Recent Court Decisions Create New Questions About Religious Accommodations for Healthcare Workers

Over the past two years, unique religious accommodation rules have created unexpected compliance obligations for healthcare entities. As we previously discussed , healthcare employees and government agencies have brought several claims recently challenging healthcare entities’ mandatory vaccination policies, and claiming that these entities must provide broader accommodations for employees’ religious beliefs. Last week, two court decisions created questions about a similar but separate issue, i.e., when a healthcare employee may decline to care for a patient for religious or moral reasons.

As background, earlier this year, the federal Department of Health and Human Services (HHS) adopted a “conscience protection rule.” This rule would have allowed HHS to strip federal funding from certain hospitals and clinics if they required their employees to provide care in a manner that contradicted the employees’ religious or moral beliefs. This rule immediately generated major controversy. Several entities quickly challenged this rule, and many commentators opined that it would not survive court scrutiny.

Last week, two federal district courts separately vacated the rule. First, the U.S. District Court for the Southern District of New York vacated the rule on several grounds. It held that Congress had not delegated authority to the HHS to issue the rule, and also held that the rule conflicted with several Congressionally enacted laws (including Title VII). Notably, the court struck down the entire rule, rather than attempting to sever and “save” certain portions. Then, two days later, the U.S. District Court for the Eastern District of Washington vacated the rule as being outside of the HHS’s delegated authority. (This second court has not yet issued a full opinion as of the time of this article.)

Although HHS has not yet appealed these decisions, most observers expect them to do so, and the current administration has an established record of appealing adverse district court decisions. In any event, even if this rule remains invalidated, Title VII and certain state and local laws also potentially allow employees to request changes to their job duties on the basis of sincerely held religious beliefs (although, typically, employers will have much more flexibility under these laws than under the HHS rule). Ultimately, healthcare providers should continue to monitor the status of the HHS rule, and they should remember to proceed with caution when employees request certain job changes or other accommodations due to religious or moral beliefs.

Major Milestone for Hemp Production: USDA Issues Interim Final Rule

On October 31, the US Department of Agriculture (USDA) published an interim final rule to establish the Domestic Hemp Production Program.

This program, as required by the 2018 Farm Bill, attempts to clarify the regulatory framework for individuals hoping to capitalize on the production and sale of domestic hemp.

The interim final rule requires states to submit a hemp plan for USDA approval and establishes THC testing protocols, legal protection for interstate commerce of hemp, licensing protocols and eligibility rules for federal programs, such as loan and crop insurance programs.

You can read our summary here.

Progress for the CMA in its Investigations into Suspected Anti-Competitive Agreements and Conduct in the Pharmaceutical Sector

The Competition and Markets Authority (CMA), the competition regulator in the UK, has undertaken a number of investigations into suspected anticompetitive practices in the pharma sector in recent years. Most recently, the CMA announced on 3 October 2019 that it has issued a Statement of Objections to pharmaceutical companies Aspen, Amilco and Tiofarma. The CMA’s provisional findings are that, in 2016, Aspen unlawfully agreed to pay (by different means to each of the companies) each of Amilco and Tiofarma to stay out of the UK market for fludrocortisone acetate 0.1mg tablets (a prescription-only medicine that thousands of patients rely on to treat primary or secondary adrenal insufficiency, commonly known as Addison’s Disease). The CMA’s investigation concerned suspected breaches of both Article 101 TFEU and Article 102 TFEU.

The CMA has provisionally found that Aspen, in order to protect and maintain its position as the sole UK supplier of fludrocortisone (thereby allowing it to increase prices by up to 1,800%), agreed to make Tiofarma the sole manufacturer of fludrocortisone for direct sale in the UK, and granted Amilco a 30% share of the increased prices that Aspen was able to charge, on condition that each of those companies stayed out of the market.

Aspen has previously admitted to participating in an anticompetitive agreement (in August 2019) and, as a result, agreed to settle the case with the CMA and pay a maximum fine of £2.1 million if the CMA reaches a formal decision that the law has been broken. The reason that the investigation remains ongoing is that the other two companies have not admitted liability.

In addition to that settlement, Aspen offered commitments to resolve a competition concern relating to its 2016 purchase of a competing fludrocortisone product from Tiofarma authorised for supply in the UK. The effect of that purchase was to bring all existing fludrocortisone marketing authorisations in the UK permanently under Aspen’s ownership.

The CMA has now issued a decision accepting Aspen’s commitments and making them binding; the commitments included the payment of the NHS £8 million (without the Government having to issue a follow-on claim for damages. The CMA was concerned that as a result of the impact of Aspen’s behaviour, the NHS paid a higher price for fludrocortisone), as well as ensuring that, in the future, there will be at least two suppliers of fludrocortisone in the UK to help the NHS access more competitive prices. This will be done by (i) Aspen divesting itself of the rights over Ambient Storage Fludrocortisone necessary to commercialise that product in the UK; and (ii) reintroducing and commercialising Cold Storage Fludrocortisone (the product that it was selling in the UK prior to March 2016) in the UK market within 12 months.


Proposed Changes to the Anti-Kickback Statute, Stark Law and Civil Monetary Penalties Law Address Value-Based Healthcare Environment

On October 9, the Department of Health and Human Services (HHS) released proposed rules (the Proposed Rules) aiming to update the Anti-Kickback Statute (the AKS), Stark Law and Civil Monetary Penalties Law (CMPL) to address today’s value-based and coordinated healthcare environment. The proposals reflect a recognition on HHS’s part that the healthcare landscape of today is significantly different from when these laws were adopted. Overall, HHS’s Proposed Rules appear directed at ensuring that the AKS, the Stark Law and the CMPL will not stand as an impediment to the shift toward value-based care and increased coordination of patient care among providers and across care settings. Consequently, the Proposed Rules introduce new exceptions and safe harbors, as well as re-evaluate certain existing provisions.  You can read our summary of the Proposed Rules major provisions here.

Court Sides with Hospitals on CMS Site Neutral Payment Rule for Hospital Outpatient Departments

In a ruling on September 17, 2019 by Judge Rosemary M. Collyer, the U.S. District Court for the District of Columbia vacated portions of a 2018 Centers for Medicare & Medicaid Services (CMS) rule that reduced Medicare payments for clinic-visit services at off-campus hospital outpatient departments (HOPDs).

By rulemaking, on January 1, 2019, CMS instituted a “site neutral” payment policy by equalizing Medicare Part B payment rates under both the Outpatient Prospective Payment System (OPPS) and Physician Fee Schedule services delivered at off-campus HOPDs.[1] CMS established a two-year transition period to reach site neutrality. In Calendar Year (CY) 2019, CMS began paying outpatient departments 70 percent of the full OPPS rate, which equated to half of the planned 60 percent overall reduction.[2] In the CY 2020 OPPS proposed rule, which is not yet finalized, CMS intends to reduce rates to 40 percent of full the OPPS rates.[3] Hospitals that provide those services opposed the CY 2019 proposed rule, which received almost 3,000 comments, arguing that the CMS rule “is contrary to both the Medicare statutory scheme and the policy decision reached by Congress under Section 603 of the Bipartisan Budget Act of 2015.”[4] Continue Reading

Kentucky Appellate Court Affirms Dismissal of Enrollee Claims Against MCOs

The Kentucky Court of Appeals recently affirmed dismissal of numerous lawsuits filed by Medicaid enrollees against Managed Care Organizations (“MCOs”) and the Commonwealth’s Cabinet for Health and Family Services (the “Cabinet”).   Appalachian Reg’l Healthcare, Inc. v. Commonwealth, No. 2015-CA-001670-MR, 2019 Ky. App. Unpub. LEXIS 629 (Ct. App. Aug. 30, 2019).  Applying recent Kentucky Supreme Court authority, the Appellate Court ruled that the enrollees lacked constitutional standing to sue.  Id. (citing Cabinet for Health & Family Servs. v. Sexton, 566 S.W.3d 185, 188 (Ky. 2018)).

In Appalachian Reg’l, hospitals provided services to several Medicaid enrollees.  The enrollee’s MCO denied the hospitals’ claims for payment, deeming the services medically unnecessary.  Notably, the hospitals did not send bills to the enrollees; Medicaid laws prohibit hospitals from holding enrollees liable for the costs of medical care. 

The enrollees, through the hospitals, requested a state fair hearing from the Cabinet.  The Cabinet dismissed these proceedings.  The enrollees then filed suit.  Like the Cabinet, the trial court dismissed the litigation.  Both the Cabinet and the trial court held that the enrollees lacked standing to challenge the MCO’s decision to deny the claims.

The Kentucky Court of Appeals affirmed.  Applying Sexton, the Court held that the enrollees had not suffered an “injury” because they lacked liability for payment.  The Court also rejected the argument that state Medicaid statutes confer standing to sue.  The Court recognized that “deprivation of a procedural right without some concrete interest that is affected by that deprivation—a procedural right in facuo—is insufficient to create . . . standing.”  Id. (internal quotation marks and citation omitted).  The Court thus concluded that the “injuries proffered at various times” were merely “conjectural or hypothetical.”

Sexton and Appalachian Reg’l resolve some disagreement among lower courts.  The cases also provide further certainty to MCOs by confirming that hospitals cannot use enrollees to seek reimbursement for healthcare services in litigation.  Appalachian Reg’l is also a cautionary tale for hospitals to weigh their options carefully, before proceeding with costly litigation, only to have lawsuits dismissed.


Is it Legal to Maximize Value of Secondary Diagnosis Codes?

By selecting a more severe Secondary Diagnosis Code for a patient, a physician may increase the reimbursement due from Medicare. If a hospital intentionally changes codes across its patient population, the increased revenue can be substantial. Is that legal? A federal district court in Texas faced this question when a relator filed suit under the False Claims Act.

Continue Reading

HHS Abandons Proposal to Reform Drug Manufacturer Rebate System

On Thursday, July 11, 2019, the White House administration reversed course on the Department of Health and Human Services’ (HHS) recent proposal to reform drug manufacturer rebate system. As we previously reported, HHS’s February 6, 2019 proposed rule sought to modify the Anti-Kickback Statute safe harbor protection with the aim of lowering prescription pharmaceutical product prices and out-of-pocket costs for consumers (primarily Medicare Part D and Medicaid Managed Care Plan members). With the proposed rule, HHS hoped to encourage medication manufacturers to pass discounts directly to consumers and develop a transparent framework for the prescription drug product market.

The public comment period for the proposed rule closed at midnight on April 8, 2019, with over 25,000 comments received. The pharmaceutical industry welcomed the proposed rule. Pharmaceutical Research and Manufacturers of America (PhRMA) informed HHS in April that it considers the proposed reform of the rebate system to be urgent. On the other hand, payers, pharmacy benefit manager and providers have opposed the proposal, collectively warning that the elimination of the safe harbors could lead to higher costs for patients.

According to several reports, the administration’s decision to back away from the proposed rule is based on the prospects of bipartisan legislation aimed at reducing drug costs, as well a concern that the proposed rule would have imposed increased drug costs on seniors. In a May 2019 report, the Congressional Budget Office estimated that the proposed rule would increase federal spending by about $177 billion from 2020 to 2029, with increases in Medicare Part D plan premiums.   HHS officially withdrew notice of its pending final rule on July 10, 2019.

DOJ Challenges Charitable Copay Subsidies

Medical CostsThe Department of Justice intervened in a False Claims Act lawsuit involving “so-called charitable patient assistance funds” used for prescription drug copays. The DOJ wants to make “clear that the Department will hold accountable drug companies that pay illegal kickbacks to facilitate increased drug prices.”  See a report at the Anticorruption blog here.