Analysis of President Trump’s Fiscal Year 2019 Budget Request – Healthcare Impact

The Trump Administration submitted its annual budget request to Congress on February 12, 2018, formally spurring the development of Fiscal Year (FY) 2019 federal spending bills.

In light of its release, recently confirmed U.S. Department of Health and Human Services (HHS) Secretary Alex Azar issued the following statement:

“The President’s budget makes investments and reforms that are vital to making our health and human services programs work for Americans and to sustaining them for future generations. In particular, it supports our four priorities here at HHS: addressing the opioid crisis, bringing down the high price of prescription drugs, increasing the affordability and accessibility of health insurance, and improving Medicare in ways that push our health system toward paying for value rather than volume.”

Specifically, the HHS budget request is comprised of $95.4 billion in discretionary authority and $1,120 billion in mandatory funding. This reflects an increase of $8.7 billion in discretionary spending, largely for the purpose of combatting the opioid addiction epidemic.

The Administration’s budget request for HHS seeks $812 million to support the Affordable Care Act’s (ACA) risk corridor program and provide temporary funding for cost-sharing reduction (CSR) payments. Additionally, it proposes that the ACA be repealed.

To review Squire Patton Boggs’ HHS budget request analysis, read here.

To review Squire Patton Boggs’ government-wide budget request analysis, read here.

CMS to Review Stark Law in Connection with Payment Reform

CMS has recently signaled its intention to review the Stark Law and its impact on providers. During a January, 2018 American Hospital Association webinar, CMS Administrator Seema Verma announced the development of an inter-agency group to review the Stark Law in light of provider complaints that the law acts as a barrier to their ability to improve the quality and efficiency of healthcare. While Administrator Verma presented few details, the initiative will involve representatives from CMS, OIG, and DOJ. The review is in line with CMS’s “Patients Over Paperwork” project which aims to reduce regulatory obstacles in accordance with the current administration’s broad goal of reducing regulation. Continue Reading

Alleged HIPAA Violations Follow Company Post-Close

On February 13, 2018, the HHS Office of Civil Rights (“OCR”) announced that the court appointed receiver of Filefax, an Illinois company that moved and stored medical records for covered entities before going out of business in 2016, has agreed to pay $100,000 out of a receivership estate to settle potential violations of the HIPAA Privacy and Security Rules.  According to the Resolution Agreement between HHS and the receiver for Filefax, OCR began investigating Filefax after receiving an anonymous tip suggesting that Filefax had carelessly handled and improperly disclosed medical records containing protected health information (“PHI”).  OCR’s investigation revealed that between January 28, 2015, and February 14, 2015, Filefax allegedly impermissibly disclosed the medical records of approximately 2,150 patients, when the company allowed the paper records to be left unsecured in an unlocked truck outside the Filefax facility for an individual to take to a shredding and recycling facility in exchange for cash.  Filefax went out of business while OCR was investigating the alleged HIPAA violations; however, OCR nevertheless pursued its enforcement action.

According to OCR Director Roger Severino, the settlement agreement serves as a reminder that “[t]he careless handling of PHI is never acceptable…Covered entities and business associates need to be aware that OCR is committed to enforcing HIPAA regardless of whether a covered entity is opening its doors or closing them. HIPAA still applies.”   HIPAA requires covered entities and business associates to implement appropriate administrative, technical, and physical safeguards to ensure that records are secure and remain confidential during the retention period. After the retention period is over, all PHI must be disposed of in a compliant manner.  Individual states have specific record retention and disposal requirements, too, which must be considered when a company that handles PHI goes out of business.

The resolution agreement and corrective action plan are available on the OCR website at

District Court Requires Specific Claim and ERISA Plan Allegations In ERISA Complaint

Recently, a federal district court dismissed a hospital’s complaint against an ERISA plan administrator as inadequately pled and outlined the minimum degree of specificity required in similar cases.  In Polk Med. Ctr., Inc. v. Blue Cross & Blue Shield of Ga., Inc., the plaintiff hospital alleged that the defendant administrator was employing various tactics to obstruct and/or reduce reimbursements for emergency treatment, such as refusing to honor assignments of benefits and refusing to pay claims based on supposed past overpayments.  Among its claims, the plaintiff asserted claims for ERISA benefits.

Continue Reading

CMS Announces New Bundled Payment Model

The Centers for Medicare & Medicaid Services (CMS) recently announced the launch of a new voluntary bundled payment model called Bundled Payments for Care Improvement Advanced (BPCI Advanced). Under the new BPCI Advanced model, participants can earn additional payment if all expenditures for a beneficiary’s episode of care are under a spending target that factors in quality. The Model Performance Period for BPCI Advanced begins on October 1, 2018, when the current Bundled Payments for Care Improvement initiative expires, and runs through December 31, 2023.

BPCI Advanced will qualify as an Advanced Alternative Payment Model (Advanced APM) under the Quality Payment Program (QPP) created by the Medicare Access and Chip Reauthorization Act (MACRA).   The QPP has two tracks: the Merit-Based Incentive Payment System (MIPS) and Advanced APMs. Under Advanced APMs, providers take on financial risk to earn the Advanced APM incentive payment. Continue Reading

DOJ Reveals Data Analytics Team To Fight Fraud

The 2017 Year in Review of the Department of Justice reveals a Data Analytics Team (the “Team”) for tracking healthcare fraud. The Healthcare Fraud Unit launched the Team in order to provide data mining expertise that efficiently detects healthcare fraud. Continue Reading

Update on Rejected C Plea for Pharma Company

Judge pronouncing sentence to manA recent blog post summarized an opinion in which a district court catalogued his reasons for rejecting a corporate “C” plea involving a pharmaceutical company.  Several developments have occurred since the court’s opinion including a plea and sentencing hearing scheduled for January 30, 2018. Please see the Anticorruption blog here for an update on this matter.

Reduced 340B Reimbursements? Nonprofit Institutions Act May Provide New Possibilities

A recent Centers for Medicare & Medicaid Services (CMS) final rule reduces some Medicare reimbursements to hospitals in 2018, paying 28 percent less for certain “specified covered outpatient drugs” (SCODs) purchased at a discount through the 340B Drug Pricing Program (340B). Although hospitals recently lost a challenge to the lower CMS rates in American Hospital Association v. Hargan, they may be able to offset a portion of the losses from a countervailing development in antitrust law. Regardless of 340B changes, the Robinson Patman Act (RPA) continues to apply to sales of discounted pharmaceuticals, while the scope of the Nonprofit Institutions Act (NPIA) exemption to RPA appears to have expanded. This suggests that hospitals may have new opportunities to arbitrage discounted products purchased outside of 340B. Continue Reading

HHS OCR Issues New Research Guidance

As part of its ongoing implementation of the 21st Century Cures Act (Public Law 114-255), the Department of Health and Human Services last month released a number of new HIPAA guidance tools, including additional information about research uses and disclosures.  The research guidance contains helpful tips for covered entities regarding authorizations, revocations, and “reviews preparatory to research” (including when researcher remote access is permissible).  For more information, please see our Data Privacy and Cybersecurity blog post, available here.

Will Antitrust Review of CVS/Aetna Shed Additional Light on Vertical Theories?

According to press reports, CVS/Caremark’s proposed $66 billion acquisition of Aetna is at the Department of Justice Antitrust Division (DOJ) for antitrust review, as opposed to the Federal Trade Commission (FTC). Under our bifurcated system of antitrust review, both agencies theoretically could have made a claim for the deal. The FTC historically has reviewed transactions involving retail pharmacies (such as the transactions last year involving Walgreens and Rite-Aid), as well as deals involving pharmacy benefit management, or PBM, firms. DOJ, by contrast, historically reviews health plan transactions, as demonstrated by its recent successful challenges to the proposed combinations of Anthem/Cigna and Aetna/Humana. The current deal involves CVS/Caremark, which operates both one of the nation’s two largest retail pharmacy chains and one of the two largest PBMs in the country, and Aetna, which is a major national health plan. Given that the deal touches on industries typically reviewed by both agencies, it was unclear which agency would prevail and get the opportunity to conduct the review. It appears DOJ won out.

Assuming the deal is in fact at DOJ, it will be interesting to see whether the Antitrust Division finds an issue with the transaction. The deal apparently presents some horizontal overlaps, as both parties offer Medicare Part D plans. But the core of the deal is vertical: Aetna’s health plan and CVS’s PBM. For most of the last 50 years, a deal presenting only (or predominantly) vertical issues would be extremely unlikely to draw much interest from DOJ, much less a challenge. There’s little reason to think that under the historical approach this deal would present an antitrust concern. But given the DOJ’s recent challenge to the vertical AT&T/Time Warner transaction, one could reasonably ask whether the parties in CVS/Aetna are in for a fight. Only time will tell if DOJ’s interest in vertical theories of harm extends beyond deals involving the entertainment industry, where in the past they have partnered with the FCC to impose regulatory conditions. At a minimum, DOJ’s response to the CVS/Aetna tie-up may help give the public clarification on its thinking on vertical mergers.