Cracks in the Façade—Supreme Court to Reconsider “Auer Deference” Rule and Possibly Shrink Agency Leeway In Interpreting Regulations

The playing field in a lawsuit challenging agency action is tilted toward the agency, largely by means of various deference doctrines. One of the most important has been deference to an agency’s interpretation of its own regulations. Courts have been deferring to those interpretations for decades, following a 1940s Supreme Court case, Bowles v. Seminole Rock & Sand Co.[1] The ground really shifted in 1997, when in Auer v. Robbins[2] the Supreme Court said a court should generally defer to an agency’s interpretation developed for the first time in court briefing. The Supreme Court has occasionally walked that back, suggesting that an agency only gets this deference for interpretations that reflect the “fair and reasoned judgment” of the agency. But today, in many courts, the agency can craft a new interpretation of its regulation in litigation, directly targeted to the arguments that arise in the case.

However, the playing field might get a bit more level, as this week the Supreme Court accepted a case expressly asking the Court to overrule Auer and Seminole Rock. The case under review involves a Vietnam veteran’s claim for retroactive disability benefits for service-related post-traumatic stress disorder. The claim had been rejected in 1983 due to an erroneous disqualifying diagnosis, but was reopened in 2006 with new evidence of PTSD. The Board of Veterans’ Appeals granted the veteran benefits from 2006 forward, but rejected the claim for retroactive benefits, because it deemed additional service records, which had been available in 1983 with the original request, not “relevant.” “Relevant” was a key term in the agency’s regulations about retroactive benefits, and the Board interpreted the term to encompass only evidence that directly addressed the basis of the 1983 decision. The Federal Circuit, denying a challenge to that decision, deferred to the Board’s interpretation under Auer. Now, the Supreme Court will now revisit its position that judges should accept an agency’s interpretation of its own ambiguous regulation rather interpret the meaning of the regulation on their own.

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Yates Memo Softened

Department Of Justice In Washington DCDeputy Attorney General Rod J. Rosenstein announced a revision of the “Yates Memo” concerning credit a company will receive for cooperating with an investigation.   Instead of an “all or nothing” approach, the new policy permits a company to “identify all individuals substantially involved in or responsible for the misconduct at issue.” More about this change can be found at the Anticorruption blog here.

CMS Proposes Invalidating Adjuster Methodology and Recouping Past Improper Payments From Medicare Advantage Organizations

On October 26, 2018, the Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule that will, among others initiatives, allow CMS to recover higher dollar amounts of improper payments made to Medicare Advantage Organizations.  Improper payments are identified through Risk Adjustment Data Validation (“RADV”) audits, which are audits conducted to determine whether the risk adjusted payments submitted by Medicare Advantage Organizations are for diagnoses supported by proper documentation. If there are any improper payments based on these audits, CMS is able to recover those payments.

To read more about this ruling and what it might mean for you, click here to read a recent Squire Patton Boggs alert on the subject.

 

Digital Health Update: Recent FDA Cyber Initiatives

The Food and Drug Administration (“FDA”) has greatly increased its activity around cybersecurity initiatives and medical devices. As we approach the end of the year, this is a great opportunity to review recent developments.

FDA Medical Device Cybersecurity Guidance

On October 18, 2018, the FDA published draft guidance, “Content of Premarket Submissions for Management of Cybersecurity in Medical Devices.” This draft replaces prior guidance from 2014, and the outlines recommendations for device design, data confidentiality, labeling conventions, and cybersecurity documentation. Key requirements include:

  • Risk-based categorization of devices into two tiers (based primarily upon device connectivity and risk of cybersecurity incidents);
  • Preparation of a cybersecurity bill of materials listing device components that could be vulnerable to cybersecurity incidents;
  • Recommendations such as requiring authentication before software or firmware updates; and
  • Application of the NIST Cybersecurity Framework.

The public comment period will end on March 18, 2019, and there will be a workshop open to the public on January 29-30. Industry professionals should take this opportunity to determine the effects this guidance could have on device approval in the future and consider commenting.

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Justice Department Allots Additional US$70 Million to Battle Opioid Crisis

In tandem with President Trump’s signing of H.R. 6, (now former) US Attorney General Jeff Sessions announced new Department of Justice (DOJ) funding awards aimed at curbing drug trafficking and supporting youth impacted by America’s opioid epidemic.

At DOJ’s first-ever National Opioid Summit, Sessions and Deputy Attorney General Rod Rosenstein highlighted sustained federal law enforcement efforts to combat opioid abuse and related substance issues. DOJ’s nearly US$70 million investment, which closely follows the recent announcement of nearly US$320 million in grant funding by its Office of Justice Programs, is expected to bolster a variety of department divisions and initiatives.

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Congress’ Extensive Opioid Legislation Becomes Law

On Wednesday, October 24, President Trump signed the Substance Use Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act (H.R. 6) into law.

The bill signing occurred three weeks following Congress’ overwhelming approval of the measure, and nearly one year since the Trump Administration deemed America’s opioid crisis a federal public health emergency. House Energy and Commerce Committee Chairman Greg Walden (R-OR) and Senate Health, Education, Labor, and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN), chief architects of the legislation, joined patient advocates and congressional and agency leaders at the White House ceremony.

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CMS Updates the Part D Prescription Drug Benefit Manual – Chapter 13 & 14

Last month, CMS updated Chapters 13 and 14 from the Part D Prescription Drug Benefit Manual (PDBM). These updates affect Part D plan sponsor operations as well as network and non-network pharmacies. In Chapter 13, CMS updated its guidance on premium and cost sharing subsidies for low-income beneficiaries under the Part D program. In Chapter 14, CMS updated its guidance on coordination of benefits. A selection of CMS’s updates to those chapters are highlighted below: Continue Reading

Supreme Court To Decide If HHS May Skip Notice And Comment Requirements For Certain Payment Rules

On September 27, 2018, the U.S. Supreme Court agreed to review a D.C. Circuit Court of Appeals decision that had tossed out a new calculation method, employed by the U.S. Department of Health and Human Services (“HHS”), which had cut Medicare payments to hospitals. Azar v. Allina Health Services (“Allina Health”). HHS itself estimated that the D.C. Circuit’s ruling implicates between $3 and $4 billion in so-called Medicare “DSH” payments to hospitals for federal fiscal year (“FY”) 2005 through FY 2013. While those huge amounts are directly at stake, so too is the public’s right to weigh in on HHS’s policy governing Medicare payments. If the D.C. Circuit’s ruling stands the agency will be required to submit far more of its payment policies to the rigors of notice and comment rulemaking. Continue Reading

Unauthorized TV Cameras in Hospitals Yield Costly HIPAA Penalties of $999,000

For the second time in as many years, the Department of Health and Human Services’ Office for Civil Rights (“OCR”) entered into settlement agreements with and levied hefty fines on three hospitals that allegedly impermissibly disclosed patients’ protected health information to ABC News in the course of filming a television network documentary series.  OCR announced on September 20 that Boston Medical Center, Brigham and Women’s Hospital and Massachusetts General Hospital each reached agreements with HHS in which they agreed to pay a collective $999,000 to settle potential violations of the HIPAA Privacy Rule.  According to each of the settlement agreements, HHS alleges that the covered entities allowed film crews into patient areas of the hospitals in late 2014 and January 2015 without appropriately safeguarding patients’ PHI from disclosure.  In April 2016, a New York hospital agreed to pay $2.2 Million and enter into a settlement agreement and corrective action plan with OCR for similar alleged HIPAA violations that occurred during the filming of the television show “NY Med.”

The take away for covered entity providers, here, is that written authorization from patients must be obtained prior to allowing media personnel to enter non-public areas of facilities and especially prior to allowing filming of patients for non-clinical purposes, including for medical documentaries, news pieces, or tv dramas.  As OCR made clear in its FAQ guidance document on this topic, it is not sufficient to simply require the film crew to later obscure the identity (via blurring, pixilation, or voice alteration) of any patients whose image or voice were recorded but who did not provide written authorization because the HIPAA Privacy Rule does not allow media access to the patients’ PHI in the first place absent an authorization.   When providers require filming services to produce training videos or marketing materials in which patients are identified or PHI may be accessible, entering into a HIPAA business associate agreement is the best practice in addition to obtaining prior written authorizations from patients whose PHI is included in any public materials.

For more information and recommendations on avoiding HIPAA liability, please contact the authors or your regular SPB contact.

Senate Overwhelmingly Clears Bipartisan Opioid Package

Nearly three months following House passage of a legislative proposal related to America’s opioid epidemic, the Senate overwhelmingly cleared its own comprehensive, bipartisan package to address the crisis.

On Monday, September 17, senators replaced the House-passed text with a substitute amendment and approved The Opioid Crisis Response Act of 2018 (H.R. 6) by a vote of 99-1. The bill, authored by Senate Health, Education, Labor, and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN), resulted from more than 70 pieces of legislation recommended by members of five different committees: Banking, Housing, and Urban Development; Commerce; Finance; HELP; and Judiciary. Continue Reading

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