Recent Case Provides Important Lessons For Buyers Acquiring Unionized Businesses

When healthcare entities are seeking to expand their operations, they often will find interesting targets who have union-represented employees.  A union’s presence will create additional compliance obligations but, contrary to common misconceptions, union-related obligations are not necessarily unmanageable.
In a recent case, which arose after new owners took over a skilled nursing home facility, the National Labor Relations Board reiterated the standards that will determine whether a buyer must recognize the seller’s former labor union, retain former union-represented employees, and bargain with that union before initially determining the wages, hours, and other working conditions at the organization.  Ridgewood Health Care Center, Inc., 367 NLRB No. 110 (Apr. 2, 2019).  The Board also clarified an existing rule in a way that will reduce the potential risk for a buyer.
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Sixth Circuit Upholds Ohio Law Defunding Planned Parenthood

In a closely watched decision, this past week the U.S. Court of Appeals for the Sixth Circuit upheld an Ohio law permitting Ohio to defund Planned Parenthood clinics.  See Planned Parenthood of Greater Ohio v. Hodges, Case No. 16-4027 (Mar. 12, 2019).  An 11 to 6 majority of the full panel of the Sixth Circuit reversed a district court decision enjoining a 2016 Ohio law that barred Ohio’s health department from funding organizations that perform nontherapeutic abortions.  In challenging the law, Planned Parenthood claimed that it would lose $1.5 in annual funding as a result.   Specifically, Planned Parenthood claimed that the law violated “the First and Fourteenth Amendments by conditioning government funding on giving up their rights to provide abortions and to advocate for them.”
In reversing the decision of the district court, the panel held that this funding “condition does not violate the Constitution” because the affiliates of Planned Parenthood “do not have a due process right to perform abortions.”   Because it held that providers do not have a constitutional right to perform abortions, it did not need to reach the free speech claim.

HHS Proposes Changes to the Discount Safe Harbor Framework to Realign Incentives and Put Downward Pressure on Drug Prices

On February 6, 2019, the Department of Health and Human Services (HHS) published a Proposed Rule modifying the Anti-Kickback Statute safe harbor protection with the aim of lowering prescription pharmaceutical product prices and out-of-pocket costs for (primarily Medicare Part D and Medicaid Managed Care Plan) consumers. With the Proposed Rule, HHS hopes to encourage medication manufacturers to pass discounts directly to consumers and develop a transparent framework for the prescription pharmaceutical product market.  A more thorough discussion of the Proposed Rule may be found here.

Government Shutdown – Does It Affect My Research Grant or Contract? It May

A lapse in federal funding, or a government shutdown, occurs when Congress and the President fail to agree to a new appropriations bill for oneor more of the federal government agencies. The most recent partial government shutdown, ending in January 2019, affected about 25% of government agencies (in dollar terms). The Department of Homeland Security and the Food and Drug Administration (FDA) were among those agencies whose ability to spend new funds were impacted by the government shutdown. The remaining agencies already funded through enacted appropriations with funds available through the end of September 2019 included agencies such as the Department of Defense and National Institutes of Health (NIH).
This article provides insight on the potential impact of a government shutdown for those contractors or grantees who might be affected by a funding lapse, such as academic medical centers (AMCs) or clinical researchers. Like most government rules, those related to a shutdown have room for interpretation. The bottom line: if you have a federal contract or grant, advance communication with the agency is the best preventative medicine. It is always prudent to ask the agency at the onset of the contract or grant work, and to validate just prior to the likelihood of a funding lapse, about how such an event may affect the specific contract or grant. Read the full article here.

New UK study shows reduction of competition within NHS hospital market increases patient harm rates

On 31 January 2019, economists at the UK Competition and Markets Authority and London School of Economics published a new working paper on the effect of mergers between NHS hospitals on patient harm, stating that “a hypothetical merger to monopoly would, on average, be associated with a significant increase in harm rates”.  These findings have been published amidst several recent NHS hospital merger clearances by the UK competition watchdog, the Competition and Markets Authority (CMA), which we reviewed this blog last year.
At first glance, the effect of competition within the NHS hospital market may appear reduced given certain sector-specific factors such as the fact that it is a heavily regulated sector, it is a public not-for-profit system and capacity constraints prevent hospitals from accepting additional patients (the “customers”, from a competition law standpoint).  However, competition has been in place within the NHS hospital market, and even more so since the two reforms in 2003 and 2006 provided patients with greater choice and introduced NHS funding for care in private Independent Sector Treatment Centres (ISTCs). NHS hospital mergers have therefore gained considerable scrutiny from the CMA and, since 2010, all hospital mergers (bar one) were allowed either because the CMA concluded that there was no risk of a substantial lessening of competition (SLC) or on the basis that relevant customer benefits (RCBs) outweighed any harm arising.
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State Legalized Marijuana Businesses and Access to the Bankruptcy Code

The June 13, 2018 Practical Law Practice Note co-written by Squire Patton Boggs attorneys Mark A. Salzberg, Elliot M. Smith, and John E. Wyand titled “State Legalized Marijuana Businesses and Access to the Bankruptcy Code” was recently updated to reflect recent case law as well as changes to the Controlled Substances Act. The Practice Note discusses the federal statutory scheme governing marijuana, its tension with state laws governing marijuana businesses, and the ability or inability of marijuana related businesses to access the relief provided under federal bankruptcy law.

Healthcare Cybersecurity Best Practices Out Now

A new outlook on the most prominent cybersecurity threats in the healthcare industry today and a series of corresponding, risk-prioritized cybersecurity best practices to combat these threats are now available from the Department of Health and Human Services (HHS).  More than 150 private sector healthcare and cybersecurity experts contributed to this guidance as part of the task force HHS established in response to The Cybersecurity Act of 2015.  Their goal, cost-effectively strengthening cybersecurity in the healthcare industry.
Heightened cybersecurity vigilance is a necessity everywhere today.  The healthcare sector in particular, however, has amassed vast amounts of sensitive personal, financial and health information, making it a particularly attractive target.
While this new guidance does not create a new “mandatory” cybersecurity framework, regulators and courts may still defer to it when the “reasonableness” of security safeguards is questioned post-breach in the healthcare sector.
Read more about the HHS report here.

Department of Justice 2018 in Review

Department Of Justice In Washington DCPolicy Shifts at the Department of Justice – 2018 in Review provides an easily navigated yet detailed summary of significant developments at the Department of Justice (DOJ)  focusing on fraud and abuse. This Alert sheds light on how the policy shifts may affect the health care industry in the coming year. Among the topics of interest to healthcare are:

  • Debut of Justice Manual
  • False Claims Act Developments – Granston and Brand Memos
  • Relaxing All or Nothing Yates Memo
  • Reducing Duplicative Penalties

Click here to download the full Alert.

What Employers Need to Know as Medical Marijuana Comes to Ohio

Employers need to be prepared to address issues with employees regarding possession and use of medical marijuana.
What Does the Law Say?
Ohio’s medical marijuana law, passed in 2016, permits patients with any of 21 specific medical conditions to purchase, use and possess medical marijuana in various forms (including certain dried plant material, oils and edibles). Patients must register with the state Board of Pharmacy and, if the patient is under the age of 18, he or she must also have a registered caregiver to monitor his or her use of the medical marijuana.
Importantly, the law explicitly states that employers do not have to accommodate an employee’s use of medical marijuana. Medical marijuana use or possession is considered just cause for termination under the law. For the purposes of workers’ compensation, if an employee tests positive for marijuana after a workplace accident, the state presumes the marijuana was the cause of the accident, even if the employee is a registered patient. This raises the employee’s burden to receive workers’ compensation benefits.
Also, keep in mind that marijuana for any purpose, including medical use, is still prohibited by federal law. The federal government has declined to enforce many marijuana laws in states that have legalized the drug, but it remains a federal crime to possess, use or distribute marijuana for any purpose. As a result, neither the Americans with Disabilities Act nor the Family and Medical Leave Act require accommodations or leave for patients to use medical marijuana in Ohio.
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Pharmacy Benefit Managers Are Not Subject to the Any Willing Provider Laws in GA, MS, or NC, says Eighth Circuit

The Eighth Circuit has recently reviewed whether a pharmacy benefit manager (”PBM”) is a “health benefit plan” within the meaning of the state statutes in Mississippi, North Carolina, and Georgia such that a pharmacy may bring a claim to enforce the any willing provider laws against PBMs. 
Many states have enacted some version of any willing provider laws, which generally require healthcare plans to accept any qualified provider willing to accept the plans’ terms and conditions.  Some of these laws, such as Colorado’s § 10-16-122, C.R.S., specifically refer to PBMs.  Others, such as Mississippi’s Miss. Code. Ann. § 83-9-6, are much more ambiguous.  For example, Miss. Code. Ann. § 83-9-6 applies “to all health benefit plans providing pharmaceutical services benefits, including prescription drugs…” without specifically mentioning PBMs.
A pharmacy sued a PBM in the Eastern District of Missouri, bringing claims sounding in contract, promissory estoppel, federal antitrust, and violations of Georgia, Mississippi, and North Carolina state any willing provider laws after the PBM terminated its contract with the pharmacy.  In its appellate briefing, the pharmacy argued that the District Court should have afforded it an opportunity to prove that a PBM falls within the purview of the Mississippi, North Carolina, and Georgia any willing provider laws, even in the absence of binding authority holding that these statutes apply to PBMs.  The Eighth Circuit concisely rejected this invitation with a single sentence:  the pharmacy  “has pointed to no case law that suggests that these laws apply to PBMs, and we decline to extend the reach of these laws to PBMs as a matter of first impression.”  The Eighth Circuit’s holding thus rejected the pharmacy’s claims under these statutes. 
Health care entities reviewing state any willing provider laws should perform careful state-specific research as to the applicability of those laws.  Even more generally, the Eighth Circuit opinion cautions litigants against framing claims enforcing state healthcare statutes absent authority supporting the statutes’ application.