Affinity Arrangements between Insurance Companies and Associations may give rise to Regulatory Issues

Affinity programs involving insurance companies and associations are on the rise as to all lines of insurance business. An affinity program is an arrangement in which a business offers discounts on products or services to an organization’s membership. In Friedman v. AARP, a federal court considered whether an affinity arrangement between United HealthCare (“UHC”) and AARP harmed AARP members because AARP received compensation related to insurance sales. The case demonstrates that insurance companies need to be careful in establishing affinity arrangements with associations. Continue Reading

USDA’s Hemp Production Program Advances

On January 29, 2020, the comment period closed for the United States Department of Agriculture (USDA) interim final rule, published on October 31, 2019, to establish the Domestic Hemp Production Program. The comment period, which the USDA extended by 30 days, received over 4,000 comments from interested parties, including states, tribal governments, and hemp industry participants. Public comments questioned various facets of the rule, most notably the requirement that every hemp plot be sampled 15 days prior to the anticipated harvest, the creation of a “negligence threshold” for products that contain 0.5% delta-9 tetrahydrocannabinol (THC) or higher, and unclear guidelines for the destruction of non-compliant plants.[1]

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HHS OIG Flags $2.2 Billion in Potential Medicare Advantage Overpayments for CMS Audits

CMS said it plans to audit risk-adjustment payments that Medicare Advantage (MA) plans received based on having identified additional diagnoses in beneficiary medical chart reviews. CMS’s action was spurred by a recent report from the HHS Office of Inspector General (OIG) entitled, “Billions in Estimated Medicare Advantage Payments From Chart Reviews Raise Concerns.” (Click here for the report).

As the OIG’s report explains, MA insurers receive risk-adjustment payments, based in part on diagnoses, to account for the differing levels of the health of their beneficiaries. This process “levels the playing field for [MA insurers] that enroll sicker beneficiaries who need more costly care.” Doctors and other providers initially submit payment claims with diagnoses to the MA insurers, who submit that data to CMS’s encounter data system. MA insurers may also conduct after-the-fact chart reviews to improve accuracy by adding diagnoses that providers originally missed or deleting others submitted in error. Importantly, per CMS rules, added diagnoses are either supposed to be linked to previously accepted service records or, if unlinked, be supported by documentation from a face-to-face visit. Continue Reading

DOJ and FTC Publish Draft Vertical Merger Guidelines

Recent years have seen significant vertical integration in the healthcare space, whether megamergers such as CVS-Aetna and Cigna-Express Scripts, or the numerous hospital and health system acquisitions of physician groups and other non-hospital healthcare providers. These vertical mergers—combining assets that are used at different levels of the supply chain—have largely escaped significant antitrust scrutiny since they do not reduce the number of competitors in the market and often have pro-competitive justifications that would result in lower prices and/or higher quality products and services for consumers.

Last week, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) published draft vertical merger guidelines (the Draft Guidelines), signaling that vertical merger enforcement is, and will continue to be, a priority for both agencies. The Draft Guidelines supersede the DOJ’s 1984 Non-Horizontal Merger Guidelines and are intended to be read “in conjunction with the Horizontal Merger Guidelines published by the DOJ and FTC in 2010.” Continue Reading

Fraudulent Cardiologist Was Very Busy

 Suspicious of the practices of one of its cardiologists, a hospital hired an independent expert to investigate. The expert examined records of 12 patients but “could not find support in any of the twelve cases” to implant pacemakers. The hospital terminated the doctor, and the government indicted him for health care fraud. During trial the government deployed an array of evidence including data mining, expert testimony, and evidence of an expensive lifestyle.  A report of the decision upholding conviction is available here, on the Sixth Circuit Appellate Blog.

Tenth Circuit Reverses District Court and Upholds ACA’s Statewide Average Premium Risk Adjustment Methodology

In a unanimous decision, the United States Court of Appeals for the Tenth Circuit reversed a district court decision holding that HHS’ use of the statewide premium average to calculate Affordable Care Act (ACA) risk adjustment charges and payments from 2014 to 2018 was arbitrary and capricious.  See N.M. Health Connections v. U.S. Dep’t of Health & Human Servs., Case No. 18-2186, 2019 U.S. App. LEXIS 38739 (10th Cir. Dec. 31, 2019).  New Mexico Health Connections (NMHC) filed the original lawsuit claiming that the ACA risk adjustment methodology adopted by HHS unfairly penalized smaller insurers.  The district court agreed and held that HHS failed to sufficiently explain its decision to use the statewide average premium versus other alternatives in the ACA risk adjustment program.  In addition, the district court had held that HHS erroneously interpreted the ACA’s risk adjustment provision to require budget neutrality and that budget neutrality was a policy goal for the agency.

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Movant Beware: No Right of Action Under HIPAA, and No Class-Cert Absent Notice

The Sixth Circuit has joined other circuits in unanimously holding that HIPAA creates no private right of action. That was the easy part. The panel divided 2-1 in ruling that a Tennessee statute likewise provides no remedy for patients allegedly overcharged by Ciox, a medical-records company. But Faber v. Ciox Health wasn’t a complete blowout: the court flagged Ciox’s attempt to spike the football by requiring a remand for classwide notice that…the class members lost.

Ciox is one of the largest medical-records providers in the country. It serves three of every five U.S. hospitals. Like other medical-records providers, Ciox is subject to HIPAA regulations, which limit the fees it may charge patients for accessing their medical records. Ciox is also subject to state regulations, which may layer on additional protections for patients.

Richard Faber and Jennifer Monroe sued in the WDTN on behalf of a class of patients who alleged that Ciox overcharged them. Wise to HIPAA’s lack of a private right of action, the plaintiffs styled their claims as various common-law causes of action. Judge Nalbandian’s majority opinion made short work of these: negligence (no general duty not to overcharge), negligence per se (not a cause of action), and quasi-contract/implied-in-law/unjust enrichment (a Hail Mary that fell predictably short).

As to plaintiffs’ Tennessee Medical Records Act claim, the court divided. Judge Merritt’s partial dissent located a private right of action in a 1997 Tennessee Court of Appeals decision (Pratt v. Smart Corp.) and other states’ precedents. But the majority (with Kethledge joining) held the “unambiguously clear” statutory text applied fee limits only to hospitals, not medical-records providers. The panel majority had “little doubt” that the Tennessee Supreme Court—whose rulings would bind the Sixth Circuit in a way the intermediate appellate court’s would not—“would disagree with Pratt.”

Having finished its meaty health-law menu, the opinion wrapped up with a tasty civ-pro course—indeed, a bona fide issue spotter appropriate for the approaching 1L exam season. When the district court granted summary judgment, it had granted class certification, but not yet notified absent class members. So Ciox asked the Sixth Circuit for a remand “for the sole purpose of issuing opt-out notices at Plaintiffs’ expense.”

The court, however, recognized that post-judgment notice is not a terribly useful sort of notice. And it was too late for a “one-way street” post-judgment certification. Instead, the court followed the “general rule of movant beware.” A summary-judgment motion made before class cert (or, as here, before class notice) “carries the risk of only binding the named plaintiffs, and not the entire class.” As a result, the Sixth Circuit’s notable class-cert opinion won’t actually bind the class—only the named plaintiffs.

Court Says CMS’s 2020 Payment Cuts to Off-Campus Provider-Based Departments Are Also Invalid, But They Cannot Be Challenged Till Next Year When They Are Rolled Out

As we discussed last week, the Centers for Medicare and Medicaid Services (CMS) announced that it will start fixing calendar year 2019 underpayments made to hospitals for outpatient services at off-campus provider-based departments. CMS explained that it will be doing this in response to a court order invalidating CMS’s 30% payment cuts to such off-campus PBDs in CMS’s 2019 Outpatient Prospective Payment System (OPPS) rule. However, CMS has now appealed that court decision.

It may seem contradictory for CMS to throw in the towel on this issue for 2019 yet still appeal. But the hospital associations and hospitals challenging the 2019 decision also asked the court to extend its order to CMS’s 2020 OPPS rule, which doubles the payment cuts. So CMS’s appeal signals that the agency wants another shot at defending its site-neutral payment policy for 2020.

In fact, just yesterday, the court that invalidated the 2019 cuts said that by continuing with the even larger cuts in 2020 CMS has apparently “set the agency above the law.” The court opined that the 2020 cuts should suffer the same fate as the 2019 cuts, but that any invalidation must await another day after they go into effect.

CMS’s appeal of this OPPS provider-based pay-cut issue reinforces that affected hospitals should, as a precaution, consider taking measures to preserve their right to protest this payment issue.