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Update: In Opioid Liability Ruling for Doctors, SCOTUS Deals Blow to DOJ

On June 27, 2022, the United States Supreme Court ruled that doctors who act in subjective good faith in prescribing controlled substances to their patients cannot be convicted under the Controlled Substance Act (“CSA”). The Court’s decision will have broad implications for physicians and patients alike. Practitioners who sincerely and honestly believe – even if mistakenly – that their prescriptions are within the usual course of professional practice will be shielded from criminal liability.

The ruling stemmed from the convictions of Dr. Xiulu Ruan and Dr. Shakeel Kahn for unlawfully prescribing opioid painkillers. At their trials, the district courts rejected any consideration of good faith and instructed the members of the jury that the doctors could be convicted if they prescribed opioids outside the recognized standards of medical practice. The Tenth and Eleventh Circuits affirmed the instructions. Drs. Ruan and Kahn were sentenced to 21 and 25 years in prison, respectively.

The Court vacated the decisions of the courts of appeals and sent the cases back for further review.

The question before the court concerned the state of mind that the Government must prove to convict a doctor of violating the CSA. Justice Breyer framed the issue: “To prove that a doctor’s dispensation of drugs via prescription falls within the statute’s prohibition and outside the authorization exception, is it sufficient for the Government to prove that a prescription was in fact not authorized, or must the Government prove that the doctor knew or intended that the prescription was unauthorized?”

The doctors urged the Court to adopt a subjective good-faith standard that would protect practitioners from criminal prosecution if they sincerely and honestly believed their prescriptions were within the usual course of professional practice. The Government argued for an objective, good-faith standard based on the hypothetical “reasonable” doctor. The Court took it one step further.

Justice Breyer delivered the opinion of the Court. He said that for purposes of a criminal conviction under the CSA, “the Government must prove beyond a reasonable doubt that the defendant knowingly or intentionally acted in an unauthorized manner.” To hold otherwise “would turn a defendant’s criminal liability on the mental state of a hypothetical ‘reasonable’ doctor” and “reduce culpability on the all-important element of the crime to negligence,” he explained. The Court has “long been reluctant to infer that a negligence standard was intended in criminal statutes,” wrote Justice Breyer.

Justice Samuel Alito wrote a concurring opinion, which Justice Clarence Thomas joined and Justice Amy Coney Barrett joined in part. Although Justice Alito would vacate the judgments below and remand for further proceedings, he would hold that the “except as authorized” clause of the CSA creates an affirmative defense that defendant doctors must prove by a preponderance of the evidence.

The Court’s decision will protect patient access to prescriptions written in good faith. However, for the government, the Court’s decision means prosecutors face an uphill battle in charging, much less convicting, physicians under the CSA. Indeed, the Court’s decision may have a chilling effect on the recent surge in DOJ prosecutions of medical practitioners and pain clinics.

Article By Lindsay K. Gerdes and Madeline R. Pinto of Dinsmore & Shohl LLP

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CMS Reduces COVID-19 Vaccine Mandate Surveys and Rescinds Surveyor Vaccination Requirements

In two recent memoranda, the Centers for Medicare and Medicaid Services (CMS) made changes to previously issued survey guidance related to COVID-19 vaccination issues.

In QSO-22-17-ALL, CMS modified the frequency by which State Agencies and Accreditation Organizations will survey for compliance with the federal staff vaccine mandate applicable to health care providers and suppliers (discussed in a prior post). Noting that 95% of providers and suppliers surveyed have been found in substantial compliance with the rule, CMS is eliminating the previous requirement that State Agencies and Accreditation Organizations survey for compliance with the vaccine mandate during every survey. Review of compliance with vaccine mandate is still required, however, during initial surveys, recertification surveys, and in response to specific complaint allegations that allege non-compliance with the staff vaccination requirement. This means that a State Agency or Accreditation Organization is not required to review compliance with the staff vaccination requirement during, for example, a validation survey or a complaint survey unrelated to compliance with the staff vaccination requirement. A State Agency or Accreditation Organization may still choose to expand any survey to include review of vaccine mandate compliance; however, the new guidance should result in a reduction in survey frequency of this issue for providers and suppliers.

In QSO-22-18-ALL, CMS rescinded, in its entirety, the previously issued QSO-22-10-ALL memorandum, which had mandated that surveyors of State Agencies and Accreditation Organizations be vaccinated for COVID-19. However, CMS noted that the State Agencies and Accreditation Organizations were responsible for compliance and prohibited providers and suppliers from asking surveyors for proof of vaccination. While CMS is now encouraging vaccination of surveyors performing federal oversight surveys, the mandate for vaccination is no longer in effect.

Article By Allen R. Killworth of Epstein Becker & Green, P.C.

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Health Care Providers on Alert: Two Hospitals Penalized for Continuous Noncompliance with the Hospital Price Transparency Rule

We previously discussed the requirements of the Hospital Price Transparency Rule (“Rule”) on health care providers and health plans, as well as CMS’s proposal to increase penalties for a hospital’s failure to comply with the Rule. About a year and a half after the Rule became effective, CMS has now imposed its first set of civil monetary penalties (“CMPs”) on Northside Hospital Atlanta and Northside Hospital Cherokee, which have been fined $883,180 and $214,320, respectively.

The Rule requires, in part, hospitals to make public a machine-readable file containing a list of all standard charges for all items and services, such as, e.g., supplies, room and board, and use of the facility, among other items. See 45 C.F.R. § 180.40(a); id. at § 180.20. The Rule also requires hospitals to display shoppable services in a consumer-friendly manner. See id. at § 180.60(d)(2); id. at § 180.60(b). The goal of these specific requirements, in addition to those set forth in the remainder of the Rule, is to provide consumers with sufficient information about the charges for certain items and services by requiring health care providers and health plans to be publicly transparent about such charges.

Based on CMS’s CMP letters, dated June 7, 2022, Northside Hospital Atlanta and Northside Hospital Cherokee were non-compliant with the aforementioned specific requirements of the Rule. The chronology of events is important to understand how CMS ended up issuing its CMP letters.

Northside Hospital Atlanta

For Northside Hospital Atlanta:

CMS documented the hospital’s non-compliance since March 24, 2021.
CMS issued a Warning Letter, dated April 19, 2021, to the hospital and provided it the opportunity to respond and to provide supporting documentation to CMS.
Northside Hospital Atlanta did not respond.
On September 2, 2021, CMS reviewed the hospital’s website and determined that the non-compliance persisted.
On September 30, 2021, CMS issued a Request for Corrective Action Plan (CAP) to the hospital, stating that it was non-compliant with the aforementioned specific requirements of the Rule.
On November 15, 2021, in response to the Request for CAP, the hospital stated that patients could request specific price estimate quotes by calling or emailing Northside Hospital Atlanta, which CMS determined was insufficient in response to its Request for CAP and to comply with the Rule.
On December 20, 2021, CMS requested a revised CAP from the hospital.
Northside Hospital Atlanta did not respond.
On January 11, 2022, CMS conducted a technical assistance call with the hospital, during which the hospital confirmed that it was non-compliant with the Rule and explained that it had intentionally removed all previously posted pricing files.
On January 24, 2022, CMS, again, requested a revised CAP from the hospital.
Northside Hospital Atlanta did not respond.

Based on the foregoing, CMS imposed an $883,180 CMP on Northside Hospital Atlanta, calculated as follows, pursuant to 45 C.F.R. § 180.90:

$36,300
- $300 per day of non-compliance times 121 days.
- 121 days represents the number of calendar days during 2021 that Northside Hospital Atlanta was non-compliant with the Rule (September 2, 2021 through December 31, 2021), pursuant to 45 C.F.R. § 180.90(2)(i).

plus

$846,880
- $10 per bed per day times 536 beds times 158 days.
- 158 days represents the number of calendar days during 2022 that Northside Hospital Atlanta was non-compliant with the Rule (January 1, 2022 through the date of CMS’s CMP letter, June 7, 2022), pursuant to 45 C.F.R. § 180.90(2)(ii).

Northside Hospital Atlanta has until 60 calendar days from the date of CMS’s CMP letter to pay. Until the hospital notifies CMS that all non-compliance has been corrected, CMPs will continue to accrue.

Northside Hospital Cherokee

For similar reasons as Northside Hospital Atlanta, Northside Hospital Cherokee was fined $214,320. CMS noted that Northside Hospital Cherokee was non-compliant since April 16, 2021, and notified the hospital by Warning Letter, dated May 18, 2021. CMS reviewed the hospital’s website on September 9, 2021, and issued a Request for CAP on October 27, 2021—to which the hospital did not respond. Similar to Northside Hospital Atlanta, CMS held a technical assistance call on January 11, 2022, during which Northside Hospital Cherokee notified CMS that it had intentionally removed all previously posted pricing files. CMS requested a Request for CAP on January 24, 2022—to which the hospital did not respond.

Similar to Northside Hospital Atlanta, Northside Hospital Cherokee was penalized $214,320, calculated as follows:

$34,200
- $300 per day of non-compliance times 114 days.
- 114 days represents the number of calendar days during 2021 that Northside Hospital Cherokee was non-compliant with the Rule (September 9, 2021 through December 31, 2021), pursuant to 45 C.F.R. § 180.90(2)(i).

plus

$180,120
- $10 per bed per day times 114 beds times 158 days.
- 158 days represents the number of calendar days during 2022 that Northside Hospital Cherokee was non-compliant with the Rule (January 1, 2022 through the date of CMS’s CMP letter, June 7, 2022), pursuant to 45 C.F.R. § 180.90(2)(ii).

Similar to Northside Hospital Atlanta, CMS noted that Northside Hospital Cherokee continues to be non-compliant and, thus, CMPs will continue to accrue.

Takeaways

These fines reflect CMS’s willingness to take material enforcement action where the Rule’s regulatory requirements are largely ignored and CMS’s subsequent efforts to obtain compliance are rejected. Non-compliance carries heavy fines that are calculated, in part, by the number of days of non-compliance and by bed count. Health care providers should take notice and ensure that they are compliant or, at least, making efforts towards compliance with the Rule’s requirements. Critically, CMS will not accept a refusal to comply, as reflected in CMS’s responses to Northside Hospital Atlanta’s and Northside Hospital Cherokee’s refusals to submit CAPs. As noted in CMS’s CMP letters to these providers, CMS is scanning websites and subsequently notifying providers that appear to be non-compliant with the Rule—which are ignored at the provider’s peril.

Article By Edward S. Kornreich and Matthew J. Westbrook of Proskauer Rose LLP

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Privacy Tip #335 – Health Care Sector Continues to Be Hit with Ransomware

According to the 2022 State of Ransomware Report issued recently by Sophos, it surveyed 5,600 IT professionals from 31 countries, including professionals in the health care sector. Those professionals in the health care sector shared that 66 percent of them had experienced a ransomware attack in 2021, which was an increase of 69 percent over 2020. This was the largest increase of all sectors surveyed.

If you look at the Office for Civil Rights data breach portal, you will see that a vast majority of breaches reported by health care providers and business associates are related to “Hacking/IT incident.” This confirms that the health care sector continues to be attacked by threat actors seeking to steal protected health information of patients.

If you are a patient who receives a breach notification letter from a health care provider or business associate, the letter will provide guidance on how to protect yourself following a data breach and may offer some protection guidance, including credit monitoring or fraud resolution. Such a letter has been sent to patients to comply with the breach notification requirements of HIPAA and state law. Part of those requirements includes that the patients be provided mitigation steps following the breach to protect themselves from fraud. Avail yourself of these protections in the event your information is compromised. Take the time to sign up for the mitigation offered. It is clear that these attacks will not subside any time soon.

Article By Linn F. Freedman of Robinson & Cole LLP

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ERIC Files Amicus Brief Rebutting DOL Attempt to Create New Regulations in Lawsuit, Petitions US Supreme Court on Seattle Healthcare Case

Read on below for coverage of recent law firm news from McDermott Will & Emery.

ERIC Files Amicus Brief Rebutting DOL Attempt to Create New Regulations in Lawsuit

McDermott Will & Emery’s Andrew C. Liazos, Michael B. Kimberly and Charlie Seidell recently filed an amicus brief in the US Court of Appeals for the 10th Circuit on behalf of the ERISA Industry Committee (ERIC). McDermott filed the brief in response to a US Department of Labor (DOL) amicus brief that advanced a novel interpretation of its regulations which, if adopted through litigation, would change longstanding procedures for benefit determinations under self-funded medical plans sponsored by large employers. The amicus brief focuses on key arguments against the DOL’s attempted regulatory reinterpretation, including that:

DOL may not rewrite its regulations outside of notice-and-comment rulemaking;
DOL’s interpretation of its own regulations is inconsistent with the plain text of the regulations;
There are good policy reasons underlying differential treatment of healthcare and disability benefits determinations; and
DOL’s interpretation of the regulations in its amicus brief is not entitled to deference under the Supreme Court decision in Kisor.

Read ERIC’s amicus brief here.

Read ERIC’s statement here.

ERIC Petitions US Supreme Court on Seattle Healthcare Case

McDermott Will & Emery’s Michael B. Kimberly, Sarah P. Hogarth and Andrew C. Liazos, are co-counsel on a petition for certiorari before the Supreme Court of the United States on behalf of the ERISA Industry Committee (ERIC). The petition calls for review of ERIC’s legal challenge to the City of Seattle’s hotel healthcare “play or pay” ordinance. The ordinance mandates hospitality employers make specified monthly healthcare expenditures for their covered local employees if their healthcare plans do not meet certain requirements. The petition demonstrates that Seattle’s ordinance is a clear attempt to control the benefits provided under medical plans in violation of the preemption provision under the Employee Retirement Income Security Act of 1974, as amended (ERISA). This case is of significant national importance. Several other cities have proposed making similar changes, and complying with these types of ordinances will substantially constrain the ability of employers to control the terms of their medical plans on a uniform basis. ERIC’s petition is joined by several trade associations, including the US Chamber of Commerce, the American Benefits Council and the Retail Industry Leaders Association.

Read ERIC’s petition for writ of certiorari here.

Read ERIC’s statement here.

Article by Andrew Liazos, Michael B. Kimberly, Charlie Seidell, and Sarah P. Hogarth.

For more legal industry news, click here to visit the National Law Review.

Medicare Advantage: OIG Report Finds Improper Denials

On April 27,2022, the Office of Inspector General of the Department of Health and Human Services (OIG), Office of Evaluations and Inspections, issued a report on the performance of Medicare Advantage Organizations (MAOs) in approving care and payment consistently with Medicare coverage rules. In its review, OIG found that 13% of MAO denials of prior authorization requests should have been approved and that 18% of payment requests from providers were improperly denied. OIG also made a number of recommendations to the Center of Medicare and Medicaid Services (CMS) with respect to its oversight of MAOs.

Purpose and Method of the Study

OIG undertook the study to assess whether MAOs are appropriately providing access to medically necessary services and making payment to providers consistently with Medicare coverage rules. Since CMS pays MAOs principally by capitation, MAOs have a potential incentive to increase their profits by denying access to care of beneficiaries or by denying payments to providers. CMS’s annual audits of MAOs have indicated some persistent problems related to inappropriate denials of service and payment. As enrollment in Medicare Advantage continues to grow, OIG viewed it as important to ensure that medically necessary care is provided and that providers are paid appropriately.

OIG conducted the review by randomly selecting 250 denials of prior authorization requests and 250 payment request denials by 15 of the largest MAOs during a week in June of 2019. OIG had coding experts review the cases and had physician reviewers examine the medical records. Based on these reviews, OIG estimated the rates at which MAOs issued denials of services or payment that met Medicare coverage rules and MAO billing rules. OIG also examined the reasons for the inappropriate denials and the types of services involved.

Standards

MAOs must cover items and services included in fee-for-service Medicare, and may also elect to include additional items and services. MAOs are required to follow Medicare coverage rules that define what items and services are covered and under what circumstances. As the OIG states in the Report, MAOs “may not impose limitations – such as waiting periods or exclusions from coverage due to pre-existing conditions — that are not present in original Medicare.” In following Medicare coverage rules, MAOs are permitted to use additional denial criteria that were not developed by Medicare when they are deciding to authorize or pay for a service, provided the clinical criteria are “no more restrictive than original Medicare national and local coverage policies.” MAOs may also have their own billing and payment procedures, provided all providers are paid accurately, timely, and with an audit trial.

MAOs utilize prior authorization requests before care is furnished to manage care and payment requests from providers to approve payment for services provided. Beneficiaries and providers may appeal such decisions, and beneficiaries and providers are successful in many of the appeals (for a one-time period, as many as 75% of the appeals were granted).

Findings

Prior Authorization Denials

In the study, OIG found that 13% of prior authorization denials were for services that met Medicare coverage rules, thus delaying or denying care that likely should have been approved. MAOs made many of the denials by applying MAO clinical criteria that are not part of Medicare coverage rules. As an example, a follow-up MRI was denied for a beneficiary who had an adrenal lesion that was 1.5 cm in size, because the MAO required the beneficiary to wait one year for such lesions that are under 2 cm in size. OIG’s experts found such a requirement was not contained in Medicare coverage rules and was therefore inappropriate. Rather, the MRI was medically necessary to determine if the lesion was malignant.

OIG also found instances where MAOs requested further documentation that led to a denial of care when it was not furnished, as such additional documentation was not required to determine medical necessity. OIG’s reviewers found that either sufficient clinical information was in the medical record to authorize the care or the documentation requested was already contained in the medical record.

Payment Denials

OIG found in the study that 18% of payment denials fully met Medicare coverage rules and MAO payment policies. As a result of these denials, payment was delayed or precluded for services that should have been paid.

OIG found that common reasons for these inappropriate payment denials were human error in conducting manual reviews (for example, the reviewer not recognizing that a skilled nursing facility (SNF) was an in-network provider), and inaccurate programming.

OIG also found that advanced imaging services (including MRIs and CT scans), stays in post-acute facilities (including SNFs and inpatient rehabilitation facilities), and injections were the services that were most prominent in the inappropriate denials that should have been authorized for care and payment in accordance with Medicare coverage rules.

OIG Recommendations

Based on the study, OIG recommended that:

CMS should issue new guidance on both the appropriate and inappropriate use of MAO clinical criteria that are not contained in Medicare coverage rules. In particular, OIG recommended that CMS should more clearly define what it means when it states that MAO clinical criteria may not be “more restrictive” than Medicare coverage rules.
CMS should update its audit protocols to address issues identified in the report such as MAO use of clinical criteria and/or examine particular service types that led to more denials. OIG suggests CMS should consider enforcement actions for MAOs that demonstrate a pattern of inappropriate payment denials.
CMS should direct MAOs to identify and address the reasons that led to human errors.

CMS reviewed the OIG report and concurred with each of OIG’s recommendations. Those recommendations can affect future coverage decisions as well as utilization of prior authorization tools. AHIP, a national association of health care insurers, challenged the OIG’s sample size as inappropriate to support the agency’s conclusions, and defended prior authorization tools.

Takeaways

Given CMS’s concurrence with the report’s findings, we recommend that MAOs track these issues over the next several months in advance of CMS’s Final Rate Announcement for CY 2024.

MAOs should also be aware of potential False Claims Act (FCA) exposure in this area. FCA exposure can arise when a company seeks and receives payments despite being out of compliance with the basic terms for its participation. If an MAO knew it was denying claims that should be paid because they would be covered under traditional Medicare, but the MAO was still collecting full capitation, it is possible that a whistleblower or the government may pursue FCA liability. This risk warrants attention because whistleblowers can bring qui tam suits under the FCA, with resulting high costs for defense and potentially high penalties if a violation is proven (or settled to avoid further litigation). That said, an FCA suit based on this theory would raise serious questions, including whether any non-payment actually met the FCA’s “knowingly” standard (which includes reckless disregard), or whether any non-payment met the materiality threshold necessary to demonstrate a violation of the FCA.

Article By Alexis Finkelberg Bortniker, C. Frederick Geilfuss II, Matthew D. Krueger, Maureen F. Kwiecinski, and Kinal M. Patel at Foley & Lardner LLP

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Alabama Enacts New Telemedicine Law

Alabama Governor Kay Ivey recently signed SB 272 into law, setting forth telemedicine practice standards and abolishing Alabama’s previous “special purpose license” that allowed physicians licensed in other states to practice across state lines into Alabama. The law is effective July 11, 2022.

The law creates a new article in the Code of Alabama (Sections 34-24-701 through 34-24-707 of Chapter 24, Title 34). The statutory language is lengthy, but the key provisions are summarized below.

Medical License

Unless the physician meets an exception to licensure (e.g., peer-to-peer consultations, irregular or infrequent services), a physician must obtain either a full Alabama medical license or a license via the Interstate Medical Licensure Compact in order to provide “telehealth medical services” to a patient located in Alabama.

Telehealth medical services means “[d]igital health, telehealth, telemedicine, and the applicable technologies and devices used in the delivery of telehealth. The term does not include incidental communications between a patient and a physician.
The term “irregular or infrequent” services refers to “telehealth medical services” occurring less than 10 days in a calendar year or involving fewer than 10 patients in a calendar year.

Defined Terms and Allowable Modalities

Telehealth is defined as “[t]he use of electronic and telecommunications technologies, including devices used for digital health, asynchronous and synchronous communications, or other methods, to support a range of medical care and public health services.”
Telemedicine is defined as “[a] form of telehealth referring to the provision of medical services by a physician at a distant site to a patient at an originating site via asynchronous or synchronous communications, or other devices that may adequately facilitate and support the appropriate delivery of care.” The term includes digital health, but does not include incidental communications between a patient and a physician.
Digital Health is defined as “[t]he delivery of health care services, patient education communications, or public health information via software applications, consumer devices, or other digital media.”
Asynchronous is defined as “[t]he electronic exchange of health care documents, images, and information that does not occur in real time, including, but not limited to, the collection and transmission of medical records, clinical data, or laboratory results.”
Synchronous is defined as “[t]he real-time exchange of medical information or provision of care between a patient and a physician via audio/visual technologies, audio only technologies, or other means.”

Physician-Patient Relationship

A physician-patient relationship may be formed via telehealth without a prior in-person exam.

Telemedicine Prescribing of Medications and Controlled Substances

A practitioner may prescribe a legend drug, medical supplies, or a controlled substance to a patient via telehealth. However, a prescription for a controlled substance may only be issued if:

The telehealth visit includes synchronous audio or audio-visual communication using HIPAA compliant equipment;
The practitioner has had at least one in-person encounter with the patient within the preceding 12 months; and
The practitioner has established a legitimate medical purpose for issuing the prescription within the preceding 12 months.

In-Person Visit for Unresolved Medical Condition

If a physician or practice group provides telehealth medical services more than 4 times in a 12-month period to the same patient for the same medical condition without resolution, the physician must either see the patient in-person within 12 months or refer the patient to a physician who can provide the in-person care within 12 months. This in-person visit requirement does not apply to the provision of mental health services.

The Alabama Board of Medical Examiners and the Alabama Medical Licensure Commission are currently developing administrative rules in accordance with the new law.

Article By Kristen A. Murphy and Jacqueline N. Acosta of Foley & Lardner LLP

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HIPAA Enforcement Continues Under Right of Access Initiative

On March 28, 2022, the Department of Health and Human Services (HHS) Office for Civil Rights (OCR) announced the resolution of two additional cases as part of OCR’s HIPAA Right of Access Initiative.

The Right of Access Initiative was launched by OCR in 2019 “to support individuals’ right to timely access their health records at a reasonable cost under the HIPAA Privacy Rule” as explained by OCR. In the March 28 announcement, OCR indicated its continuing commitment to enforce compliance with the HIPAA Rules, including the “foundational” Right of Access provision. With the two most recent cases, there have now been 27 investigations and settlements under the Right of Access Initiative (see full chart below).

Nearly all of the investigations in the Right of Access Initiative involve a single individual unable to obtain a copy of some or all of their protected health information from a health care provider or to do so within the timeframe required or in accordance with fees permitted by the HIPAA Privacy Rule. In some cases, additional issues found during the investigation, such as failure to have conducted a HIPAA risk assessment or lack of HIPAA policies, are part of the settlement. In all cases, in addition to the monetary penalty, the settlement has included a Corrective Action Plan imposing various obligations, such as policy development, training, and mandatory reporting to OCR.

The Right of Access Initiative remains one of the most active areas of HIPAA enforcement. In its most recent Annual Report to Congress on HIPAA Privacy, Security, and Breach Notification Rule Compliance, OCR noted that right of access was the third most common issue of complaints resolved. Moreover, the Right of Access Initiative coordinates with the ONC 2020-2025 Federal HIT Strategic Plan and the goal of “Providing patients and caregivers with more robust health information.” It is a core tenant of the Federal HIT Strategic Plan that access to health information will “better support person-centered care and patient empowerment.”

Article By Allen R. Killworth and Zeina Abu-Hijleh of Epstein Becker & Green, P.C.

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HHS OIG Signs Off on Substance Use Recovery Incentive Program

On March 2, 2022, the Department of Health and Human Services (“HHS”) Office of the Inspector General (the “OIG”) issued a new advisory opinion (“AO 22-04”) related to a program through which the Requestor would provide certain individuals access to digital contingency management (“CM”) and related tools to treat substance use disorders (“Program”). The OIG advised that it would not impose administrative sanctions under the Anti-Kickback Statute (“AKS”) or the Beneficiary Inducements Civil Monetary Penalty Law (“CMPL”).

The Requestor, a digital health company, offers a Program that uses smartphone and smart debit card technology to implement CM for individuals with substance use disorders, addressing aspects of these disorders “in ways that conventional counseling and medications often cannot.” The Requestor makes this technology available to individuals who meet certain requirements through contracts with a variety of entities, such as health plans, addiction treatment providers, employee assistance programs, research institutions, and other treatment providers (“Customers”).

Individuals (‘Members”) are Customer- or self-referred, and are subject to a structured interview using the American Society of Addiction Medicine Continuum Triage tool before participation in the Program. The Requestor’s enrollment specialist, under the guidance of a licensed clinical supervisor, determines the type of services and frequency of recovery coaching using an evidence-based, automated algorithm. The Program technology establishes the schedule of expected target behavioral health events, objectively validates whether each expected event has occurred, and, if it has, promptly disburses the exact, protocol-specified incentive to the Member, using (where appropriate) a progressive reinforcement schedule.

The Program is not limited to treatments or federally reimbursable services; it also includes, among other features, support groups, medication reminders, and appointment attendance verification. For those that do include federally reimbursable services, the Requestor advised that such services may be furnished by a Customer. Incentives from the Program are provided to Members via a “smart debit card.” The card includes “abuse and anti-relapse protections (e.g., it cannot be used at bars, liquor stores, casinos, or certain other locations nor can it be used to convert credit to cash at ATMs or gas stations)”, and allows the Requestor to monitor use. Incentives are capped at $200/month and $599/year; individual incentives are typically relatively small, at $1-$3.

The Requestor receives fees from Customers on either a flat monthly basis, per eligible, active Member, or a pay-for-performance model, in which Requestor is paid upon a Member achieving certain agreed-upon targets for abstinence. The Requestor certified that the aggregate fees are consistent with fair market value and do not vary based on the volume or value of business generated under federal health care programs. Instead, fees are based on the service configurations being purchased and the intensity of behavioral targets that are planned for each Member, as well as whether a member is low- or high-risk, and in or out of treatment.

OIG concluded that two stream of remuneration potentially implicate the AKS and CMPL. First, Customers pay Requestor a fee to provide services, some of which could incentivize a Member to receive a federally billable service. Second, some of the fees Customers pay to Requestor get passed on to Members as CM Incentives for achieving certain behavioral health goals, some of which may involve services that could be billable to Federal health care programs (e.g., a counseling session) by a particular provider or supplier, which could be a Customer. OIG noted its longstanding concerns relating to the offer of incentives intended to induce beneficiaries to obtain federally reimbursable items and services, as such incentives could present significant risks of fraud and abuse.

The OIG concluded that the Program presents a minimal risk of fraud and abuse and declined to impose sanctions, providing four justifications –

The Requestor certified that the Program is based in research, and provided evidence that CM is a “highly effective, cost-efficient treatment for individuals with substance use disorders.” Therefore, the OIG decided that, taken together with the other safeguards present in the Arrangement, the incentives in the Requestor’s Program serve as “part of a protocol-driven, evidence-based treatment program rather than an inducement to seek, or a reward for having sought, a particular federally reimbursable treatment.”
The incentives offered through the Program have a relatively low value and a cap, and largely are unrelated to any federally payable services, especially as the Requestor is not enrolled in and does not bill to federal health care programs for Program services. Therefore, the OIG determined that the risk of the incentives “encouraging overutilization of federally reimbursable services is low.”
The Requestor’s Customer base is not limited to entities that have an incentive to induce receipt of federally reimbursable services. While the OIG acknowledged that there may be instances where an incentive may be given for receiving a federally billable service, the fees do not vary based on volume or value of any federally reimbursable services, and the Customers do not have control of the Program. Therefore, the OIG determined that the risk is low an entity would become a Customer to “generate business or reward referrals.”
Although the incentives loaded onto a smart debit card function as cash equivalents, the OIG found the safeguards included in the Arrangement sufficient to mitigate fraud and abuse concerns. The Requestor, which does not bill federal health care programs or have an incentive to induce overutilization, determines what services an individual needs and what incentives are attached. Additionally, the smart debit card has “anti-relapse protections”, which can signal possible need for intervention. Therefore, the OIG concluded that the remuneration in the form the smart debit card is sufficiently low risk.

AO 22-04 reflects HHS’s continued aims to increase flexibility around substance use disorder treatments. Just two weeks before, HHS announced two grant programs, totaling $25.6 million, to expand access to medication-assisted treatment for opioid use disorder and prevent the misuse of prescription drugs. In a press release, HHS Secretary Xavier Becerra is quoted as saying, “At HHS we are committed to addressing the overdose crisis, and one of the ways we’re doing this is by expanding access to medication-assisted treatment and other effective, evidenced-based prevention and intervention strategies.” HHS’ “National Tour to Strengthen Mental Health” is intended to “hear directly from Americans across the country about the challenges they’re facing, and engage with local leaders to strength the mental health and crisis care in our communities”, focused on three aspects: mental health, suicide, and substance use. Further flexibilities should be anticipated in these areas as the Tour continues.

Anyone seeking treatment options for substance misuse should call SAMHSA’s National Helpline at 800-662-HELP (4357) or visit findtreatment.gov. If you or anyone you know is struggling with thoughts of suicide, please call the National Suicide Prevention Lifeline at 800-273-TALK (8255), or text the Crisis Text Line (text HELLO to 741741).

Article By Christine M. Clements and Theresa E. Thompson of Sheppard, Mullin, Richter & Hampton LLP

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Surprise! The No Surprises Act Changes Again

The No Surprises Act (Act), which became effective Jan. 1, 2022, is the latest health care law passed with the best of intent: to create consumer protection from unexpected out-of-network medical bills and to create a federal independent dispute resolution (IDR) process to resolve payment disputes between payers and out-of-network providers. Unfortunately, the Act, especially the U.S. Department of Health and Human Services’ (HHS) implementation of the IDR process, also creates a new administrative burden for health care providers. Providers and medical associations filed lawsuits in multiple jurisdictions to challenge HHS’ implementation of the IDR process and the constitutionality of the Act before it was even in effect.

On Feb. 24, 2022, the United States District Court for the Eastern District of Texas granted the Texas Medical Association’s Motion for Summary Judgement to vacate select IDR requirements. The Court found that HHS’ interim final rule’s IDR process, intended to resolve payment disputes regarding reimbursement for out-of-network emergency services and out-of-network services provided at in-network facilities, was contrary to the clear language of the Act[1] (Rule).

In general, the Act[2] requires health insurance payers (Insurers) to reimburse providers for certain out-of-network services at a statutorily calculated “out-of-network rate.”[3] Where an All-Payer Model Agreement or specified state law does not exist, to set such a rate, an Insurer must issue an initial out-of-network rate decision and pay such amount to the providers within 30 days after the out-of-network claim is submitted.[4] If the provider disagrees with the Insurer’s proposed out-of-network reimbursement rate, the provider has a 30-day window to negotiate a different payment rate with the Insurer.[5] If these negotiations fail, the parties can proceed to the IDR process.[6]

Congress adopted a baseball-style arbitration model for the Act’s IDR process. The Insurer and provider each submit a proposed out-of-network rate with limited supporting evidence. The arbitrator picks one of the offers while taking into account specified considerations, including the “qualified payment amount,” the provider’s training, experience, quality, and outcomes measurements, the provider’s market share, the patient’s acuity, the provider’s teaching status, case mix, and scope of services, and the provider’s/Insurer’s good-faith attempts to enter into a network agreement.[7] The “qualifying payment amount” (QPA), is designed to represent the median rate the Insurer would pay for the item or service if it were provided by an in-network provider.[8]

The Rule requires the IDR arbitrator to select the proposed payment amount that is closest to the QPA unless “the certified IDR entity [arbitrator] determines that credible information submitted by either party … clearly demonstrates that the [QPA] is materially different[9] from the appropriate out-of-network rate.”[10] This is a clear departure from the analysis set forth in the Act.

The Texas Medical Association challenged the Rule under the Administrative Procedures Act (APA), arguing that the Departments exceeded their authority by giving “outsized weight” to one statutory factor over the others specified by Congress, and that the Departments failed to comply with the APA’s notice and comments requirements in promulgating the Rule. In turn, the Departments argued that the plaintiffs did not have standing to bring the claims.

After dispensing with defendant’s standing arguments, the Eastern District of Texas Court ruled in favor of the plaintiff’s Motion for Summary Judgment and determined that “the Act unambiguously establishes the framework for deciding payment disputes and concludes that the Rule conflicts with the statutory text.” Under the Act, the arbitrators (or certified IDR entities) “shall consider … the qualifying payment amounts” and the provider’s level of training, experience, and quality outcomes, the market share held by the provider, the patient’s acuity, the provider’s teaching status, case mix, and scope of services, and the demonstrated good faith efforts of both parties in entering into a network agreement.”[11] The Act did not specify that any one factor should be considered the “primary” or “most important” factor. The Rule, in contrast, requires arbitrators to “select the offer closest to the [QPA]” unless “credible” information, including information supporting the “additional factors,” “clearly demonstrates that the [QPA] is materially different from the appropriate out-of-network rate.”[12] The Departments characterized the other factors as “permissible additional factors” that may be considered only when appropriate.[13] The Court found that the Department’s Rule was inconsistent with the Act and that since Congress had spoken clearly on the factors to be considered in the arbitration process, the Department’s interpretation of the Act was not appropriate and had exceeded the Department’s authority.[14]

Following the Court’s decision, the Departments issued a memorandum on Feb. 28, 2022, clarifying the Act’s requirements for providers and Insurers. The memo specifically noted that the Court’s decision would not, in their opinion, affect the patient-provider dispute resolution process.[15] The Departments also stated they would withdraw any guidance inconsistent with the Court’s Opinion, provide additional training for interested parties, and keep the IDR process portal open to resolve disputes. The Departments also will be considering further rulemaking to address the IDR process.

The No Surprises Act continues to surprise us all with more adaptations. Enforcement of this new law remains uncertain in light of the numerous legal challenges, including at least one constitutionality challenge.

[1] Requirements Related to Surprise Billing: Part II, 86 Fed. Reg. 55,980 (Oct. 7, 2021).

[2] Consolidated Appropriations Act of 2021, Pub. L. No. 116-260, div. BB, tit. I, 134 Stat. 1182, 2758-2890 (2020).

[3] 300gg-111(a)(1)(C)(iv)(II) and (b)(1)(D).

[4] 300gg-111(a)(1)(C)(iv) and (b)(1)(C).

[5] 300gg-111(c)(1)(A).

[6] 300gg-111(c)(1)(B).

[7] 300gg-111(c)(5).

[8] 300gg-111(a)(3)(E)(i)(I)-(II).

[9] “Material difference” is defined as “a substantial likelihood that a reasonable person with the training and qualifications of a certified IDR entity making a payment determination would consider the submitted information significant in determining the out-of-network rate and would view the information as showing that the [QPA] is not the appropriate out-of-network rate. 149.510(a)(2)(viii).

[10] 45 C.F.R. 149.510(c)(4)(ii).

[11] 300gg-111(c)(5)(C)(i)-(ii).

[12] 45 C.F.R. 149.510(c)(4)(ii)(A).

[13] 86 Fed. Reg. 56,080.

[14] Because the Departments had exceeded their statutory authority, no Chevron deference was owed to their regulations. Chevron U.S.A. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984).

[15] This is a separate dispute resolution process designed to address disputes between patients and providers when bills for uninsured and self-pay patients are inconsistent with the good faith estimate provided by the health care provider.

Article By Stacey A. Borowicz and Joseph D. Wheeler of Dinsmore & Shohl LLP

For more healthcare legal news, click here to visit the National Law Review.

Tag: healthcare

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