Category: Health

The Evolution of AI in Healthcare: Current Trends and Legal Considerations

Artificial intelligence (AI) is transforming the healthcare landscape, offering innovative solutions to age-old challenges. From diagnostics to enhanced patient care, AI’s influence is pervasive, and seems destined to reshape how healthcare is delivered and managed. However, the rapid integration of AI technologies brings with it a complex web of legal and regulatory considerations that physicians must navigate.

It appears inevitable AI will ultimately render current modalities, perhaps even today’s “gold standard” clinical strategies, obsolete. Currently accepted treatment methodologies will change, hopefully for the benefit of patients. In lockstep, insurance companies and payors are poised to utilize AI to advance their interests. Indeed, the “cat-and-mouse” battle between physician and overseer will not only remain but will intensify as these technologies intrude further into physician-patient encounters.

  1. Current Trends in AI Applications in Healthcare

As AI continues to evolve, the healthcare sector is witnessing a surge in private equity investments and start-ups entering the AI space. These ventures are driving innovation across a wide range of applications, from tools that listen in on patient encounters to ensure optimal outcomes and suggest clinical plans, to sophisticated systems that gather and analyze massive datasets contained in electronic medical records. By identifying trends and detecting imperceptible signs of disease through the analysis of audio and visual depictions of patients, these AI-driven solutions are poised to revolutionize clinical care. The involvement of private equity and start-ups is accelerating the development and deployment of these technologies, pushing the boundaries of what AI can achieve in healthcare while also raising new questions about the integration of these powerful tools into existing medical practices.

Diagnostics and Predictive Analytics:

AI-powered diagnostic tools are becoming sophisticated, capable of analyzing medical images, genetic data, and electronic health records (EHRs) to identify patterns that may elude human practitioners. Machine learning algorithms, for instance, can detect early signs of cancer, heart disease, and neurological disorders with remarkable accuracy. Predictive analytics, another AI-driven trend, is helping clinicians forecast patient outcomes, enabling more personalized treatment plans.

 

Telemedicine and Remote Patient Monitoring:

The COVID-19 pandemic accelerated the adoption of telemedicine, and AI is playing a crucial role in enhancing these services. AI-driven chatbots and virtual assistants are set to engage with patients by answering queries and triaging symptoms. Additionally, AI is used in remote and real-time patient monitoring systems to track vital signs and alert healthcare providers to potential health issues before they escalate.

 

Drug Discovery and Development:

AI is revolutionizing drug discovery by speeding up the identification of potential drug candidates and predicting their success in clinical trials. Pharmaceutical companies are pouring billions of dollars in developing AI-driven tools to model complex biological processes and simulate the effects of drugs on these processes, significantly reducing the time and cost associated with bringing new medications to market.

Administrative Automation:

Beyond direct patient care, AI is streamlining administrative tasks in healthcare settings. From automating billing processes to managing EHRs and scheduling appointments, AI is reducing the burden on healthcare staff, allowing them to focus more on patient care. This trend also helps healthcare organizations reduce operational costs and improve efficiency.

AI in Mental Health:

AI applications in mental health are gaining traction, with tools like sentiment analysis, an application of natural language processing, being used to assess a patient’s mental state. These tools can analyze text or speech to detect signs of depression, anxiety, or other mental health conditions, facilitating earlier interventions.

  1. Legal and Regulatory Considerations

As AI technologies become more deeply embedded in healthcare, they intersect with legal and regulatory frameworks designed to protect patient safety, privacy, and rights.

Data Privacy and Security:

AI systems rely heavily on vast amounts of data, often sourced from patient records. The use of this data must comply with privacy regulations established by the Health Insurance Portability and Accountability Act (HIPAA), which mandates stringent safeguards to protect patient information. Physicians and AI developers must ensure that AI systems are designed with robust security measures to prevent data breaches, unauthorized access, and other cyber threats.

Liability and Accountability:

The use of AI in clinical decision-making raises questions about liability. If an AI system provides incorrect information or misdiagnoses a condition, determining who is responsible—the physician, the AI developer, or the institution—can be complex. As AI systems become more autonomous, the traditional notions of liability may need to evolve, potentially leading to new legal precedents and liability insurance models.

These notions beg the questions:

  • Will physicians trust the “judgment” of an AI platform making a diagnosis or interpreting a test result?
  • Will the utilization of AI platforms cause physicians to become too heavily reliant on these technologies, forgoing their own professional human judgment?

Surely, plaintiff malpractice attorneys will find a way to fault the physician whatever they decide.

Insurance Companies and Payors:

Another emerging concern is the likelihood that insurance companies and payors, including Medicare/Medicaid, will develop and mandate the use of their proprietary AI systems to oversee patient care, ensuring it aligns with their rules on proper and efficient care. These AI systems, designed primarily to optimize cost-effectiveness from the insurer’s perspective, could potentially undermine the physician’s autonomy and the quality of patient care. By prioritizing compliance with insurer guidelines over individualized patient needs, these AI tools could lead to suboptimal outcomes for patients. Moreover, insurance companies may make the use of their AI systems a prerequisite for physicians to maintain or obtain enrollment on their provider panels, further limiting physicians’ ability to exercise independent clinical judgment and potentially restricting patient access to care that is truly personalized and appropriate.

Licensure and Misconduct Concerns in New York State:

Physicians utilizing AI in their practice must be particularly mindful of licensure and misconduct issues, especially under the jurisdiction of the Office of Professional Medical Conduct (OPMC) in New York. The OPMC is responsible for monitoring and disciplining physicians, ensuring that they adhere to medical standards. As AI becomes more integrated into clinical practice, physicians could face OPMC scrutiny if AI-related errors lead to patient harm, or if there is a perceived over-reliance on AI at the expense of sound clinical judgment. The potential for AI to contribute to diagnostic or treatment decisions underscores the need for physicians to maintain ultimate responsibility and ensure that AI is used to support, rather than replace, their professional expertise.

Conclusion

AI has the potential to revolutionize healthcare, but its integration must be approached with careful consideration of legal and ethical implications. By navigating these challenges thoughtfully, the healthcare industry can ensure that AI contributes to better patient outcomes, improved efficiency, and equitable access to care. The future of AI in healthcare looks promising, with ongoing advancements in technology and regulatory frameworks adapting to these changes. Healthcare professionals, policymakers, and AI developers must continue to engage in dialogue to shape this future responsibly.

©2024 Norris McLaughlin P.A., All Rights Reserved
For more on AI, visit the NLR Artificial Intelligence section.

Application of New Mental Health Parity Rules to Provider Network Composition and Reimbursement: Perspective and Analysis

On September 23, 2024, the U.S. Departments of Labor, the Treasury, and Health and Human Services (collectively, the “Departments”) released final rules (the “Final Rules”) that implement requirements under the Mental Health Parity and Addiction Equity Act (MHPAEA).

The primary focus of the Final Rules is to implement new statutory requirements under the Consolidated Appropriations Act of 2021, which amended MHPAEA to require health plans and issuers to develop comparative analyses to determine whether nonquantitative treatment limitations (NQTLs)—which are non-financial restrictions on health care benefits that can limit the length or scope of treatment—for mental health and substance use disorder (MH/SUD) benefits are comparable to and applied no more stringently than NQTLs for medical/surgical (M/S) benefits.

Last month, Epstein Becker Green published an Insight entitled “Mental Health Parity: Federal Departments of Labor, Treasury, and Health Release Landmark Regulations,” which provides an overview of the Final Rules. This Insight takes a closer look at the application of the Final Rules to NQTLs related to provider network composition and reimbursement rates.

Provider Network Composition and Reimbursement NQTL Types

A key focus of the Final Rules is to ensure that NQTLs related to provider network composition and reimbursement rates do not impose greater restrictions on access to MH/SUD benefits than they do for M/S benefits.

In the Final Rules, the Departments decline to specify which strategies and functions they expect to be analyzed as separate NQTL types, instead requiring health plans and issuers to identify, define, and analyze the NQTL types that they apply to MH/SUD benefits. However, the Final Rules set out that the general category of “provider network composition” NQTL types includes, but is not limited to, “standards for provider and facility admission to participate in a network or for continued network participation, including methods for determining reimbursement rates, credentialing standards, and procedures for ensuring the network includes an adequate number of each category of provider and facility to provide services under the plan or coverage.”[1]

For NQTLs related to out-of-network rates, the Departments note that NQTLs would include “[p]lan or issuer methods for determining out-of-network rates, such as allowed amounts; usual, customary, and reasonable charges; or application of other external benchmarks for out-of-network rates.”[2]

Requirements for Comparative Analyses and Outcomes Data Evaluation

For each NQTL type, plans must perform and document a six-step comparative analysis that must be provided to federal and state regulators, members, and authorized representatives upon request. The Final Rules divide the NQTL test into two parts: (1) the “design and application” requirement and (2) the “relevant data evaluation” requirement.

The “design and application” requirement, which builds directly on existing guidance, requires the “processes, strategies, evidentiary standards, or other factors” used in designing and applying an NQTL to MH/SUD benefits to be comparable to, and applied no more stringently than, those used for M/S benefits. Although these aspects of the comparative analysis should be generally familiar, the Final Rules and accompanying preamble provide extensive new guidance about how to interpret and implement these requirements.

The Final Rules also set out a second prong to the analysis: the requirement to collect and evaluate “relevant data” for each NQTL. If such analysis shows a “material difference” in access, then the Final Rules also require the plan to take “reasonable” action to remedy the disparity.

The Final Rules provide that relevant data measures for network composition NQTLs may include, but are not limited to:

  • in-network and out-of-network utilization rates, including data related to provider claim submissions;
  • network adequacy metrics, including time and distance data, data on providers accepting new patients, and the proportions of available MH/SUD and M/S providers that participate in the plan’s network; and
  • provider reimbursement rates for comparable services and as benchmarked to a reference standard, such as Medicare fee schedules.

Although the Final Rules do not describe relevant data for out-of-network rates, these data measures may parallel measures to evaluate in-network rates, including measures that benchmark MH/SUD and M/S rates against a common standard, such as Medicare fee schedule rates.

Under the current guidance, plans have broad flexibility to determine what measures must be used, though the plan must ensure that the metrics that are selected reasonably measure the actual stringency of design and application of the NQTL with regard to the impact on member access to MH/SUD and M/S benefits. However, additional guidance is expected to further clarify the data evaluation requirements that may require the use of specific measures, likely in the form of additional frequently asked questions as well as updates to the Self-Compliance Tool published by the Departments to help plans and issuers assess whether their NQTLs satisfy parity requirements.

The Final Rules require plans to look at relevant data for network composition NQTLs in the aggregate—meaning that the same relevant data must be used for all NQTL types (however defined). As such, the in-operation data component of the comparative analysis for network composition NQTLs will be aggregated.

If the relevant data indicates a “material difference,” the threshold for which the plan must establish and define reasonably, the plan must take “reasonable actions” to address the difference in access and document those actions.

Examples of a “reasonable action” that plans can take to comply with network composition requirements “include, but are not limited to:

  1. Strengthening efforts to recruit and encourage a broad range of available mental health and substance use disorder providers and facilities to join the plan’s or issuer’s network of providers, including taking actions to increase compensation or other inducements, streamline credentialing processes, or contact providers reimbursed for items and services provided on an out-of-network basis to offer participation in the network;
  2. Expanding the availability of telehealth arrangements to mitigate any overall mental health and substance use disorder provider shortages in a geographic area;
  3. Providing additional outreach and assistance to participants and beneficiaries enrolled in the plan or coverage to assist them in finding available in-network mental health and substance use disorder providers and facilities; and
  4. Ensuring that provider directories are accurate and reliable.”

These examples of potential corrective actions and related discussion in the Final Rules provide an ambitious vision for a robust suite of strategies that the Departments believe that plans should undertake to address material disparities in access as defined in the relevant data. However, the Final Rules put the onus on the plan to design the strategy that it will use to define “material differences” and remedy any identified disparity in access. Future guidance and enforcement may provide examples of how this qualitative assessment will play out in practice and establish both what the Departments will expect with regard to the definition of “material differences” and what remedial actions they consider to be sufficient. In the interim, it is highly uncertain what the practical impact of these new requirements will be.

Examples of Network Analyses Included in the Final Rules

The Final Rules include several examples to clarify the application of the new requirements to provider network composition NQTLs. Unfortunately, the value of these examples for understanding how the Final Rules will impact MH/SUD provider networks in practice may be limited. As a result, given the lack of detail regarding the complexity of analyzing these requirements for actual provider networks, as well as the fact that the examples fail to engage in any meaningful discussion of where to identify the threshold for compliance with these requirements, it remains to be seen how regulators will interpret and enforce these requirements in practice.

  • Example 1 demonstrates that it would violate the NQTL requirements to apply a percentage discount to physician fee schedule rates for non-physician MH/SUD providers if the same reduction is not applied for non-physician M/S providers. Our takeaways from this example include the following:
    • This example is comparable to the facts that were alleged by the U.S. Department of Labor in Walsh v. United Behavioral Health, E.D.N.Y., No. 1:21-cv-04519 (8/11/21).
    • Example 1 is useful to the extent that it clarifies that a reimbursement strategy that specifically reduces MH/SUD provider rates in ways that do not apply to M/S provider rates would violate MHPAEA. However, such cut-and-dried examples may be rare in practice, and a full review of the strategies for developing provider reimbursement rates is necessary.
  • Example 4 demonstrates that plans may not simply rely on periodic historic fee schedules as the sole basis for their current fee schedules. Here are some key takeaways from this example:
    • Even though this methodology may be neutral and non-discriminatory on its face, given that the historic fee schedules are not themselves a non-biased source of evidence, to meet the new requirements for evidentiary standards and sources, the plan would have to demonstrate that these historic fee schedules were based on sources that were objective and not biased against MH/SUD providers.
    • If the plan cannot demonstrate that the evidentiary standard used to develop its fee schedule does not systematically disfavor access to MH/SUD benefits, it can still pass the NQTL test if it takes steps to cure the discriminatory factor.
    • Example 4 loosely describes a scenario where a plan supplements a historic fee schedule that is found to discriminate against MH/SUD access by accounting for the current demand for MH/SUD services and attracting “sufficient” MH/SUD providers to the network. Unfortunately, however, the facts provided do not clarify what steps were taken to achieve this enhanced access or how the plan or regulator determined that access had become “sufficient” following the implementation of the corrective actions.
  • Example 10 provides that if a plan’s data measures indicate a “material difference” in access to MH/SUD benefits relative to M/S benefits that are attributable to these NQTLs, the plan can still achieve compliance by taking corrective actions. Our takeaways from this example include the following:
    • The facts in this example stipulate that the plan evaluates all of the measure types that are identified above as examples. Example 10 also states that a “material difference” exists but does not identify the measure or measures for which a difference exists or what facts lead to the conclusion that the difference was “material.” To remedy the material difference, this example states that the plan undertakes all of the corrective actions to strengthen its MH/SUD provider network that are identified above as examples and, therefore, achieves compliance. However, this example fails to clarify how potentially inconsistent outcomes across the robust suite of identified measures were balanced to determine that the “material difference” standard was ultimately met. Example 10 also does not provide any details about what specific corrective actions the plan takes or what changes result from these actions.

Epstein Becker Green’s Perspective

The new requirements of the Final Rules will significantly increase the focus of the comparative analyses on the outcomes of the provider network NQTLs. For many years, the focus of the comparative analyses was primarily on determining whether any definable aspect of the plan’s provider contracting and reimbursement rate-setting strategies could be demonstrated to discriminate against MH/SUD providers. The Final Rules retain those requirements but now put greater emphasis on the results of network composition activities with regard to member access and require plans to pursue corrective actions to remediate any material disparities in that data. This focus on a robust “disparate impact” form of anti-discrimination analysis may lead to a meaningful increase in reimbursement for MH/SUD providers or other actions to more aggressively recruit them to participate in commercial health plan networks.

However, at present, it remains unclear which measures the Departments will ultimately require for reporting. Concurrent with the release of their Notice of Proposed Rulemaking on July 23, 2023, the Departments published Technical Release 2023-01P to solicit comments on key approaches to evaluating comparability and stringency for provider network access and reimbursement rates (including some that are referenced as examples in the Final Rules). Comments to the Technical Release highlighted significant concerns with nearly all of the proposed measures. For example, proposals to require analysis of MH/SUD and M/S provider reimbursement rates for commercial markets that are benchmarked to Medicare fee schedules in a simplistic way may fail to account for differences in population health and utilization, value-based reimbursement strategies, and a range of other factors with significant implications for financial and clinical models for both M/S and MH/SUD providers. Requirements to analyze the numbers or proportions of MH/SUD and M/S providers that are accepting new patients may be onerous for providers to report on and for plans to collect and may obscure significant nuances with regard to wait times, the urgency of the service, and the match between the provider’s training and service offerings to the patient’s need. Time and mileage standards highlighted by the Departments not only often fail to capture important access challenges experienced by patients who need MH/SUD care from sub-specialty providers or facilities but also fail to account for evolving service delivery models that may include options such as mobile units, school-based services, home visits, and telehealth. Among the measures identified in the Technical Release, minor differences in measure definitions and specifications can have significant impacts on the data outcomes, and few (if any) of the proposed measures have undergone any form of testing for reliability and validity.

Also, it is still not clear where the Departments will draw the lines for making final determinations of noncompliance with the Final Rules. For example, where a range of different data measures is evaluated, how will the Departments resolve data outcomes that are noisy, conflicting, or inconclusive? Similarly, where regulators do conclude that the data that are provided suggest a disparity in access, the Final Rules identify a highly robust set of potential corrective actions. However, it remains to be seen what scope of actions the Departments will determine to be “good enough” in practice.

Finally, we are interested in seeing what role private litigation will play in driving health plan compliance efforts and practical impacts for providers. To date, plaintiffs have found it challenging to pursue litigation on the basis of claims under MHPAEA, due in part to the highly complex arguments that must be made to evaluate MHPAEA compliance and in part to the challenge for plaintiffs to have adequate insight into plan policies, operations, and data across MH/SUD and M/S benefits to adequately assert a complaint under MHPAEA. Very few class action lawsuits or large settlements have occurred to date. These challenges for potential litigants may continue to limit the volume of litigation. However, to the extent that the additional guidance in the Final Rules does give rise to an uptick in successful litigation, it is possible that the courts may end up having a greater impact on health plan compliance strategies than regulators.

ENDNOTES

[1] 26 CFR 54.9812- 1(c)(4)(ii)(D), 29 CFR 2590.712(c)(4)(ii)(D), and 45 CFR 146.136(c)(4)(ii)(D).

[2] 26 CFR 54.9812- 1(c)(4)(ii)(E), 29 CFR 2590.712(c)(4)(ii)(E), and 45 CFR 146.136(c)(4)(ii)(E).

©2024 Epstein Becker & Green, P.C. All rights reserved.
For more on Mental Health, visit the NLR Health Law Managed Care section

USTR Finalizes New Section 301 Tariffs

The United States Trade Representative (USTR) published a Federal Register notice detailing its final modifications to the Section 301 tariffs on China-origin products. USTR has largely retained the proposed list of products subject to Section 301 tariffs announced in the May 2024 Federal Register notice (see our previous alert here) with a few modifications, including adjusting the rates and implementation dates for a number of tariff categories and expanding or limiting certain machinery and solar manufacturing equipment exclusions. USTR also proposes to impose new Section 301 tariff increases on certain tungsten products, polysilicon, and doped wafers.

The notice, published on September 18, 2024, clarifies that tariff increases will take effect on September 27, 2024, and subsequently on January 1, 2025 and January 1, 2026 (Annex A). The final modifications to Section 301 tariffs will apply across the following strategic sectors:

  • Steel and aluminum products – increase from 0-7.5% to 25%
  • Electric vehicles (EVs) – increase from 25% to 100%
  • Batteries
    • Lithium-ion EV batteries – increase from 7.5% to 25%
    • Battery parts (non-lithium-ion batteries) – increase from 7.5% to 25%
    • Certain critical minerals – increase from 0% to 25%
    • Lithium-ion non-EV batteries – increase from 7.5% to 25% on January 1, 2026
    • Natural graphite – increase from 0% to 25% on January 1, 2026
  • Permanent magnets – increase from 0% to 25% on January 1, 2026,
  • Solar cells (whether or not assembled into modules) – increase from 25% to 50%
  • Ship-to-shore cranes – increase from 0% to 25% (with certain exclusions)
  • Medical products
    • Syringes and needles (excluding enteral syringes) – increase from 0% to 100%
    • Enteral syringes – increase from 0% to 100% on January 1, 2026
    • Surgical and non-surgical respirators and facemasks (other than disposable):
      • increase from 0-7.5% to 25%; increase from 25% to 50% on January 1, 2026
    • Disposable textile facemasks
      • January 1, 2025, increase from 5% to 25%; increase from 25% to 50% on January 1, 2026
    • Rubber medical or surgical gloves:
      • increase from 7.5% to 50% on January 1, 2025; increase from 50% to 100% on January 1, 2026
    • Semiconductors – increase from 25% to 50% on January 1, 2025

USTR adopted 14 exclusions to temporarily exclude solar wafer and cell manufacturing equipment from Section 301 tariffs (Annex B), while rejecting five exclusions for solar module manufacturing equipment proposed in the May 2024 notice. The exclusions are retroactive and applicable to products entered for consumption or withdrawn from warehouse for consumption on or after January 1, 2024, and through May 31, 2025. USTR also granted a temporary exclusion for ship-to-shore gantry cranes imported under contracts executed before May 14, 2024, and delivered prior to May 14, 2026. To use this exclusion, the applicable importers must complete and file the certification (Annex D).

With respect to machinery exclusion, USTR added five additional subheadings to the proposed 312 subheadings to be eligible for consideration of temporary exclusions. USTR did not add subheadings outside of Chapters 84 and 85 or subheadings that include only parts, accessories, consumables, or general equipment that cannot physically change a good. USTR will likely issue additional guidance to seek exclusions of products under these eligible subheadings.

Importers should assess the (i) table of the tariff increases for the specified product groups (Annex A), (ii) temporary exclusions for solar manufacturing equipment (Annex B), (iii) the Harmonized Tariff Schedule of the United States (HTSUS) modifications to impose additional duties, to increase rates of additional duties, and to exclude certain solar manufacturing equipment from additional duties (Annex C), (iv) Importer Certification for ship-to-shore cranes entering under the exclusion (Annex D), and (v) HTSUS subheadings eligible for consideration of temporary exclusion under the machinery exclusion process (Annex E). The descriptions set forth in Annex A are informal summary descriptions, and importers should refer to the HTSUS modifications contained in Annex C for the purposes of assessing Section 301 duties and exclusions.

Importers should also carefully review the final list of products subject to the increased Section 301 tariff, with their supply chains, to identify products subject to increases in tariff rates as a result of the recent of USTR and consider appropriate mitigation strategies.

© 2024 Miller, Canfield, Paddock and Stone PLC
For more news on Section 301 Tariffs, visit the NLR Antitrust Trade Regulation section.

Walgreens Settles for $106.8 Million Over FCA Violations

On September 13, the US Department of Justice (DOJ) announced that Walgreens Boots Alliance Inc. and Walgreen Co. (collectively, Walgreens) agreed to pay $106.8 million to resolve allegations of violating the False Claims Act (FCA) and state statutes. The allegations pertain to billing government health care programs for prescriptions that were never dispensed. The government alleged that from 2009 until 2020, Walgreens submitted claims to federal health care programs for prescriptions that were processed but never picked up by beneficiaries. This resulted in Walgreens receiving 10s of millions of dollars for prescriptions that were never actually provided to health care beneficiaries.

Under the resolution, Walgreens agreed to enhance its electronic pharmacy management system to prevent future occurrences and self-reported certain conduct. In addition, Walgreens refunded $66,314,790 related to the settled claims, which allowed Walgreens to receive credit under the DOJ’s guidelines for taking disclosure, cooperation, and remediation into account in FCA cases.

Under the settlement agreement, the federal government received $91,881,530, and the individual states received $14,933,259 through separate settlement agreements. The settlement will resolve three cases pending in the District of New Mexico, Eastern District of Texas, and Middle District of Florida under the qui tam, or whistleblower, provision of the FCA. Whistleblowers Steven Turck and Andrew Bustos, former Walgreens employees, will receive $14,918,675 and $1,620,000, respectively, for their roles in filing the suits.

The DOJ’s press release can be found here.

CVS Health Subsidiary Settles FCA Allegations for $60 Million

On September 16, Chicago company Oak Street Health, a subsidiary of CVS Health, agreed to pay $60 million to resolve allegations that it violated the FCA by paying kickbacks to third-party insurance agents in exchange for recruiting seniors to Oak Street Health’s primary care clinics from September 2020 through December 2022.

According to the DOJ, in 2020, Oak Street Health developed a program called the Client Awareness Program. Under the program, which was developed to increase patient membership, seniors who were eligible for Medicare Advantage received marketing messages designed to generate interest in Oak Street Health. Upon receipt of these messages, third-party insurance agents organized three-way phone calls with Oak Street Health employees for the interested seniors. Oak Street Health paid agents around $200 per beneficiary referred or recommended as part of this service. Instead of basing referrals and recommendations on the best interest of the seniors, these payments allegedly encouraged agents to base referrals and recommendations on Oak Street Health’s financial interests.

The DOJ’s press release can be found here.

Dunes Surgical Hospital Settles for $12.76 Million Over FCA Violations

On September 16, South Dakota companies Siouxland Surgery Center LLP, d.b.a. Dunes Surgical Hospital, United Surgical Partners International Inc. (USPI), and USP Siouxland Inc. agreed to pay approximately $12.76 million to settle FCA allegations related to improper financial relationships between Dunes and two physician groups. Since July 1, 2014, USPI has maintained partial ownership of Dunes through USP Siouxland, a wholly owned subsidiary of USPI. Following an internal investigation, Dunes and USPI disclosed the arrangements at issue to the government.

From at least 2014 through 2019, Dunes allegedly made financial contributions to a nonprofit affiliate of a physician group whose physicians referred patients to Dunes. According to the complaint, those payments allegedly funded the salaries of referring employees. Other allegations include that Dunes provided a different physician group with below-market-value clinic space, staff, and supplies. The DOJ alleged that these arrangements violated both the Anti-Kickback Statute and the Stark Law, which are “designed to ensure that decisions about patient care are based on physicians’ independent medical judgment and not their personal financial interest.”

Following Dunes’ and USPI’s internal compliance review and independent investigation, the companies promptly took remedial actions and disclosed such arrangements to the DOJ. The companies also provided the government with detailed and thorough written disclosures and cooperated throughout its investigation, resulting in cooperation credit for the companies.

Under the settlement, Dunes and USPI will pay $12.76 million to the federal government for alleged violations of the FCA, and approximately $1.37 million to South Dakota, Iowa, and Nebraska for their share of the Medicaid portion of the settlement.

The DOJ’s press release can be found here.

California Man Convicted for Paying Illegal Kickbacks for Patient Referrals to Addiction Treatment Facilities

On September 11, a federal jury convicted Casey Mahoney, 48, of Los Angeles, for paying nearly $2.9 million in illegal kickbacks for patient referrals to his addiction treatment facilities in Orange County, California. The facilities involved are Healing Path Detox LLC and Get Real Recovery Inc.

According to court documents and evidence presented at trial, Mahoney paid illegal kickbacks to “body brokers” who referred patients to his facilities. These brokers appeared to pay thousands of dollars in cash to patients to induce them to procure treatment at Mahoney’s facilities. Mahoney allegedly concealed these illegal kickbacks through sham contracts with the body brokers. The contracts purportedly required fixed payments and prohibited payments based on the volume or value of patient referrals, when in reality, payments were negotiated based on patients’ insurance reimbursements and the number of days Mahoney could bill for treatment. Mahoney also allegedly laundered the proceeds of the conspiracy through payments to the mother of one of the body brokers, falsely characterizing them as consulting fees.

The Eliminating Kickbacks in Recovery Act formed the basis of the charges against Mahoney. He was convicted of one count of conspiracy to solicit, receive, pay, or offer illegal remunerations for patient referrals, seven counts of illegal remunerations for patient referrals, and three counts of money laundering. He is scheduled to be sentenced on January 17, 2025, and faces a maximum penalty of five years in prison for the conspiracy charge, 10 years in prison for each illegal remuneration count, and 20 years in prison for each money laundering count.

The DOJ’s press release can be found here.

© 2024 ArentFox Schiff LLP

by: D. Jacques Smith, Randall A. Brater, Michael F. Dearington, Nadia Patel, Hillary M. Stemple, and Rebekkah R.N. Stoeckler of ArentFox Schiff LLP

For more news on FCA Violations visit the NLR Criminal Law Business Crimes section.

Consumer Privacy Update: What Organizations Need to Know About Impending State Privacy Laws Going into Effect in 2024 and 2025

Over the past several years, the number of states with comprehensive consumer data privacy laws has increased exponentially from just a handful—California, Colorado, Virginia, Connecticut, and Utah—to up to twenty by some counts.

Many of these state laws will go into effect starting Q4 of 2024 through 2025. We have previously written in more detail on New Jersey’s comprehensive data privacy law, which goes into effect January 15, 2025, and Tennessee’s comprehensive data privacy law, which goes into effect July 1, 2025. Some laws have already gone into effect, like Texas’s Data Privacy and Security Act, and Oregon’s Consumer Privacy Act, both of which became effective July of 2024. Now is a good time to take stock of the current landscape as the next batch of state privacy laws go into effect.

Over the next year, the following laws will become effective:

  1. Montana Consumer Data Privacy Act (effective Oct. 1, 2024)
  2. Delaware Personal Data Privacy Act (effective Jan. 1, 2025)
  3. Iowa Consumer Data Protection Act (effective Jan. 1, 2025)
  4. Nebraska Data Privacy Act (effective Jan. 1, 2025)
  5. New Hampshire Privacy Act (effective Jan. 1, 2025)
  6. New Jersey Data Privacy Act (effective Jan. 15, 2025)
  7. Tennessee Information Protection Act (effective July 1, 2025)
  8. Minnesota Consumer Data Privacy Act (effective July 31, 2025)
  9. Maryland Online Data Privacy Act (effective Oct. 1, 2025)

These nine state privacy laws contain many similarities, broadly conforming to the Virginia Consumer Data Protection Act we discussed here.  All nine laws listed above contain the following familiar requirements:

(1) disclosing data handling practices to consumers,

(2) including certain contractual terms in data processing agreements,

(3) performing risk assessments (with the exception of Iowa); and

(4) affording resident consumers with certain rights, such as the right to access or know the personal data processed by a business, the right to correct any inaccurate personal data, the right to request deletion of personal data, the right to opt out of targeted advertising or the sale of personal data, and the right to opt out of the processing sensitive information.

The laws contain more than a few noteworthy differences. Each of the laws differs in terms of the scope of their application. The applicability thresholds vary based on: (1) the number of state residents whose personal data the company (or “controller”) controls or processes, or (2) the proportion of revenue a controller derives from the sale of personal data. Maryland, Delaware, and New Hampshire each have a 35,000 consumer processing threshold. Nebraska, similar to the recently passed data privacy law in Texas, applies to controllers that that do not qualify as small business and process personal data or engage in personal data sales. It is also important to note that Iowa adopted a comparatively narrower definition of what constitutes as sale of personal data to only transactions involving monetary consideration. All states require that the company conduct business in the state.

With respect to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Iowa’s, Montana’s, Nebraska’s, New Hampshire’s, and Tennessee’s laws exempt HIPAA-regulated entities altogether; while Delaware’s, Maryland’s, Minnesota’s, and New Jersey’s laws exempt only protected health information (“PHI”) under HIPAA. As a result, HIPAA-regulated entities will have the added burden of assessing whether data is covered by HIPAA or an applicable state privacy law.

With respect to the Gramm-Leach-Bliley Act (“GLBA”), eight of these nine comprehensive privacy laws contain an entity-level exemption for GBLA-covered financial institutions. By contrast, Minnesota’s law exempts only data regulated by GLBA. Minnesota joins California and Oregon as the three state consumer privacy laws with information-level GLBA exemptions.

Not least of all, Maryland’s law stands apart from the other data privacy laws due to a number of unique obligations, including:

  • A prohibition on the collection, processing, and sharing of a consumer’s sensitive data except when doing so is “strictly necessary to provide or maintain a specific product or service requested by the consumer.”
  • A broad prohibition on the sale of sensitive data for monetary or other valuable consideration unless such sale is necessary to provide or maintain a specific product or service requested by a consumer.
  • Special provisions applicable to “Consumer Health Data” processed by entities not regulated by HIPAA. Note that “Consumer Health Data” laws also exist in Nevada, Washington, and Connecticut as we previously discussed here.
  • A prohibition on selling or processing minors’ data for targeted advertising if the controller knows or should have known that the consumer is under 18 years of age.

While states continue to enact comprehensive data privacy laws, there remains the possibility of a federal privacy law to bring in a national standard. The American Privacy Rights Act (“APRA”) recently went through several iterations in the House Committee on Energy and Commerce this year, and it reflects many of the elements of these state laws, including transparency requirements and consumer rights. A key sticking point, however, continues to be the broad private right of action included in the proposed APRA but absent from all state privacy laws. Only California’s law, which we discussed here, has a private right of action, although it is narrowly circumscribed to data breaches.  Considering the November 2024 election cycle, it is likely that federal efforts to create a comprehensive privacy law will stall until the election cycle is over and the composition of the White House and Congress is known.

©2024 Epstein Becker & Green, P.C. All rights reserved.
For more on Data Privacy, visit the NLR Communications Media Internet section.

Major Changes Coming for Medicare Drug Program: Negotiated Prices, Cap on Out of Pocket and Creditable Coverage

Some major changes are on the way for Medicare beneficiaries regarding drug costs. Due to the Inflation Reduction Act, the federal government now will have the ability to negotiate the prices of drugs for Medicare beneficiaries. After an initial set of negotiations, new lower prices have been announced for 10 expensive drugs. The discounts for some blood thinners and drugs for arthritis, cancer, diabetes, and heart failure result in costs as much as 79% lower. The new drug prices will go into effect starting in 2026. Just these 10 drugs make up about 20% of the program’s drug spending, so the impact is huge for the medicinal market. The federal government will turn to negotiating another batch of drugs in 2025, with 15-20 drugs targeted annually.

Another major change under the Inflation Reduction Act will be the out-of-pocket maximum under all Medicare Part D plans of $2,000 per year beginning January 2025. Beneficiaries will be able to prorate the cost monthly or pay it as the costs are incurred. This will be a game changer for many Medicare beneficiaries with high drug costs. In addition, certain drugs covered by Part B (typically those administered in a doctor’s office or hospital) might incur a co-pay of less than the standard 20% if the prices have increased faster than inflation. The drugs subject to reduced copays will be published quarterly.

These changes may have an unintended consequence for Medicare-eligible individuals who are still working and therefore enrolled in employer plans, or other individuals enrolled in retiree or other private plans. Those who are Medicare eligible but are enrolled in non-Medicare plans must show that they have “creditable” coverage under Medicare standards. A plan is “creditable” if coverage is at least as good as or better than the Medicare drug benefit. Creditable coverage is based on a test that measures whether the expected amount of paid claims is at least as much as the standard Part D benefit. Non-Medicare plans must advise enrollees if their coverage is considered “creditable.” It is crucial for coverage to be considered “creditable;” otherwise, the Medicare beneficiary can be subject to a Late Enrollment Penalty (LEP) for each month they are not enrolled in a plan providing creditable coverage.

It is unclear whether the $2,000 cap coming to Part D plans or other changes in drug coverage will mean that non-Medicare plans that do not match the changes will continue to be considered creditable in the future. Beneficiaries need to be aware of this important issue when considering their coverage options.

©2024 Norris McLaughlin P.A., All Rights Reserved
For more on the Medicare Drug Program, visit the NLR Health Law Managed Care section

(Employee) Therapy Anyone?

The recent WSJ article about employer-provided in-office therapy sessions raises some good points about destigmatizing mental health in the workplace and promoting overall wellness generally. But the article also reminds us about the risks of blurring lines between an employee’s personal and professional life and the potential dangers inherent in the spillover of confidential (personal, medical, and other information) in the workplace. I have written previously about the beneficial role performance evaluations may have as “talk therapy” in an employee’s career based upon the learning that comes with balanced feedback. But it seems to me that true talk therapy – undertaken by a licensed and trained professional in an appropriate diagnostic setting – does not belong in the workplace.

The article features an employer who provides an annual benefit of a dozen free on-site therapy sessions to its employees. While it is commendable to care about the whole employee, providing on-site therapy touches upon a few somewhat sensitive employment topics. The first concerns confidentiality of health information, which includes an employee’s decision to seek (or even not seek) medical treatment. The employer in the article was reported to have taken steps to provide a separate location for the therapy sessions so employees did not encounter each other during on-site therapy visits, as well as other privacy preservation measures. But the simple fact is that confidentiality is hard to guarantee for on-site employment activities. And even though GenX employees (and the generation of workers who follow them) do think differently about mental health and wellness than the generations preceding them, there is a real risk that an employee’s use of this benefit will become the topic of what used to be known as water cooler – now Slack – talk.

The other employment risk on-site therapy poses is the potential use of information that is disclosed during a therapy session. Ethical, licensing and medical rules govern what a therapist must and must not do with information learned about a patient, but what about information the therapist learns about an employer? This is particularly a concern if the information source and content is confirmed by several different employees and might be information that merits action (such as information suggesting that a manager is engaging in harassing or other actionable or illegal conduct). There is a reason employers follow guidelines when reports or complaints are made concerning such conduct. It is unclear how those guidelines should be followed if the contents of a therapy session are supposed to remain confidential, for good legal, therapeutic and ethical reasons.

It seems to me a far better approach for employers wishing to explore this benefit is to provide employees with a set amount of money (perhaps as part of a tax-advantaged benefit plan ) that the employee is encouraged to use at the employee’s discretion as part of well-being program designed to support all aspects of health (mental, physical and even financial fitness). That way therapy can be encouraged and supported, but kept separate in all other respects from the workplace. Therapy for all may be an excellent idea, but conducting it outside the confines of the workplace seems like a better one.

©1994-2024 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more news on Employer Provided Therapy, visit the NLR Labor & Employment section.

Top Questions Health Care Providers Should Consider in a Post-Chevron World – A Polsinelli Round Table Discussion

Health Care is one of the most regulated industries in the country, and for many years, one of the key administrative agencies overseeing health care in the United States, the Department of Health and Human Services’ (“HHS”) Centers for Medicare & Medicaid Services (“CMS”), has enjoyed broad authority to regulate health care under the “Chevron doctrine.” Under this doctrine, CMS and other federal agencies were granted broad discretion to interpret and implement the law, thus allowing them to drive how care is delivered and paid for in the United States. It was difficult for providers to successfully challenge agency rulemaking in federal court, even if they thought the agency’s interpretation of the law was incorrect. The Supreme Court’s dismantling of Chevron doctrine will have a significant impact on health care providers, which we may begin to see as we move into CMS’s annual rulemaking cycle.

The Supreme Court’s decision to overturn Chevron was expected, but it is still too soon to truly understand the full impact of the decisions on the health care industry. A round table of attorneys and policy advisors from Polsinelli’s Health Care, Public Policy and Government Investigations Department discussed the potential short and long-term implications of the decision and offer the following insights for health care providers across this ever-changing industry for navigating the web of statutes, rules and other sub-regulatory guidance post-Chevron.

1. What do the Loper/Relentless Decisions Change for Health Care Organizations in the Short-Term? Has CMS’s Authority to Regulate Health Care Gone Away or Been Substantially Limited?

“Likely, not. Many of the health care regulations are based on clear statutory language and will continue to give providers the rules for the road from a compliance standpoint. More controversial rules – like mental health parity, payment cuts, surprise billing, antidiscrimination, etc. – may be further delayed or even tabled for the short term while we learn more about how these challenges will be viewed by the courts. To the extent health care providers are struggling with a rulemaking negatively impacting them, it is worth beginning to evaluate whether challenging it may be warranted.” – Bragg Hemme

“CMS’s authority to regulate today is just like yesterday and probably tomorrow. Without a challenger to a rule, any rule continues unchanged – at least for the short-term. We have already seen; however, some regulated entities challenge a particular rule to a federal court and get some immediate regulatory relief. Members of Congress who want to see large scale changes to regulatory authority may well pursue identification of rules that were upheld in lower courts citing Chevron with an eye towards vitiating those rules with broad Congressional action. There are thousands of such cases and potentially impacted rules.” – Jennifer Evans

“Where the crux of Loper Bright unravels the courts’ existing practice of deferring to regulators’ interpretation of a statute that is unclear or ambiguous, we can expect to see increased litigation that challenges agency action arguing that the foundational law for such action was ambiguous and the agency has exceeded its statutory authority. It is unlikely we will see any change in regulator action or regulatory enforcement unless and until courts begin to overturn agency action on the basis that a statute is ambiguous and the agency that interpretated the statute was incorrect. We can also expect to see increased legislation explicitly delegating more authority to agencies.” – Meredith Duncan and Sara Avakian

2. What are Some Specific Areas of Health Care Regulation that may be Impacted?  

Health Care Fraud, Waste, and Abuse Laws

“The overruling of Chevron may have a significant effect on the application of the health care fraud and abuse laws, particularly the Physician Self-Referral Law (“Stark Law”) and Anti-Kickback Statute (“AKS”). Over the years, agencies including the HHS Office of Inspector General (“OIG”) and CMS have published hundreds of pages of rules, preamble language, and explanatory sub-regulatory guidance regarding the application of these laws. Some of these interpretations favor regulated entities, while others favor enforcers. To the extent Loper Bright represents a fundamental change in the role of agencies in clarifying or refining the scope and effect of statutory language, these implementing regulations and, thus, some longstanding health care industry practices could be impacted.” – Neal Shah

Reimbursement

“Coverage and payment rules from CMS (Medicare and Medicaid) and DHA (TriCare) may be ripe for attack. It will be interesting to see if the agencies are able or willing to engage in active negotiations to avoid or settle litigation that they did not face with Chevron deference.” – Jennifer Evans

“I anticipate that many of the routine Medicare reimbursement-related rulemakings (e.g., IPPS, OPPS, Physician Fee Schedule) will continue as they have in the past. Certain aspects of those rules or any controversial rulemakings may now be up for challenge. For instance, rules related to Disproportionate Share Hospitals have already been challenged since the Loper Bright decision. Any type of payment cut or agency effort to rein in health care costs, like Medicare drug pricing rules, surprise billing, mental health parity will also be closely scrutinized and likely challenged.” – Bragg Hemme

FDA

“Immediate impact is likely to be felt by the Lab Developed Test rule FDA is trying to finalize. Congress tried, but failed, to give the FDA statutory authority in this space via the VALID Act. The FDA went ahead and went through the rulemaking process in one year. This was lightspeed for the FDA. The rule was challenged prior to the reversal of Chevron. I expect to see the plaintiff amending their complaint now.”  – Michael Gaba

Surprise Billing

“I expect the Loper/Relentless decisions will impact the continued rollout of the regulations implementing the No Surprises Act. Since the law went into effect in 2022, regulations and guidance implementing the No Surprises Act have been vacated following challenges under the Administrative Procedures Act on four separate occasions – and that was under the prior Chevron standard, which of course was more deferential to agency decisions. But there are more rules that the Agencies are expected to issue – both as a result of the prior lawsuits and as part of their ongoing obligation to implement the law – that will have a significant impact on how the No Surprises Act functions in practice. These rules will also likely depend on the Departments’ interpretation of the No Surprises Act, and such interpretation will now not be afforded the deference that existed in the pre-Loper/Relentless landscape.” – Josh Arters

3. What Areas of Health Care Regulation are less Likely to be Impacted?

HIPAA

“From an HHS data privacy/security/breach perspective, the Jarkesy and Chevron decisions will arguably have very little impact unless parties are willing to challenge HHS HIPAA decisions in court. In other words, HHS OCR is proceeding as normal, and will continue to do so, particularly given that the HIPAA Rules were codified and specifically modified by Congress in the HITECH Act in 2009. However, to the extent a client would like to appeal a civil money penalty directly to a district court (Jarkesy) or attack a specific provision of sub regulatory guidance post-Chevron (Loper Bright), we could certainly attempt to do so.” – Iliana Peters

Long-Term Care

“Long term care providers are unlikely to see any immediate changes in regulation or enforcement. In most authorizing statutes, Congress delegated authority to CMS to develop and implement conditions of participation, and the guidance that has been provided interpreting those rules. It is unlikely the Loper Bright decision will cause CMS to change its survey process or the remedies imposed therefrom. However, any regulation or sub-regulatory guidance, such as the State Operations Manual, which is not expressly authorized by statute or otherwise interprets an ambiguous statute could be ripe for litigation to challenge CMS’ authority and/or CMS’ interpretation of the statute. To determine whether specific regulations and guidance is subject to challenge will require careful consideration of the Social Security Act and the deference, if any, afforded to CMS for rulemaking.” – Meredith Duncan and Sara Avakian

State Licensing & Practice Rules

“Many of the laws that impact health care providers, such as professional or facility licensing requirements and corporate practice of medicine prohibitions, are state laws that are unlikely to be immediately impacted by Loper Bright. However, Loper Bright may become a catalyst for new challenges to state-level administrative actions, which could create uncertainty related to state agency actions, such as Medical Board rules or guidance.”  – Kathleen Sutton

4. What Issues Should Health Care Organizations Anticipate in the Long-Term?

“It is unclear if there will be rule/no rule ‘chaos’ for health care organizations. When we think of all of the arrangements that default to ‘compliance with laws’ those provisions may lose meaning and effectiveness if the underlying legal rule-structure is threatened” – Jennifer Evans

“With the rise of litigation to combat potentially adverse rulemakings, we may see disagreement within the provider community to the extent some providers are ’winners’ and others are ‘losers.’ Further, we could see the same rulemaking get treated differently by courts depending on where the rules are being challenged. This will be very difficult to navigate for national providers. Hopefully, this ruling will cause regulatory agencies to take more shareholder feedback in their rulemaking. We will likely see more work needed at a Congressional level, however, if a statute is required for things that have historically been dealt with at a regulatory level, causing a slowdown.  This will be a challenge, particularly for innovative providers that are changing care models or adopting new technology, for instance. Health care rules often were behind the evolution of health care. Requiring Congressional action may present some opportunities but will not make things move faster.” – Bragg Hemme

“In the long-term, health care organizations should anticipate an increased opportunity to challenge unlawful regulations that run afoul of Congressional action. That is generally a good thing. But a negative consequence of the Loper Bright decisions is the likely impact on the agency rulemaking process, and the time it might take for agencies to issue regulations. Agencies are likely to move a bit slower when issuing new regulations in light of the dramatic change to how their rulemaking will be scrutinized by the courts going forward.” – Josh Arters

“It is likely that Congress will carefully craft new statutes and delegate more clear authority to the administrative agencies charged with enforcement. We also anticipate agencies taking more time to carefully craft their rules and guidance to mitigate the challenges that could arise based on these decisions. For providers, this will only further delay an already backlogged process.” – Meredith Duncan and Sara Avakian

“Loper Bright creates opportunities for health care organizations to challenge agency actions, but this opportunity comes at the expense of clarity and certainty that came from deference to agencies. The health care regulatory landscape is already complex and ever-changing, but the lack of uniformity that may result from different courts interpreting the same set of rules is going to create further complexity and confusion. The aftermath of Loper Bright may create a chilling effect for innovation or growth for health care businesses. Health care organizations will have to be strategic and stay up-to-date on the changing laws to maintain and grow their businesses while navigating this uncertainty.” – Kathleen Sutton

5. What can Health Care Organizations do if a CMS Rulemaking Has a Significant Impact on their Organization?

“If a rule isn’t working and there is a reasonable interpretation that the statue enabling the rule offers a better outcome, it may be time for health care organizations to start their engines and challenge rules that don’t match specific statutory requirements and fundamental principles. For example, think about adequate reimbursement and access to care. Does this reopen a provider’s ability to litigate payment rules that do not ensure access to care? Maybe.” – Jennifer Evans

“When faced with rulemaking that has a significant impact on operations, health care organizations might be presented with an opportunity to work with federal agencies to find a resolution without having to resort to litigation. Now that agencies understand that their rulemaking may be challenged under a less deferential standard, and, at least for now, most courts have held that a district court may vacate unlawful rules nationally, agencies might be more willing to find more creative and/or individualized solutions to the unique impact their rules might have on a particular health care organization.” – Josh Arters

6. Does this Decision Provide a Greater Ability for Health Care Providers to Advocate for Laws and Regulations to CMS and/or Congress?

“Providers have always had the opportunity to make a contribution in the public policy process; Loper means it is even more important. Engagement in the public policy process does not guarantee success, but lack of involvement almost certainly means a loss.  Both the legislature and agencies may be more open to negotiated laws and regulations. These processes will take longer, however.” – Julius Hobson

“Being part of the debate in the US Congress on health care legislation (and any legislation for that matter) is now more crucial than ever. Members of Congress will no longer be able to write laws that are ambiguous, which would give the agency of jurisdiction the authority to legislate through regulatory fiat. Congress now will be required to be more prescriptive in their laws, outlining specifically in statute the intent of the law. Congress currently relies on ‘report language’ that accompanies legislation, which expresses the legislative intent; however, the report language is not the black letter of the law and more often than not, the agency of jurisdiction ignores report language.  Finally, now that the Congress will need to be more prescriptive in its drafting of legislation Congress will be required be even more deliberative in crafting a bill. This will mean that laws will require more consensus to get the bills it works on approved.”  – Harry Sporidis

“In 2019, when the Supreme Court issued the Azar v. Allina Health Services decision, every component in CMS was tasked with reviewing, analyzing, and verifying that all the guidance materials had regulatory and/or statutory support. For a few years after the decision, CMS went through the rulemaking process for any guidance/policy that was not clearly articulated or supported by regulation. Now that the Supreme Court has overturned Chevron, CMS will likely conduct a similar exercise to determine all of the policy areas where the law is ambiguous, and the Agency has made the determination on how best to carry out the law. CMS will also likely consult with its legislative arm to work with Congress to clarify such laws. This undertaking will take CMS several years to complete. While CMS is engaged its review, there is an opportunity for health care organizations to engage with CMS to review policy position that result from an ambiguous statute and reconsider a more favorable interpretation on of the law.” – Ronke Fabayo

Sara Avakian, Iliana L. Peters, Kathleen Snow Sutton, Julius W. Hobson, Jr., Harry Sporidis, and Ronke Fabayo also contributed to this article.

© Polsinelli PC, Polsinelli LLP in California
by: Bragg E. Hemme, Jennifer L. Evans, Meredith A. Duncan, Neal D. Shah , Michael M. Gaba, and Joshua D. Arters of Polsinelli PC

For more news on the Health Care Industry Post-Chevron, visit the NLR Health Law & Managed Care section.

Washington Shake-Up: Vice President Harris to Lead Democratic Nomination for 2024 Presidency

Following President Biden’s withdrawal from the 2024 presidential race on Sunday, the nation’s capital has experienced another political shock, leading to swift mobilization within the Democratic Party. President Biden quickly endorsed Vice President (VP) Kamala Harris as the Democratic nominee, triggering a rapid wave of support from Congressional leaders, governors, stakeholders, and party donors including former Speaker Nancy Pelosi (D-CA), Senate Majority Leader Chuck Schumer (D-NY), House Democratic Leader Hakeem Jeffries (D-NY), all 24 Democratic governors, EMILYs List, and the United Auto Workers.

VP Harris has secured enough backing from Democratic delegates to clinch her party’s nomination to challenge former president Donald Trump in November. With the election a little over 100 days away, we have highlighted VP Harris’ stance on key issues during her tenure in Congress and her 2020 Presidential bid.

Technology

VP Harris is very familiar with the tech industry due to her roots in Silicon Valley as San Francisco’s district attorney, and her subsequent roles as Attorney General and US Senator from California. Although she hasn’t called for the breakup of big tech like some of her former colleagues in the Senate, she has criticized tech CEOs for the data privacy practices and targeted advertising tactics that their companies deploy, and voiced support for general regulation of big tech firms. In the White House, she serves as President Biden’s lead on AI initiatives and has actively promoted policies aimed at mitigating AI risks such as algorithmic bias, disinformation, and privacy concerns, while maximizing its benefits for Americans.

Climate Change

VP Harris has a long history of challenging the oil industry for its role in pollution and is likely to take it a step further than President Biden in tackling climate change. In the 2020 Presidential race, Harris proposed a $10 trillion climate plan aimed at achieving a carbon-neutral US economy by 2045, featuring initiatives such as a climate pollution fee and the elimination of fossil fuel subsidies.

In the Senate, Harris authored legislation that would have authorized grants to fund projects that address the specific climate-related challenges faced by vulnerable communities and invest in critical upgrades to the nation’s water infrastructure.

As California’s attorney general, VP Harris brought lawsuits against major oil companies, including British Petroleum (BP) for failing to stop underground storage tanks from leaking gasoline at 800 sites across the state, and also filed an investigation into ExxonMobil over its climate change disclosures.

Health Care

Maternal health was at the forefront of Harris’ health care priorities during her tenure in the Senate and has continued in her current role as Vice President. She sponsored landmark legislation such as the Black Maternal Health Momnibus Act, aimed at tackling the crisis facing Black maternal health care. This legislation enhances data collection, expands access to prenatal, postpartum, and doula care in underserved communities, promotes implicit bias training for health care professionals, and funds research and innovation to improve health outcomes and reduce disparities for Black women. Although the bill was not enacted, it remained a priority in both chambers of Congress after Harris’ departure from the Senate. It is also the centerpiece bill of the Congressional Black Maternal Health Caucus. Harris also championed legislation aimed at addressing the impact of uterine fibroids on women’s health through initiatives such as research funding, patient support tactics, and health care provider training. Additionally, she supported legislation to establish a loan repayment program for mental health professionals working in areas with critical workforce shortages.

In her 2020 presidential campaign, Harris introduced a health care plan that proposed a gradual transition toward Medicare-for-All over a decade. Her plan allowed individuals and employers to initially buy into Medicare while maintaining strict regulations for private insurance options. She also consistently opposed efforts to restrict access to reproductive health care services.

Tax

With numerous tax provisions under former President Trump’s Tax Cuts and Jobs Act set to expire in 2025, all eyes are on VP Harris’ anticipated tax policy proposals. During her tenure in Congress, she championed a significant tax reform bill that would have introduced the LIFT credit—a refundable tax credit of $3,000 for single filers and $6,000 for married couples—benefiting a large portion of middle- and working-class Americans. Unlike the Earned Income Tax Credit (EITC), this credit’s amount would not depend on the number of children reported on a taxpayer’s return but would phase out as income increased. Harris emphasized that this credit aimed to boost families’ after-tax income to help them cope with rising living costs.

Additionally, she sponsored legislation in Congress aimed at protecting workers from harassment and discrimination, funding earthquake mitigation efforts, and providing housing assistance to low-income families. During her 2020 presidential campaign, Harris advocated strongly for repealing Trump’s tax law. She proposed implementing a financial transaction tax to expand Medicare coverage and advocated for taxing capital gains as part of her broader economic platform.

A Look Ahead

With midterm elections looming in the House and 33 Senate seats up for election, the impact of VP Harris’ nomination on Congressional races will be watched closely. As the first woman of color and the highest-ranking woman in US history to hold the office of Vice President, Harris’ nomination marks a pivotal moment in American politics. It may influence voter behavior, candidate strategies across the aisle, and the broader political landscape leading up to the November elections.

The Democratic National Convention (DNC) is scheduled to be held in Chicago, Illinois, from August 19 to August 22. However, due to upcoming state ballot deadlines which precede the convention date, a virtual roll call where delegates formally select Kamala Harris as the nominee will conclude by August 7. Harris is expected to choose her running mate in the coming days, as her campaign team has sent vetting materials to Arizona Sen. Mark Kelly, Michigan Gov. Gretchen Whitmer, Minnesota Gov. Tim Walz, North Carolina Gov. Roy Cooper, and Pennsylvania Gov. Josh Shapiro.

©1994-2024 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more on the 2024 Election, visit the NLR Election Law Legislative News section

What Does the End of Chevron Deference Mean for Federal Health Care Programs?

On June 28, 2024, the Supreme Court rejected the doctrine of Chevron deference in the closely watched case of Loper Bright Enterprises v. Raimondo.[1] In a 6-3 decision, the Court held that Chevron’s rule that courts must defer to federal agencies’ interpretation of ambiguous statutes gave the executive branch interpretive authority that properly belonged with the courts. Moreover, the Court concluded that Chevron deference was inconsistent with the Administrative Procedure Act (APA), holding that the APA requires courts to exercise independent judgment when deciding legal issues in the review of agency action.

Loper will have significant and immediate implications for the U.S. Department of Health and Human Services (HHS), the federal agency charged with the administration of the federal health care programs, including Medicare and Medicaid. As detailed below, the Court’s decision sets a more exacting standard for courts to apply when reviewing HHS’s regulations and legal positions.

What Was Chevron Deference?

The doctrine of Chevron deference was established in 1984 by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.[2] In that case, the Court held when a “statute is silent or ambiguous with respect to the specific issue” raised regarding a statute that the agency administers, “the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”[3]

Although scholars have debated Chevron’s rationale at length, it generally was read to require deference based upon agencies’ presumed subject matter expertise and an assumption that Congress delegated authority to agencies—rather than courts—to fill in gaps in statutory schemes. Notably, the Supreme Court had not itself invoked Chevron deference since 2016, although lower courts have continued to rely on it regularly.[4]

What Did Loper Decide?

Loper involved two New England fishing companies appealing the D.C. Circuit’s ruling that applied Chevron deference to uphold the National Marine Fisheries Service’s interpretation of the Federal Magnuson-Stevens Act (the “Act”) as requiring fishermen to pay for the use of compliance monitors on certain fishing boats, even though the federal law is silent on who must pay. Petitioners used the case as a vehicle to present a broader challenge to Chevron,arguing that the doctrine has led to excessive deference to federal agencies, resulting in overregulation, the abdication of judicial responsibility to interpret statutes, and the unwarranted imposition of regulatory enforcement costs.

The Loper majority firmly rejected Chevron and held that the APA requires courts to exercise their independent judgment in deciding legal questions that arise in reviewing agency action. As the majority held, “courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”[5]

Importantly, however, Loper noted that deference may still be afforded agencies in certain instances. First, the Court observed that the APA expressly mandates a deferential standard of review for agency policy-making and fact-finding.[6] Second, Loper explained that some statutes are best read to “delegate[] discretionary authority to an agency,” in which case a court’s role is to merely ensure the agency “engaged in ‘reasoned decisionmaking’” within that authority.[7] Lastly, Loper reaffirmed that an agency’s “expertise” remains “one of the factors” that may make an agency’s interpretation persuasive.[8]

How Will Loper Impact Federal Health Care Programs?

Loper’s directive that courts should construe statutes independently and not defer to agencies’ positions has enormous implications for providers and suppliers that participate in federal health care programs. Much of today’s health care landscape is governed by HHS’ regulations, impacting many Americans and much of the federal budget. For example, Medicare currently covers more than 67 million beneficiaries, and Medicare spending comprised 12% of the federal budget in 2022 and 21% of national health care spending in 2021.[9]

Federal health care programs like Medicare and Medicaid are established by statutes that set forth myriad requirements regarding the coverage of items and services, and how, when, and by whom those items and services may be furnished.[10] HHS’s various components—most notably the Centers for Medicare and Medicaid Services (CMS)—have issued numerous, detailed regulations to implement these statutes. HHS’s components also include FDA, CDC, HRSA, AHRQ, OCR, NIH, and many others that intersect with health care providers and suppliers regularly.

Going forward under Loper, future challenges to agency regulations will take place upon a much different playing field. This has several important implications:

  • More Legal Challenges: We expect to see more legal challenges brought against HHS’s regulations as they are issued. Loper expressly stated that it “does not call into question prior cases that relied on the Chevron framework,” so prior decisions affirming regulations should be stable.[11] But going forward, Loper means that courts have no “thumb on the scale” in favor of HHS’s legal positions, and so litigants may view Loper as increasing their odds of success. At the same time, this may create more uncertainty for providers and suppliers who must determine how to comply with new regulations under challenge.
  • Less Ability for HHS to Create New Programs or Impose New Requirements: Especially where HHS imposes new substantive requirements that are not clearly authorized by statute, HHS’s regulations may be vulnerable. For example, the challengers to CMS’s minimum-staffing requirements for nursing homes are sure to cite Loper.[12] Likewise, when HHS creates new programs or initiatives by regulation based on broad statutory language (e.g., HHS’s recent creation of rural emergency hospital regulations[13]), the regulations may be more vulnerable to challenges. As another example, legal challenges to FDA’s new rule on Laboratory Developed Tests are pending and will likely invoke Loper.[14]
  • More Incentive to Challenge Reimbursement Rules: Legal challenges are frequently brought to CMS’s rules governing reimbursement, which often have complicated statutory formulas subject to differing interpretations. Whereas in the past, courts often deferred to CMS’s interpretations,[15] Loper now creates more potential for providers and suppliers to seek more favorable legal interpretations to enhance reimbursement.
  • Slower and More Cautious Rulemaking: As HHS promulgates new regulations, it will now have to consider the enhanced litigation risk that Loper creates. This may lead to agencies slowing and proceeding more cautiously in rulemaking as agencies seek to craft defensible regulations.
  • Inconsistent Decisions by Courts: Because Loper directs courts to exercise independent judgment rather than defer to HHS’s interpretations, we expect that courts in different areas of the country may reach differing conclusions regarding HHS regulations. This may make certain geographic locations more advantageous for provider and supplier operations or expansions.

Conclusion

Going forward, courts will be more amenable than ever to siding with challenges to HHS regulations. This creates both challenges and opportunities for providers and suppliers who should carefully assess the legal basis for all new regulations.

The authors acknowledge the contributions of Callie Ericksen, a student at the University of California Davis Law School and 2024 summer associate at Foley & Lardner LLP.

[1] Loper Bright Enterprises v. Raimondo, No. 22-451 (June 28, 2024), together with Relentless, Inc. v. Department of Commerce, No. 22-1219, available here.

[2] 467 U.S. 837 (1984).

[3] Id. at 843 (emphasis added).

[4] See Am. Hosp. Ass’n (“AHA”) v. Becerra, 142 S. Ct. 1896, 1904 (2022) (determining that HHS’s preclusion of judicial review “lacks any textual basis,” remaining silent with respect to Chevron); Becerra v. Empire Health Found., 142 S. Ct. 2354, 2362 (2022) (illustrating that HHS’s reading aligns with the statute’s “text, context, and structure” in calculating the Medicare fraction for purposes of Medicare Part A benefits, without any mention of Chevron); Vanda Pharms., Inc. v. Ctrs. for Medicare & Medicaid Servs.,98 F.4th 483 (2024) (holding that CMS’s definitions of “line-extension” and “new formulation” did not conflict with the Medicaid statute).

[5] Loper Bright Enterprises v. Raimondo, No. 22-451, slip op. 35 (June 28, 2024).

[6] Id. at slip. op. 14 (citing 5 U.S.C. §§ 706(2)(A), (E)).

[7] Id. at slip op. 18.

[8] Id. at slip op. 25 (citing Skidmore v. Swift & Co., 323 U.S. 134 (1944).

[9] See KFF, Medicare 101 (published May 28, 2024), available here.

[10] See 42 U.S.C. §§ 1395–1395lll.

[11] Loper Bright Enterprises v. Raimondo, No. 22-451, slip op. 34 (June 28, 2024).

[12] See Am. Health Care Ass’n v. Becerra, No. 24-cv-114 (N.D. Tex) (challenging the rule issued at 89 Fed. Reg. 40876 (May 10, 2024).

[13] Conditions of Participation, 42 C.F.R. §§ 485.500-485.546 (Subpart E), and Payments, §§ 419.90-419.95 (Subpart J), 87 Fed. Reg. 71748, 72292-93 (Nov. 23, 2022),

[14] 21 C.F.R. § 809, 89 Fed. Reg. 37286 (May 6, 2024).

[15] See, e.g., Baptist Mem’l Hosp. – Golden Triangle, Inc. v. Azar, 956 F.3d 689 (5th Cir. 2020) (deferring to CMS’s rule addressing “costs incurred” for calculating Medicaid Disproportionate Share Hospital payments).

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