U.S. Supreme Court Agrees with HHS Payment Methodology for Disproportionate Share Hospitals

The fight about how Medicare compensates disproportionate share hospitals (“DSH”) is one of the longest-running reimbursement disputes of recent years, and it has generated copious work for judges around the country.  In a 5-4 decision, the U.S. Supreme Court settled one piece of the conflict:  the counting of “Medicare-entitled” patients in the Medicare fraction of the “disproportionate-patient percentage.”  Becerra v. Empire Health Found., 597 U.S. ___ (2022) (slip op.).  The Supreme Court concluded that the proper calculation, under the statute, counts “individuals ‘entitled to [Medicare] benefits[,]’ . . . regardless of whether they are receiving Medicare payments” for certain services.  Id. (slip op., at 18) (emphasis added).

DSH payments are made to hospitals with a large low-income patient mix.  “The mark-up reflects that low-income individuals are often more expensive to treat than higher income ones, even for the same medical conditions.”  Id. (slip op., at 3).  The federal government thus gives hospitals a financial boost for treating a “disproportionate share” of the indigent population. 

The DHS payment depends on a hospital’s “disproportionate-patient percentage,” which is basically the sum of two fractions: the Medicare fraction, which reflects what portion of the Medicare patients were low-income; and the Medicaid fraction, which reflects what portion of the non-Medicare patients were on Medicaid.  Historically, HHS calculated the Medicare fraction by including only patients actually receiving certain Medicare benefits for their care.  In 2004, however, HHS changed course and issued a new rule.  It counted, in the Medicare fraction, all patients who were eligible for Medicare benefits generally (essentially, over 65 or disabled), even if particular benefits were not actually being paid.  For most providers, that change resulted in a pay cut.

The new rule sparked several lawsuits.  Hospitals challenged HHS’s policy based on the authorizing statutory language.  These hospitals essentially argued in favor of the old methodology.  Appeals led to a circuit split, with the Sixth and D.C. Circuits agreeing with HHS, and the Ninth Circuit ruling that HHS had misread the statute.

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Avoiding Endless Liability From ‘Take Home’ COVID Claims

You’ve just been informed that an employee who apparently contracted COVID-19 from an exposure in your workplace brought the virus home, and now their spouse, who is in a high-risk category, has contracted the virus and is in the hospital. Do you as the employer face potential liability for the spouse’s illness?

More than two dozen so-called take-home COVID-19 lawsuits have been filed across the country, including against some of the largest employers in the U.S.  This alarming pattern has prompted trade groups to warn employers of the potential for lawsuits stemming from COVID-19 infections filed not only by workers’ family and friends, but by anyone infected by that circle of people, creating seemingly endless chains of liability for employers.  Some states have enacted laws shielding employers from such suits, but where that is not the case, the legal theories and procedural paths under which these suits have proceeded vary — including some being brought in state courts, some in federal courts, and others brought under claims within the workers’ compensation system.

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Healthcare Non-Competes in 2022: Status Following Recent Developments

For healthcare entities that use non-compete agreements, the landscape has changed as much recently as it has at any point in recent memory.  Several developments at the federal level have created a potential pitfall that did not materially exist until recently, i.e., a non-compete agreement violating antitrust law.  Further, several recent state laws have heightened the bar for an employer seeking to enforce a non-compete.  Finally, the new landscape of union organizing has created another key consideration for healthcare organizations that wish to protect against unfair competition, while at the same time maintaining high morale and avoiding unwanted union organizing.

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FDA Issued Enforcement Discretion Measures for Infant Formula

In recognition of the infant formula crisis facing the United States supply chain, the Food and Drug Administration (“FDA”) issued guidance on May 16, 2022 providing for enforcement discretion with respect to certain requirements for infant formulas that may not comply with certain statutory and regulatory requirements. The guidance remains in effect until November 14, 2022. Under this guidance, three categories of manufacturers may submit information to FDA:

  • Infant formula manufacturers who manufacture infant formula for export in domestic facilities;
  • Infant formula manufacturers who presently do not export infant formula manufactured in foreign facilities to the United States; and
  • Infant formula manufacturers who may be able to provide infant formula to help address shortages by changing production site(s), changing production practice(s), or making other changes to an existing infant formula.

Submissions should contain all the required information in Section III. D of the guidance and be submitted to Infant_formula_flexibility@fda.hhs.gov. FDA requests information including product specifications and labeling, current markets, inventory, manufacturing facilities, distribution plans to the retail level, full quantitative formulations, test results, and certifications for the manufacturing facility, as applicable. Upon receipt of the request, FDA will then consider “whether to exercise enforcement discretion and the extent of that enforcement discretion.”

                Generally, FDA requires persons responsible for infant formula manufacture or distribution to register with FDA and provide submissions for any new formulations or changes to existing formulations. There is a built-in timing delay, as manufactures may not market the new infant formula until 90 days after the filing date provided by FDA upon receipt of the submission. The submission package requires details including a description of the formula, quantitative formulation, compliance assurances, and quality assurance data, among other requirements. Regulated as a food, infant formula has its own statutory and regulatory requirements located in 21 CFR Parts 106 and 107 that manufacturers need to follow. This includes minimum amounts for thirty nutrients and maximum amounts for ten of them. See 21 CFR § 107.100. FDA has explained in guidance that infant formula not meeting these designated levels are considered adulterated. The guidance provides an important pathway for manufacturers who may presently meet FDA requirements to assist in alleviating the domestic shortage of infant formula.

Ohio Expands Availability of Telehealth

Since the beginning of the COVID-19 pandemic, policymakers at both the federal and state level have worked to expand the availability of telehealth services. Since telehealth , in many cases, is viewed to provide a convenient, accessible and safe alternative to in-person visits with healthcare providers, it has been considered an effective tool to maintain access to healthcare services in light of the pandemic’s challenges. Consequently, many pre-pandemic regulatory limitations to telehealth were temporarily waived during the pandemic. Given this experience, and the generally favorable responses to expanded telehealth availability from patients and providers, many policymakers are now working to make this temporary expansion permanent.

Consistent with this trend, last year the Ohio legislature passed House Bill 122, which was signed into law by Governor DeWine on December 22, 2021. HB 122 helps expand telehealth availability through two primary mechanisms: (i) requiring health plans to reimburse healthcare professionals for providing covered telehealth services, and (ii) expanding the classes of health care providers who are authorized to provide telehealth services. Continue Reading

Government Continues Aggressive Antitrust Enforcement in the Healthcare Space

On February 24, 2022, the U.S. Department of Justice (“DOJ”) filed suit to block UnitedHealth’s proposed acquisition of Change Healthcare. UnitedHealth owns the largest health insurer in the U.S., while Change Healthcare is a data company whose software is the largest processor of health insurance claims in the U.S. The DOJ alleges that the acquisition, if allowed to proceed, would give UnitedHealth unfettered access to rival health insurers’ competitively sensitive information, including health insurance pricing. According to the complaint, this would lessen competition and “result in higher cost, lower quality, and less innovative commercial health insurance for employers, employees, and their families.”

The DOJ’s challenge continues a recent trend of aggressive enforcement involving vertical mergers (i.e. transactions between firms at different levels of the supply chain), with the Federal Trade Commission challenging three vertical mergers in the last year alone. These enforcement efforts represent a material shift from the prior enforcement attitude, which often allowed parties to resolve competition concerns raised by vertical mergers through conduct remedies such as information firewalls or supply commitments. The DOJ’s decision to forego such a remedy (assuming one was proposed) signals the government’s intent to take a tougher stance on mergers in the healthcare space. President Joe Biden previously listed prescription drugs and healthcare services as an antitrust priority area in his July 9, 2021 executive order.

The complaint was filed in the District Court for the District of Columbia and can be accessed here: https://www.justice.gov/opa/press-release/file/1476676/download.

Judge Strikes Down Part Of Administration’s Surprise Billing Rules In Win For Physicians

The Biden Administration’s Interim Final Rule implementing provisions of the No Surprises Act suffered its first major legal setback yesterday.  Judge Kernodle of the Eastern District of Texas issued a decision vacating portions of the Rule relating to the independent dispute resolution (“IDR”) process that the Act creates.

As we’ve previously reported, the No Surprises Act tasks IDR entities with resolving disputes between providers and insurers over the appropriate rate of reimbursement for out-of-network services.  When a provider and an insurer are at an impasse in negotiations over a reimbursement dispute, the Act, if applicable, requires them to submit their offers to the IDR entity, which is supposed to select the most reasonable of the two offers.  In making that determination, the Act requires the IDR entity to consider an express list of statutory factors, such as the median in-network rate for the services, information relating to the training and experience of the provider, and the market share of the parties.  On September 30, 2021, the government promulgated the interim Rule, which requires IDR entities to “select the offer closest to the” median in-network rate “unless the certified IDR entity determines that credible information submitted by either party [regarding the other statutory factors] clearly demonstrates that the” median in-network rate “is materially different from the appropriate out-of-network rate.”  In those instances, the IDR entity must select the offer that “best represents the value of the” services rendered. Continue Reading

Highest French Administrative Court Freezes Ban on CBD Flowers and Leaves

The regulation of CBD/Hemp products has been a very hot topic in France these past months since the “Kanavape” ruling. In Kanavape, the CJEU asked France to review its very strict CBD regulations, more specifically its Regulation (arrêté) of 22 August 1990 (CJEU, 19 November 2020, C-663/18) in light of the free movement of goods principle. In the European Union, France has one of the toughest laws against cannabis but the highest rate of cannabis use.

After the Kanavape ruling, the debate took a political dimension: France had to submit a new draft Regulation to the European Commission and French courts have been giving effect to the European ruling directly, despite the legal uncertainty created by this situation.

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Italian Ministers Announce Timetable for Investment in Digital Health

On January 8, 2022, Minister of Health Roberto Speranza and Minister for Technological Innovation and Digital Transition Vittorio Colao, in an article published in the Italian press, made a number of announcements about the timing of the Italian government’s intended investment in digital health. This investment forms part of the Italian Recovery and Resilience Plan (RRP).

On July 13, 2021, the European Council approved the final version of the RRP. The RRP is part of the EU Next Generation program (NGEU), namely the €750 billion package of which €222 billion has been allocated to Italy.

Through the RRP, the Italian government intends to invest €15.63 billion in the healthcare sector. Specifically, it intends to invest more than €2 billion in healthcare digitalization.

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AMA and AHA Challenge IDR Process under the No Surprises Act

The American Medical Association and the American Hospital Association filed suit under the Administrative Procedure Act in the District of Columbia District Court challenging portions of the interim final rule (the “Rule”) issued by the Department of Health and Human Services, the Department of Labor, the Department of the Treasury, and the Office of Personnel Management relating to the dispute resolution process under the No Surprises Act.  They are joined in the suit by two healthcare systems and two individual physicians.

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