Roadmap to the Phased Transition Process for Medical Devices after Covid-19 Public Health Emergency

On March 27, 2023, the U.S. Food &Drug Administration (FDA) released two final guidance documents to assist with the transition of medical devices that were legally distributed: (1) subject to certain enforcement policies issued during the COVID-19 public health emergency (PHE) or (2) Emergency Use Authorizations (EUAs). Manufacturers, distributors, and industry stakeholders that have products subject to one of these pathways should review the agency guidance if they wish to continue marketing the products. If an entity is not sure whether an EUA applies to a product, FDA has generated a full list at this site.

On January 31, 2020, the Department of Health and Human Services (HHS) first determined a public health emergency (PHE) existed because of COVID-19.  This PHE determination has been renewed many times, the most recent on February 9, 2023.  However, change is approaching for the regulated industry since HHS recently announced that it is preparing to declare an end to the PHE for COVID-19 on May 11, 2023. As a result, certain industry sectors will be impacted, particularly those that manufacture or distribute medical devices subject to FDA enforcement polices and EUAs issued during the PHE.

During the PHE, the FDA issued numerous EUAs and enforcement policies allowing manufacturers to quickly develop and distribute products such as masks, medical devices, and ventilators. The EUAs and enforcement policies provided flexibility for manufacturers to avoid the standard requirements for medical devices, such as premarket notifications, that otherwise could lead to significant delay in reaching the market. These flexibilities helped non-traditional manufacturers to provide much-needed medical devices to aid in the nationwide COVID-19 response.   

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Healthcare Companies and Companies Doing Business with the US Government – Supreme Court Appears Likely to Clarify False Claims Act (FCA) Knowledge Requirements

The Supreme Court recently heard oral argument in the appeal of two False Claims Act (FCA) cases from the Seventh Circuit that called into question the level of intent, or scienter, required to establish corporate liability under the FCA for “knowingly” overbilling the government for goods or services.  The Court’s eventual decision may have widespread implications in healthcare, government contracting, and other industries because it may impact how a company can defend against an FCA claim by arguing that its conduct was objectively reasonable, even if, subjectively, the company or its employees may have intended to violate the FCA or did not otherwise take adequate steps to ensure that their conduct was consistent with the statute.  Squire Patton Boggs attorneys Jerrob Duffy and Karen Harbaugh discuss this and the potential implications of the Court’s upcoming decision on our Global Investigations & Compliance Review Blog, which may be read here.

Sixth Circuit Limits Anti-Kickback Claims Brought Under False Claims Act

Recently, the Sixth Circuit issued an important decision limiting the scope of claims alleging violations of the Anti-Kickback Statute that are brought under the False Claims Act. In Shannon Martin, M.D., et al. v. Hathaway, et al., No. 22-1463 (March 28, 2023), the court clarified the meaning of remuneration under the Anti-Kickback Statute. Squire Patton Boggs attorneys Colin Jennings, Vipal Patel, Marisa Darden and Shams Hirji discuss the case in detail on our Global Investigations & Compliance Review Blog, available here.

CMS Blanket Stark Waivers will Terminate Upon End of COVID-19 Emergency

Earlier this year, the U.S. Department of Health and Human Services (“HHS”) announced the expiration of the COVID-19 public health emergency declarations effective May 11, 2023.  As a result, many of the regulatory waivers and flexibilities available to health care providers, including the blanket waivers applicable to many Stark Law requirements (the “Stark Waivers”), will terminate on that date.

As we discussed at the pandemic’s outset, CMS issued the Stark Waivers in March 2020 under the authority provided to the Secretary of HHS through Social Security Act Section 1135.  The Stark Waivers were implemented to help providers respond to the then new COVID-19 pandemic and to ensure the availability of sufficient health care resources to address the emergency.  The Stark Waivers applied to a wide variety of arrangements between entities and physicians so long as the remuneration and referrals were related to broadly defined “COVID-19 Purposes.”  Arrangements protected under the Stark Waivers included rental arrangements, some non-FMV services arrangements, certain loans, and others.  The Stark Waivers were understandably welcomed by providers already struggling to address the COVID-19 pandemic.

While the OIG did not issue specific Anti-Kickback Statute waivers, in April 2020 it did release a Policy Statement setting forth the OIG’s policy that, in light of the unique circumstances of the COVID-19 emergency, it would “exercise its enforcement discretion not to impose administrative sanctions under the Federal anti-kickback statue for certain remuneration “covered by Stark Waivers. In its Policy Statement, the OIG set this policy to terminate on the same date as the Stark Waivers’ termination.  Thus, providers will no longer be able to rely on the assurance provided by the Policy Statement after May 11.

In light of the May 11 termination date, providers who have structured agreements relying on the Stark Waivers and OIG Policy Statement should act now to either confirm that such arrangements will remain compliant with the Stark Law and Anti-Kickback Statute as of that date, reform such arrangements to bring them into compliance, or possibly terminate some arrangements.  Reach out to your Squire Patton Boggs attorney if you need help evaluating or reforming any agreements in light of this upcoming deadline. 

The U.S. Department of Justice Loses Another Labor-related Antitrust Case with Jury’s Acquittal of Four Home-Health Operators

In a blow to the Biden Administration’s goal to heighten enforcement of labor-related competitor agreements, a Maine jury on Wednesday acquitted four home-health operators who were accused of conspiring to fix the wages of home-health workers in the Spring of 2020.  The U.S. Department of Justice (“DOJ”) had alleged that the operators violated Section 1 of the Sherman Act (15 U.S.C. § 1) by making a secret pact to set wages at $15 to $16 per hour and agreeing to allocate workers by not hiring each other’s employees.  The conspiracy was allegedly carried out via an encrypted messaging app and both virtual and in-person meetings.  Those meetings also allegedly resulted in an agreement to recruit other operators to join the conspiracy.

The not-guilty verdict is the third time in less than a year that the DOJ lost a labor-related antitrust case in the healthcare sector.  In April 2022, the DOJ faced a similar trial loss in Denver when a jury acquitted dialysis provider DaVita, Inc. and its former CEO of allegedly negotiating agreements with rival companies to not solicit each other’s employees.  That same month, a Texas jury acquitted the former owner and clinical director of a physical therapist staffing company of conspiring to lower wages of physical therapists.  The DaVita case and staffing company case were the DOJ’s first criminal no-poach and wage-fixing challenges.

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CMS Plans to Implement Stricter Enforcement Efforts to Boost Hospital Price Transparency Compliance

In January 2021, the Centers of Medicare and Medicaid Services (“CMS”) implemented the Price Transparency Regulations (“PTR”) which required hospitals to publish prices for all their services on their websites in a user-friendly format — improving consumer access to pricing information when shopping for health services. Since implementing the PTR, CMS has seen a significant increase in hospital price reporting. However, CMS is pushing more hospitals to become fully compliant by implementing stricter enforcement efforts. 

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The U.S. Department of Justice Signals Policy Change with Withdrawal of Three Healthcare Policy Guidelines

The U.S. Department of Justice (“DOJ”) recently withdrew three policy statements regarding conduct in the healthcare sector.  The statements withdrawn are the Department of Justice and FTC Antitrust Enforcement Policy Statements in the Health Care Area (dated September 1993); the Statement of Antitrust Enforcement Policy in Health Care (dated August 1996); and the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (dated October 2011).

In a related speech, Principal Deputy Assistant Attorney General Doha Mekki said that changes in the delivery of healthcare products and services, heightened understanding of health care economics, and increased industry reliance on data necessitated the policy change.  Of note, Mekki indicated that the guidelines’ use of “safety zones” around the exchange of competitively sensitive information was no longer tenable due to the changing market. 

“Antitrust safety zones,” as used in the guidelines, described circumstances under which the DOJ and the Federal Trade Commission (“FTC”) would not challenge conduct as anticompetitive under federal law.   Such circumstances included mergers involving a small hospital, joint ventures involving high-technology medical equipment, certain joint purchasing arrangements, and the collective provision of nonprice information for healthcare consumers.

The guidelines also recognized “safety zones” for the exchange of competitively sensitive information, such as price and cost information.  Competitively sensitive information was within a “safety zone” if the information was exchanged using (a) a survey managed by a third-party, (b) information more than three-months old, and (c) aggregated data from at least five providers.

Although these policy statements centered on the healthcare industry, the information exchange policies were used as guidelines for all industries.  The withdrawal of such guidelines and the lack of any imminent replacement is likely to create uncertainty surrounding what information companies can share with competitors and what form that information should be in.

Added to this uncertainty is the fact that the FTC has not withdrawn from the policy statements.  The 2000 joint FTC and DOJ Antitrust Guidelines for Collaborations Among Competitors is also still in effect.  Those guidelines indicate that an independent third-party entity can lessen the likelihood of anticompetitive effects arising from information sharing between competitors.

It is likely that the DOJ will engage in a case-by-case analysis of information exchanges moving forward.  Enforcement actions will help inform what means of information exchanges are permissible.  Recent enforcement actions regarding information sharing, such as the DOJ’s 2022 poultry processors lawsuit,  indicate that aggregated data managed by third-parties will still reduce the risk of running afoul of antitrust laws.  In the 2022 lawsuit, poultry processors violated antitrust laws because the data gathered was “current, disaggregated, and identifiable.”

CMS Instructs IDR Entities Not To Issue New Payment Determinations Pending Further Guidance from Departments

As we recently reported, on February 6, 2023, Judge Kernodle of the United States District Court for the Eastern District of Texas issued a decision in Texas Medical Association v. U.S. Dep’t of H.H.S., Case No. 6:22-cv-372 vacating certain portions of the regulations governing the dispute resolution process governing reimbursement disputes under the No Surprises Act (“NSA”).   On February 10, 2023, in response to this decision, CMS issued a notice advising that “the Departments are in the process of evaluating and updating Federal IDR process guidance, systems, and related documents to make them consistent with the TMA II decision.”  As a result, IDR entities have been instructed, effectively immediately, that they “should not issue new payment determinations until receiving further guidance from the Departments.”  In addition, the IDR entities have been instructed to “recall any payment determinations issued after February 6, 2023.”  (Emphasis in original).  That said, CMS explained that “IDR entities should continue working through other parts of the IDR process as they wait for additional direction from the Departments.”

We will be watching for additional guidance from the Departments, but at a minimum, this significant decision by CMS will delay payment determinations for NSA disputes that have already been submitted to the IDR process.  In addition, it is likely to result in further backlogs as additional new disputes are submitted.  Stay tuned for more details.

Bankruptcy Court Doors Swing Open For Cannabis Companies, But Just Slightly

Are bankruptcy doors now opening for cannabis companies?  A recent decision from a California bankruptcy court indicates perhaps so, at least for cannabis companies that are no longer operating. Squire Patton Boggs partner Mark Salzburg discusses this case and its implications on our Restructuring GlobalView blog, available at this link.

District Court Declares Portion of Regulations Governing NSA’s Dispute Resolution Process Invalid

On February 6, 2023, Judge Kernodle of the Eastern District of Texas once again vacated certain provisions of an agency rule as inconsistent with the No Surprises Act (the “NSA”).  Almost a year ago, Judge Kernodle issued a similar decision, which we blogged about.  Both decisions concerned the independent dispute resolution (“IDR”) process the NSA creates.

As we’ve previously reported, the NSA tasks IDR entities with resolving disputes between providers and insurers over the appropriate rate of reimbursement for certain out-of-network services.  When a provider and an insurer are at an impasse in negotiations over a reimbursement dispute, the NSA, 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 NSA requires consideration of a list of statutory factors, such as the median in-network rate for the services (also known as the “Qualify Payment Amount” or “QPA”), information relating to the training and experience of the provider, and the market share of the parties.

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