.  If the law is repealed, however, what would take its place, and how would Congress address the roughly 20 million Americans currently covered in some way under the ACA (and the potential rise in uncompensated care costs that also would result)?  Despite the call for repeal, certain parts of the law are popular. For instance, President-elect Trump noted on the campaign trail that he was in support of the ACA’s prohibition against the use of pre-existing health conditions to deny coverage (or as a basis for premium-setting).  Other proposals offered by Trump as candidate include allowing for the sale of health insurance across state lines as long as plans comply with state requirements, various tax benefits, and more transparency in health care pricing.  In today’s policy statement, President-elect Trump added support for high-risk pools, which he characterizes as “a proven approach to ensuring access to health insurance coverage for individuals who have significant medical expenses and who have not maintained continuous coverage.”  Congressional Republicans have offered a number of alternatives that are likely to be a springboard for reform, most notably the “Better Way” plan proposed by House Speaker Paul Ryan.  In fact, according to the Speaker’s office, “in the 114th Congress alone, House Republicans have introduced more than 400 individual bills that would improve our nation’s health care system” – demonstrating that Congress is not reticent about legislating on health care issues.  The new Senate’s Republican majority will not have the 60 votes required to override a potential Democratic filibuster of legislation to fully repeal the law. While Congress could use budget reconciliation authority (which requires only 50 votes in the Senate) to make significant changes, the drawn-out pace of the budget process may not satisfy those who want quick action in this area.  Regardless of the legislative vehicle, after years of calling for Obamacare repeal while President Obama was in office, the Republican Congress will be under tremendous pressure to act quickly – even if it is a “down-payment” on reform — now that Republicans will control the presidency and the Congress.

Continue Reading Looking Ahead to a Trump Administration: Health Care and Life Sciences Industry Perspectives

The Department of Health and Human Services (HHS) is increasing maximum civil monetary penalty (CMP) amounts applicable to HHS agencies and programs, in compliance with the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (which was part of the Bipartisan Budget Act of 2015).  The magnitude of the individual CMP increases varies depending on when the specific type of penalty was last adjusted and consequently how large a “catch-up” adjustment is applied.  Increases range from 1% to 150%.  For instance:
Continue Reading HHS Inflation Adjustment Rule Hikes CMPs Across Department Programs

Today the Department of Justice published an interim final rule with request for comments that applies an inflation adjustment to civil monetary penalty (CMP) amounts assessed by the Department, as mandated by the Bipartisan Budget Act of 2015.  Notably, the new maximum CMP for False Claims Act (FCA) violations under 31 U.S.C. 3729(a) is

The OIG has issued its Spring 2016 Semiannual Report to Congress, which describes significant enforcement and investigative activities relating to HHS programs during the first half of FY 2016 (October 1, 2015 – March 31, 2016). The OIG reports expected recoveries of more than $2.77 billion ($554.7 million in audit receivables and about $2.22

A number of recent Congressional hearings have focused on health policy topics, including the following:

  • A House Energy and Commerce Subcommittee on Health hearing on “Medicare Access and CHIP Reauthorization Act of 2015: Examining Physician Efforts to Prepare for Medicare Payment Reforms.”
  • A House Judiciary Constitution and Civil Justice Subcommittee hearing on oversight of the

The Bipartisan Budget Act of 2015 (H.R. 1314), signed into law by President Obama November 2, 2015, will increase the civil monetary penalties (CMPs) imposed under the Social Security Act (SSA) in addition to False Claims Act (FCA) penalties (among other civil penalties).  Under an innocuous-sounding provision, entitled “Civil monetary penalty inflation adjustments,” the budget deal removed an inflation update exclusion that previously applied to the SSA as well as the Occupational Safety and Health Act (OSHA).  The budget deal also requires that federal agencies implement a “catch up” penalty update through interim rulemaking no later than August 1, 2016, along with annual penalty updates thereafter. Pursuant to the provision requiring penalty “catch up” adjustments, agencies must update penalties to reflect Consumer Price Index (CPI) updates for each CMP from October of the calendar year during which the amount of such CMP was established or last adjusted under a provision of law other than the Federal Civil Penalties Inflation Adjustment Act of 1990.  However, such “catch up” adjustment are capped at 150% of the current penalty amount.  For example, a penalty now set at $10,000 may not increase to more than $25,000.  Under this “catch up” methodology, per day CMPs imposed on nursing facilities under the SSA, currently capped at $10,000, will likely increase to approximately $20,000 no later than August 1, 2016.  The nursing facility CMP update to approximately $20,000 would reflect the inflation updates since the establishment of these CMPs in 1987.  After the initial, “catch up” update, annual adjustments will be made consistent with CPI cost-of-living updates.
Continue Reading Bipartisan Budget Act Jacks Up Civil Monetary Penalties Under the Social Security Act and False Claims Act Penalties

The Department of Justice’s “Yates Memo” sets forth regulatory principles, applicable to both civil and criminal investigations, to ensure that individuals are held accountable for corporate wrongdoing. While several U.S. Attorney Offices had been applying many of these principles already, the Yates Memo now establishes the principles expected to be followed by all U.S. Attorney