FDA Takes Action Against Retailers Selling Tobacco Products to Minors

On February 7 FDA initiated enforcement action against a Miami, Florida Walgreens and a Charleston, South Carolina Circle K store for repeated sales of tobacco products to minors.  The enforcement action, called a no-tobacco-sale-order (NTSO) would prevent the individual stores from selling any tobacco product for thirty days.

In its press release, FDA noted that Walgreens is the top violator amongst pharmacies that sell tobacco products, having been cited for tobacco sales to minors during 22 percent of the retail compliance check inspections at Walgreens stores since they began in 2010.  These violations have resulted in over 1,550 warning letters and 240 civil money penalties, but this is  the first NTSO at a Walgreens store.  Other stores identified as frequent violators include Walmart (17.5 percent of inspections resulted in sales to minors violations), Dollar General (14 percent), and Rite Aid (9.6 percent).

FDA commissioner Dr. Scott Gottlieb is quoted in the press release as being “deeply disturbed” by the number and frequency of sales to minors at Walgreens stores and he called on Walgreens management to meet with him to discuss why so many Walgreens stores fail to prevent sales to minors.  Dr. Gottlieb speculated that the pharmacy setting might impact consumer perceptions regarding the safety of tobacco products.

 

© 2019 Keller and Heckman LLP.
Read more news on the FDA on the National Law Review’s Biotech, Food and Drug Type of Law page.

After Shutdown, US EPA Announces New Hearing Date for the New WOTUS Rule

As a result of the recent lapse in appropriations, the US EPA and US Department of the Army (Army) delayed a planned January 23, 2019 hearing regarding the proposed new “Waters of the United States” (WOTUS) definition. Publication of the proposed rule and the start of the comment period on the rule were also postponed due to the shutdown. On February 6, 2019, EPA announced that the hearing will now be held on February 27 and 28, 2019.   The Office of the Federal Register has not yet published the proposed rule, which will start the clock on the 60-day comment period.

Because it determines the scope of the Clean Water Act, the definition of “waters of the United States” has been a hot-button issue since it was amended, and significantly broadened, by the Obama administration in mid-2015.  The 2015 rule was challenged by 31 states and numerous other stakeholders in multiple lawsuits. In October 2015, the Sixth Circuit issued a nationwide stay of the rule. The nationwide stay was lifted when the US Supreme Court determined on January 13, 2017, that review of the rule falls within the jurisdiction of the district courts.   Although the nationwide stay is no longer in effect, decisions by the US District Courts for the Districts of North Dakota, Southern District of Georgia, and Southern District of Texas, preliminarily enjoining the 2015 rule in 28 states remain in effect. Thus, the Obama-era rule is in effect in only 22 states, the District of Columbia, and US territories.

In an effort to eliminate or narrow the Obama-era rule and reestablish a consistent nationwide rule, on December 11, 2018, the US EPA and the Army signed a newly proposed rule revising the WOTUS definition. The proposed rule is part of the agencies’ two-step plan to remove and replace the 2015 rule, which the agencies believe exceeds US EPA’s statutory authority. The first step, a rule which suspended the application of the 2015 rule, was enjoined and vacated by two district courts. Despite this roadblock, the agencies moved forward with step two and submitted the new proposed definition rule to the Office of the Federal Register. However, due to the shutdown, it has not yet been published. The 60-day comment period for the rule will begin on the date of publication.

Under the proposed rule “waters of the United States” encompasses “traditional navigable waters, including the territorial seas; tributaries that contribute perennial or intermittent flow to such waters; certain ditches; certain lakes and ponds; impoundments of otherwise jurisdictional waters; and wetlands adjacent to other jurisdictional waters.” Importantly, the agencies propose to eliminate the case-by-case application of the significant nexus test, which under the 2015 rule extends the definition of WOTUS to water, including wetlands, that “significantly affects the chemical, physical, or biological integrity of a water.” The agencies propose instead “the establishment of clear categories of jurisdictional waters.”

The new WOTUS definition would also exclude from regulation some tributaries and waters adjacent to jurisdictional waters. The 2015 rule extends to adjacent waters that are bordering, contiguous or neighboring a jurisdictional water, which broadly encompasses any water within 100 feet of a jurisdictional water or water located within the 100-year floodplain of a jurisdictional water. By contrast, the proposed rule includes only adjacent wetlands that “abut or have a direct hydrological surface connection” to a water. Under the 2015 Obama-era rule, a tributary is a water that contributes flow to a jurisdictional water. The proposed rule eliminates ephemeral flows from being considered a tributary, requiring a water that contributes at least “perennial or intermittent flow.” Given these and other significant differences between the two rules, once published, the proposed rule is certain to draw intense debate over the proper reach of the Clean Water Act.

US EPA is not alone in experiencing delays, as the federal rulemaking process ground to a halt during the shutdown. The Office of the Federal Register (OFR) issued “Government Shutdown FAQs,” stating that in an appropriations lapse the OFR may publish documents from unfunded agencies “directly related to the performance of governmental functions necessary to address imminent threats to safety of human life or protection of property.”   And, in the case of a partial shutdown, where some agencies are funded, the OFR may publish documents from funded agencies “if delaying publication until the end of the appropriations lapse would prevent or significantly damage the execution of funded functions at the agency.”

 

© Copyright 2019 Squire Patton Boggs (US) LLP
This post was written by Weslynn P. Reed of Squire Patton Boggs (US) LLP.
For more environmental legislative and regulatory news check out the National Law Review’s Environmental Type of Law Page.

Compliance Risk Alert: Opioid Warning Letters issued by the U.S. Department of Justice Target Prescribers

U.S. Attorney’s Offices (“USAOs”) across the country are issuing warning letters to physicians and other prescribers (collectively, “Prescribers”) cautioning them about their opioid prescribing practices (the “Warning Letters”). In just the last week, the USAO for the Eastern District of Wisconsin sent warning letters to over 180 prescribers identified by Drug Enforcement Administration (“DEA”) data as prescribing opioids at relatively high levels. The Food and Drug Administration and the Federal Trade Commission have also been issuing their own warning letters to opioid marketers and distributors over the past several months, evidencing a concerted effort to combat the opioid epidemic on a number of fronts through various federal enforcement and regulatory efforts.

The Warning Letters appear to be based entirely on review and analysis of DEA’s data with no other investigation into the patients who received opioid prescriptions or their medical conditions. Importantly, each of these USAOs has recognized explicitly that the prescribers have not necessarily broken any laws and that the prescriptions may all be medically appropriate. Nevertheless, any warning from an office wielding criminal enforcement authority should never be taken lightly, particularly when related to an issue – opioid overprescribing – that remains a top Department of Justice and U.S. government enforcement priority. While the Warning Letters themselves are issued without meaningful investigation, they may often signal that additional investigatory or enforcement action is forthcoming. In some cases, for instance, prescribers may be visited unannounced and in-person by DEA diversion investigators, special agents, or other law enforcement officers.

Prescribers who have already received a Warning Letter should contact legal counsel to assist in taking measures to assess their degree of risk and preparing for potential further government inquiry. Contacting legal counsel early and preserving privilege could be key to prevent an informal inquiry from becoming a protracted criminal investigation. Experienced counsel can help focus the government’s inquiry, provide the information in a manner that is responsive to the government’s request while also providing relevant context, and limit disruption to the provider’s practice. In collaboration with their counsel, contacted Prescribers should consider:

  • An audit of medical records related to patients who have received opioid prescriptions to confirm their propriety in light of medical documentation;
  • Correction and supplementation of any deficient records, consistent with government requirements for medical documentation to support such prescriptions; and
  • Implementing any required process improvements to mitigate future risk.

Prescribers who prescribe opioids as part of their practices but who have not received a Warning Letter should consider taking prophylactic measures in response to this increased government scrutiny, as should their employers and partners. For instance, Prescribers – and those who employ or contract with prescribers – should consider:

  • Reviewing prescribing patterns against local and national benchmarks;
  • Reviewing a sample of documentation related to opioid prescription decisions to ensure that it sufficiently supports medical necessity and provides additional training on documentation practices as needed;
  • Reviewing and implementing the most current standards of care related to opioid prescribing and patient monitoring, including recommendations issued by the Centers for Disease Control and Prevention’s Guideline for Prescribing Opioids for Chronic Pain; and
  • In larger practices, implementing or updating, as necessary, policies and procedures related to opioid prescribing.
Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.
This post was written by Erica J. Kraus, Michael W. Paddock, David L. Douglass, Danielle Vrabie and A. Joseph Jay, III of Sheppard Mullin Richter & Hampton LLP.
Read more health care compliance news on the National Law Review’s Health Care Type of Law page.

IRS Notice Offers Good News for State Colleges and Universities (at Least for Now)

In January 2019, the Internal Revenue Service (IRS) issued Notice 2019-09, which provides interim guidance for Section 4960 of the Internal Revenue Code of 1986. As a reminder, Section 4960 imposes an excise tax of 21 percent on compensation paid to a covered employee in excess of $1 million and on any excess parachute payments paid to a covered employee. A “covered employee” is one of the organization’s top-five highest-paid individuals for years beginning after December 31, 2016. An organization must determine its covered employees each year, and once an individual becomes a covered employee, that individual will remain a covered employee for all future years.

Of particular interest to state colleges and universities is the answer to Q–5 of the notice. It provides that the Section 4960 excise tax does not apply to a governmental entity (including a state college or university) that is not tax-exempt under Section 501(a) and does not exclude income under Section 115(l). What does this mean? Basically, if an institution does not rely on either of those statutory exemptions from taxation, the institution will not be subject to the excise tax provisions of Section 4960. This exclusion from Section 4960 means the institution could compensate its athletic coaches (or other covered employees) in excess of the $1 million threshold and not be subject to the 21 percent excise tax.

As we discussed previously, some institutions rely on political subdivision status for tax purposes. Importantly, the notice also provides that any institution relying on its political subdivision status to avoid taxation, as opposed to relying on either of the above-mentioned exemptions, will be subject to the Section 4960 excise tax if the institution is “related” to any entity that does rely on either of the exemptions.

Although the IRS’s guidance is helpful in determining Section 4960’s application to state colleges and universities, it appears not to reflect “Congressional intent.” On January 2, 2019, the Committee on Ways and Means of the U.S. House of Representatives released a draft technical corrections bill that seeks to correct “technical and clerical” issues in the Tax Cuts and Jobs Act of 2017. The corrections bill seeks to clarify Section 4960’s application by stating that any college or university that is an agency or instrumentality of any government or any political subdivision, or that is owned or operated by a government or political subdivision, is subject to Section 4960. Given the current state of affairs in Washington, D.C., we are not confident that the corrections bill’s expanded application to state colleges and universities will ever come to fruition.

 

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

State Legislators React to Proposed Federal Title IX Regulations with State Law Proposals

While college, universities and educational professionals await the Department of Education’s (DOE) proposed new Title IX regulations, which will dictate a revised process by which allegations of sexual misconduct must be handled, the state legislatures in Missouri and Arizona are currently considering legislation that would adopt many of Secretary DeVos’s anticipated regulatory modifications.

The proposed Missouri legislation, contained in Senate Bill 259 offered by Senator Gary Romine and House Bill 573 introduced by Representative Dean Dohrman, would allow students involved in Title IX complaints to appeal findings outside of the university system to the Missouri Administrative Hearing Commission, considered a “neutral and independent hearing officer for the state.”

The key elements of the proposed Missouri bill are:

  • All state universities would be required to expedite hearings for students if the investigation and resolution of the complaint deprives their education.
  • Those accused would be provided with the identities of the parties and known witnesses and would have the opportunity to cross-examine parties and witnesses.
  • Denial of appropriate due process in a Title IX complaint would be considered a “breach of contract between the student and the university,” potentially resulting in a $250,000 fine for the institution.
  • If someone is found to have made a false complaint, the accused has the right to seek actual and punitive damages.

The House version of the bill would also “ensure that all parties use the terms ‘complainant’ and ‘respondent’ and refrain from using the term ‘survivor’ or any other term that presumes guilt before an actual finding of guilt.”

Senator Romine commented on his reason for introducing the proposed legislation by stating, “The problem is that a lot of times the accused does not have a proper recourse through the system, and we want to make sure that if there isn’t a proper recourse, that the institution that’s supposed to be upholding Title IX is held accountable for it.”

Representative Dohrman commented on his reasons for introducing the House bill in a press release, stating “due process is vital in both civil and criminal proceedings and Title IX proceedings are no different. I have filed this bill to… protect all students by making sure both the accuser and the accused are in a just proceeding.”

In addition to the proposed legislation in Missouri, Arizona State Representative Anthony Kern has introduced House Bill 2242, the “Campus Individual Rights Act, which is a similar statutory modification to Title IX for students in Arizona. Senator Kern’s proposed legislation would amend existing state law and would provide that an Arizona community college district or university may not prohibit the following:

  • An accused student and an alleged victim from having a legal representative at  disciplinary proceeding
  • The legal representative for the accused student and the alleged victim from having full participation in the disciplinary proceeding

In addition, the bill requires the parties to the disciplinary proceeding to make a good faith effort to exchange any evidence which either party intends to use in the proceeding, without authorizing either party the right to participate in formal discovery. In addition, Senator Kern’s proposed legislation would prohibit a school employee from acting as an adjudicator, hearing officer or appellate officer if that individual has previously served as:

  • An advocate or counselor for an accused student or alleged victim,
  •  An investigator,
  • An administrator presenting arguments and evidence on behalf of the educational institution, or
  • An advisor to a person described in 1-4 above.
Jackson Lewis P.C. © 2019
Read more Education Legal News on the National Law Review’s Public Education & Services Type of law page.

More States Attempt to Ban Sodas from Kids’ Meals

Recently introduced Kids’ Meal Bills in Connecticut and Rhode Island would prohibit restaurants from including soft drink beverages on children’s menus and in children’s meals. More specifically, Connecticut House Bill 7006 would limit beverages listed on children’s menus to “water, sparkling water, flavored water with no added sweeteners, unflavored milk or a nondairy milk alternative,” effective January 1, 2020. It was referred to the Joint Committee on Children on January 31, 2019, and is one of the agenda items to be considered at the Committee’s Public Hearing this Thursday.

Connecticut’s bill defines “Nondairy milk alternative” as “a fluid milk substitute that meets the standards established pursuant to the National School Lunch Program meal requirements for lunches and requirements for afterschool snacks.” By way of background, flavored, low-fat milk was temporarily added to the milk option in the National School Lunch Program in November 2017 and on December 12, 2018, USDA published a final rule in the Federal Register to codified that change, effective February 11, 2019 (see 86 FR 63776).

Rhode Island’s Health Beverage Act, 2019 – S 0179, was introduced on January 24, 2019, and referred to the State’s Senate Special Legislation and Veterans Affairs Committee. It specifies that default beverages in children’s meals must be one of the following:

  • Water, sparkling water, or flavored water, with no added natural or artificial sweeteners;
  • Nonfat or 1% milk or non-dairy milk alternative containing no more than 130 calories per container and/or serving; or
  • 100% fruit juice or fruit juice combined with water or carbonated water, with no added sweeteners.

While several states introduced similar legislation last year, California was the only state to pass a Kids’ Meal Bill (see our August 29, 2019 blog for details). However, efforts to eliminate sweetened soft drinks from children’s menus are continuing into the current legislative session.

 

© 2019 Keller and Heckman LLP

Health Care Enforcement 2019: How 2018’s Enforcement Actions Can Shape Your Compliance Plan

While it’s impossible to predict what government enforcement officials are currently working on, the trends from 2018 provide strong guidance for planning compliance efforts in 2019. In fact, 2018 was another busy year for the Department of Justice (the DOJ) and the Office of the Inspector General for Health and Human Services (the OIG). The following are some notable enforcement trends that may be helpful in planning your 2019 compliance initiatives.

Anti-Kickback and Physician Self-Referral Law Enforcement

One of the most notable trends in the last several years is the prevalence of False Claims Act cases premised on physician compensation relationships that are alleged to violate the Physician Self-Referral Law (Stark) and/or the Anti-Kickback Statute (the AKS). Here is a summary of a few exemplary cases that were resolved in 2018:

  • The University of Pittsburgh Medical Center Hamot was alleged to have entered into medical director or administrative services contracts with twelve physicians that violated both Stark and the AKS. The government contended that there was no legitimate need for the agreements because the services were either not performed or were duplicative in that they were already being provided by other physicians who were not being paid. The case was resolved for $20.75 million.

  • Montana-based Kalispell Regional Healthcare System (KRH) was alleged to have paid excessive full-time compensation to 60 specialists, many of whom worked less than full-time, to induce referrals. In addition, a subsidiary of KRH allegedly provided administrative services at below fair market value to a hospital joint venture owned by both the KRH subsidiary and an affiliated physician group in order to reduce expenses and increase the profits for the physician investors as a means of inducing referrals. The whistleblower was the CFO of the physicians’ network for the health system. The allegations were resolved for $24 million.

  • Detroit’s William Beaumont Hospital paid $85.5 million to resolve the allegations made by four whistleblowers that Beaumont paid compensation substantially in excess of fair market value to physicians and provided office space and employees at below fair market value to physician groups. Specifically, the allegations made by the whistleblowers included:

    • Full-time salaried cardiologists were paid in excess of fair market value as evidenced by the fact that they also continued to maintain separate private practices from which they retained the compensation;

    • The hospital provided office space and leased employees to the physicians’ practices at less than fair market value; and

    • 56 salaried medical directorships and other leadership positions had no job descriptions, no performance standards, no metrics, and no recorded evidence of any activities in exchange for the payment and were above fair market value. Some physicians in these positions also maintained full-time private practices.

The settlement also resolved claims that Beaumont allegedly misrepresented that a CT radiology center qualified as an outpatient department of Beaumont.

False Claims Enforcement Related to Medical Necessity

Cases involving medically unnecessary services continue to be a significant focus for the DOJ. Importantly, the legal community awaits a long-pending decision by the 11th Circuit Court of Appeals that may impact the government’s ability to bring FCA cases based on a lack of medical necessity. In U.S. ex rel. Paradise vs. AseraCare (Docket No. 16-13004), the trial judge found that the government could not bring FCA claims against a hospice provider for medically unnecessary services. The judge reasoned that, because determinations of medical necessity are subjective medical determinations, the government’s expert testimony that patients were not terminally ill (and, therefore, the services were not medically necessary) was insufficient to establish that the claims were false. The government argued that determining the falsity of hospice claims does not rest simply on two conflicting expert opinions on subjective medical determinations. Rather, the government contended that the expert testimony goes to the more objective determination of whether the medical records contained clinical information and documentation to support the patient’s terminal prognosis.

Despite the pending 11th Circuit decision, several significant FCA cases based on medically unnecessary services were resolved in 2018. A key theme in several of these cases was that, when there was a vendor or supplier providing the services in a hospital or skilled nursing facility, the government pursued both entities for submitting false claims or causing false claims to be submitted. Therefore, effective compliance programs must monitor the medical necessity of services provided by any vendor or supplier. The following are several representative examples of resolutions involving medically unnecessary services:

  • Two cases were resolved in which the government contended that the hospitals billed Medicare for medically unnecessary inpatient stays, when less expensive outpatient or observation care could have been provided. Banner Health settled for $18 million and Prime Healthcare Services settled for $65 million.

  • Healogics settled allegations that it caused the submission of claims for medically unnecessary hyperbaric oxygen (HBO) therapy. Healogics managed hospital-based wound clinics and was alleged to have caused those clinics to submit claims for medically unnecessary HBO therapy. The case settled for $22.5 million. In addition, the OIG issued an audit report (A-01-15-00515) in 2018 concerning medically unnecessary HBO therapy. Medicare only pays for HBO therapy for diabetic patients that meet certain coverage criteria. The OIG audit found that a significant portion of HBO claims it analyzed were not supported by sufficient documentation that the beneficiary met the coverage criteria for diabetic patients.

  • The government continues to aggressively pursue medically unnecessary rehabilitation services provided by long term care facilities. Signature HealthCARE paid $30 million to resolve allegations of medically unnecessary rehabilitation claims caused by presumptively placing patients in the highest therapy reimbursement category rather than individually evaluating patients to determine the level of need and by pressuring therapists to complete planned therapy minutes even when the patients were ill or declined treatment. Similarly, Southern SNF Management, Rehab Services in Motion, and several skilled nursing facilities where they provided therapy services, paid $10 million to resolve allegations related to medically unnecessary therapy.

  • A post-acute medical management company and four hospitals paid $1.7 million to resolve allegations that they provided medically unnecessary intensive outpatient psychotherapy to patients.

Opioid-Related Enforcement

Opioid-related enforcement continues to be a major focus of DOJ. Most states now have an opioid task force that includes the DOJ and federal and local law enforcement. The DOJ’s 2018 national “health care fraud takedown” announced a significant number of opioid enforcement matters. Most of these were criminal “pill mill” type cases focused on providers unlawfully distributing of controlled substances, including opioids. As part of the takedown, the U.S. Attorney’s Office for the Eastern District of Wisconsin announced the indictment of an advanced nurse practitioner and several other individuals related to a cash-only pain clinic for conspiring to distribute oxycodone and methadone outside of professional medical practice and not for legitimate medical purposes.

The DEA continues to be a significant player in opioid enforcement related to institutional providers. In August, the DEA announced a $4.3 million civil settlement with the University of Michigan Health System primarily related to violations of the Controlled Substances Act’s (CSA) record-keeping requirement. After the opioid overdoses of two UMHS providers (one of which was fatal), the DEA conducted an investigation and concluded that a number of the hospital’s practices concerning controlled substances were in violation of the CSA. For example, UMHS failed to secure DEA registrations for 15 off-site ambulatory care locations, each of which received narcotics from the main hospital’s pharmacy and dispensed them to patients. The DEA also determined that UMHS failed to maintain complete and accurate records of certain controlled substances that it received, sold, delivered or otherwise disposed of, and failed to notify the DEA in a timely manner regarding certain instances of thefts or significant losses of controlled substances. It is note-worthy that the DEA has had a number of significant settlements in recent years related to providers failing to timely notify it of thefts or losses of controlled substances.

The Department of Health and Human Services (HHS) is also adding to the conversation of opioid related enforcement. In June, HHS’s Office of Evaluations and Inspections (OEI) issued a data brief concerning opioid use in Medicare Part D that ultimately focused on prescribers who issued an aberrant number of opioid prescriptions. OEI identified Medicare Part D beneficiaries receiving large numbers of opioid prescriptions and then drilled down to the prescribers issuing those prescriptions. The report concluded that, based on the data analyzed, there were 282 prescribers that stood out for questionable prescribing. The report specifically identified providers who ordered opioids for a high number of beneficiaries with non-cancer diagnoses who were receiving “extreme” amounts of opioids and those providers who wrote prescriptions for beneficiaries that the data showed the patient was likely doctor-shopping. It is likely that the OIG is looking further into the providers identified by OEI’s data analysis.

Yates Memo Revisions

After the change in administrations, there was a lot of buzz about comments from DOJ officials that the Yates Memo (officially, the “Memorandum on Individual Accountability for Wrongdoing”) was being “reviewed.” Recently, Deputy Attorney General Rod Rosenstein announced the results of that review but the changes are likely to be considered only minor adjustments or clarifications, rather than the hoped-for large-scale revisions. For criminal liability, the revisions clarify that companies seeking cooperation credit must identify every individual who was substantially involved in or responsible for any criminal conduct, rather than every employee involved regardless of relative culpability. Further, the revisions to the policy for civil cases recognizes that civil cases primarily target the recovery of funds and that pursuing all employees involved in wrong-doing may not be an efficient use of resources. As a result, the new policy makes clear that cooperation in a civil case is not an “all or nothing” proposition and that a company that identifies senior management but not lower level employees involved in wrongful conduct may qualify for at least partial cooperation credit.

HIPAA Enforcement

The penalties for violations of the Health Insurance Portability and Accountability Act (HIPAA) continue to stiffen. While providers for many years were focused on implementing HIPAA policies and procedures, the enforcement trends suggest the growing importance of rigorous audits and enforcement of those policies. The following are representative examples:

  • University of Texas MD Anderson Cancer Center (MD Anderson) was found to have violated HIPAA’s Privacy and Security Rules by an administrative law judge and ordered to pay $4,348,000 in civil money penalties. OCR investigated MD Anderson following three separate data breach reports in 2012 and 2013 involving the theft of an unencrypted laptop of an MD Anderson employee and the loss of two unencrypted USB drives containing the electronic protected health information (ePHI) of over 33,500 individuals. OCR’s investigation found that MD Anderson had written encryption policies as far back as 2006 and that MD Anderson’s own risk analyses had found that the lack of device-level encryption posed a high risk to the security of ePHI. Despite the policies and risk analysis findings, MD Anderson did not begin to adopt an enterprise-wide solution to implement encryption of ePHI until 2011 and failed to encrypt its inventory of electronic devices containing ePHI until 2013.

  • In February, a physician in Massachusetts pleaded guilty to a misdemeanor count of wrongful disclosure of individually identifiable health information in violation of HIPAA. The physician allowed a pharmaceutical sales representative to access the confidential medical information of patients to identify potential candidates for one of the pharmaceutical company’s drugs.

Conclusion

One of the hallmarks of an effective compliance program is to regularly engage in an assessment of the risks faced by the organization. One method of assessing those risks is to be familiar with the recent enforcement trends and evaluate whether those trends apply to the organization. Based on the past year, financial relationships with physicians and the medical necessity of services billed to Medicare and Medicaid are enforcement risk areas and should be considered for incorporation into compliance planning. As noted above, the evaluation of the medical necessity of services should not be limited to those provided internally as the government has sought to impose liability for services provided by external business partners. Moreover, with the ongoing and significant impact of the opioid epidemic on the country, law enforcement will undoubtedly continue to be focused on enforcing the Controlled Substances Act. Finally, while for many years providers have been focused on implementing HIPAA policies and procedures, the enforcement trends suggest that the focus needs to shift to ensuring that those policies and procedures are monitored and enforced to avoid exposure to increasing penalties.

 

©2019 von Briesen & Roper, s.c.
Read more health legal news on the National Law Review’s Health Page.

HHS Proposes to Revise Discount Safe Harbor Protection for Drug Rebates

On January 31, 2019, the Department of Health and Human Services (HHS) released a notice of proposed rulemaking (the Proposed Rule) as part of ongoing administration drug pricing reform efforts. The Proposed Rule would modify a regulatory provision that had previously protected certain pharmaceutical manufacturer rebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statute.

Specifically, the Proposed Rule would exclude from “safe harbor” protection rebates and other discounts on prescription pharmaceutical products offered by pharmaceutical manufacturers to Medicare Part D plan sponsors or Medicaid Managed Care Organizations (MCOs), unless the price reduction is required by law (such as rebates required under the Medicaid Drug Rebate Program). The proposed exclusion would apply to rebates offered directly to Part D plan sponsors and Medicaid MCOs, as well as those negotiated by or paid through a pharmacy benefit manager (PBM). HHS stated that it does not intend for the revisions in this Proposed Rule to negatively impact protection of prescription pharmaceutical product discounts offered to other entities such as wholesalers, hospitals, physicians, pharmacies and third-party payors in other federal health care programs. The proposed effective date of this regulatory modification is January 1, 2020, although HHS has sought comments regarding whether this allows sufficient time for parties to restructure existing arrangements.

In addition, the Proposed Rule would add two new regulatory safe harbors for:

  • Certain price reductions that are fully passed through to the dispensing pharmacy and applied to the price charged to the member at the point-of-sale; and

  • Fixed fee payments from manufacturers to PBMs for the services that PBMs provide those manufacturers. In order to be protected, the fees would have to be for services that relate to the PBM’s arrangements with health plans (e.g., services that rely on data collected from health plan customers).

These new safe harbors would become effective 60 days after HHS publishes a final rule.

The potential implications of the Proposed Rule extend beyond the context of federal Anti-Kickback Statute compliance to drug reimbursement in the United States more broadly. The proposals will likely be subject to significant public debate and legal scrutiny.

The Proposed Rule is scheduled to be published in the Federal Register on February 6, 2019, and public comments on the proposals would be due 60 days later. The Proposed Rule can be found here and the HHS Factsheet is available here.

 

© 2019 McDermott Will & Emery

Is Paris Burning? France Considers Whether Damages for Employee Dismissals Should Be Capped

The latest version of Article L. 1235-3 of the French Labor Code, based on the “Macron Ordinances,” has recently been the subject of major dispute, with several labor tribunals issuing conflicting decisions.

The article limits a judge’s ability to determine compensation for an employee whose dismissal has been recognized as having no “real and serious” cause. It caps the damages awarded at an amount between 0.5 months’ salary (for an employee with less than one year of continuous service) and 20 months’ salary (for an employee with more than 29 years of continuous service).

However, this system is not applicable in a number of cases, particularly where the dismissal is declared null and void because, for example, of a “violation of a basic human right,” an “act of harassment,” or its “discriminatory” nature.

By introducing this new system, the government intended to “remove uncertainty” about the “cost of a termination” by allowing the employer to anticipate the risk incurred if the dismissal was found to be without real and serious cause (Report to the President of the Republic on Order No. 2017-1387 of 22 September 2017 on the predictability and security of labor relations).

However, in a series of decisions issued in December 2018 and January 2019, labor courts have ruled that this system conflicts with several international conventions applicable in France.

Even if the Constitutional Council had approved, both in principle (C.C., 2017-751 DC of 7 September 2017) and in its implementation (C.C., 2018-761 DC of 21 March 2018), the concept of a cap on compensation for damage caused by the fault of an employer, it is not up to the Council to ensure compliance of this system with the international agreements ratified by France.

It is judges who are responsible for checking that the system established by the labor tribunal complies with the international conventions applicable in France.

However, Article 10 of Convention 158 of the International Labour Organization stipulates that a judge who finds that a dismissal is unjustified, but does not propose reinstatement of the employee to his or her original position, must be able to order the “payment of adequate compensation or such other relief as may be deemed appropriate.” Similarly, Article 24 of the European Social Charter provides for the “the right of workers whose employment is terminated without a valid reason to adequate compensation or other appropriate relief.”

Considering these stipulations, two labor tribunals (Le Mans and Caen, the latter being ruled by a professional judge) adopted the applicable scale, considering that it provided for “appropriate” compensation for damages.

By contrast, the labor tribunals of Troyes, Amiens, Lyon, Grenoble, and Angers decided, in highly publicized decisions, not to apply the mandatory scale stipulated by Article L. 1235-3. As a result, they granted compensation in excess of the legal maximum. None of these five cases fell into the provided categories allowing a judge to exceed this maximum.

At present, while other councils could follow this reasoning, the impact remains limited. The Administrative Supreme Court has already been called upon in urgent situations to rule on the validity of these measures. It considered that because of the possibility of deviation from the scale when the dismissal is deemed null and void, so that the scale is compliant with the stipulations of the conventions (CE, 7 December 2017, CGT, N° 415243).

It will be up to the Courts of Appeal and then to the Court of Cassation, France’s Supreme Court, to decide whether it is appropriate to continue to apply this system or whether the international conventions ratified by France require that it be overruled.

Pending these decisions, the possibility that the scale is inapplicable may divide the courts and create judicial uncertainty in labor tribunal disputes. The underlying objective of legal certainty is therefore, at least temporarily, severely compromised: neither employees nor employers can use this scale to assess with certainty the chances of profit or the risks involved when making a decision on any given dismissal.

A rapid resolution would be desirable. To this end, referral to the Court of Cassation for a legal opinion in accordance with the provisions of Article L. 441-1 of the Code of Judicial Organization and Article 1031-1 of the Code of Civil Procedure (referral for an opinion) might have seemed particularly appropriate if the Court of Cassation had not recently refused to grant such an opinion regarding the compliance to conventional rules of another legal text (Cass, avis, 12 juillet 2017, 17-70.009).

Thus, it can only be hoped that a litigant whose rights are “imperiled” by a ruling requests that a Court of Appeals set a day for a priority hearing (Article 917 of the Code of Civil Procedure). Such proceedings would reduce the delay before the appeal hearing and would provide a finer outlook on the future of the mandatory scale.

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
This post was written by Jean-Marc Albiol and Thibaud Lauxerois of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Nursing Shortage Expected to Continue Through 2024: How CMS Is Easing the Burden on Hospice Agencies

The U.S. Department of Labor’s Bureau of Labor Statistics has forecast a nursing shortage through 2024, with the United States projected to need more than half a million new nurses to replace those who leave the profession. This nursing shortage stems from a convergence of factors. First, the healthcare arena has experienced an influx of new patients due to the Affordable Care Act and an aging population, increasing the demand for healthcare services. Second, many baby boomers have already reached or will soon reach retirement age. Finally, there are barriers to education for new nurses, including a lack of programs, faculty, and clinical sites to support training needs.

Extraordinary Circumstance Designation

On December 21, 2018, the director of the Quality, Safety & Oversight Group of the Centers for Medicare & Medicaid Services (CMS) issued a memorandum that officially extends CMS’s designation of the national nursing shortage as an “extraordinary circumstance.” This extension will permit hospice agencies to use contract workers to provide core nursing services through September 30, 2020.

Under 42 C.F.R. 418.64, hospice agencies “must routinely provide substantially all core services” through their own employees. Hospice agencies may use contract staff in their facilities only if there are “extraordinary or other non-routine circumstances.” These circumstances are generally unforeseen temporary events, such as “[u]nanticipated periods of high patient loads, staffing shortages due to illness or other short-term temporary situations that interrupt patient care; and temporary travel of a patient outside of the hospice’s service area.”

CMS’s designation of the nursing shortage as an “extraordinary circumstance” means that hospice agencies are exempt from the general rule requiring them to employ their own nurses to provide core nursing services. While this exemption will allow hospice agencies to hire contractors to supplement their own employee workforces, these agencies still will be responsible for all professional, financial, and administrative functions, as well as counseling, medical social services, and other core hospice services.

The memorandum also eases the paperwork burden on hospice agencies. CMS previously required that hospice agencies provide notification and a stated justification to CMS and the agency’s state survey agency whenever they used contract staff during extraordinary circumstances. Under this memorandum, the notification and justification are no longer required. Documentation, however, is still required if a hospice agency uses contract staff for other reasons and will be reviewed as part of the routine survey process.

Key Takeaways

This may be welcome news for hospice agencies struggling to care for patients, but there are some limitations these agencies may want to keep in mind. Notably, the “extraordinary circumstances” designation permits agencies to use contract staff only to supplement—not replace—their core nursing staff. Additionally, although hospice agencies may hire contract staff for core nursing functions, the exemption does not apply to other professional, financial, and administrative functions. Finally, hospice agencies should remember that they must still document their use of contract staff when it is due to a reason other than the nursing shortage.

 

© 2019, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

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