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.

CMS to Reverse Invalid Payment Cuts to Excepted Off-Campus Provider-Based Departments

Yesterday, in response to a court victory by several hospital associations, the Centers for Medicare and Medicaid Services (CMS) announced it will begin fixing calendar year 2019 underpayments made to hospitals for outpatient services at grandfathered off-campus provider-based departments (off-campus PBDs). CMS states it has instructed Medicare contractors to “automatically reprocess” claims paid at the invalidly lower rate and that “no provider action needed.” While CMS’s action should correct these 2019 payments, in case they are not fully corrected, affected hospitals should consider including this issue as a protest item on their 2019 cost reports.

CMS lowers 2019 OPPS rates for all off-campus PBDs

CMS’s 2019 Outpatient Prospective Payment System (OPPS) rule lowered the payment rate for clinic-visit services at all off-campus PBDs by 30% as part of a two-year reduction to match the rate for similar services at physician offices, intending to shift patients towards the latter under its site-neutrality policy. Previously, those services were paid at higher OPPS rates to all off-campus PBDs. However, Congress authorized CMS to set alternative payment rates for off-campus PBDs that were new as of November 2, 2015. All other off-campus PBDs in existence or in mid-build as of that date were exempted from this treatment.

Court vacates CMS’s payment cuts, triggering CMS to announce it will reverse them

The American Hospital Association, along with the Association of American Medical Colleges and several hospitals, sued in federal court over CMS’s OPPS payment cuts to excepted off-campus PBDs. In September, the court ruled that CMS had exceeded its statutory authority and ordered CMS to vacate the cuts.

In a December 12, 2019 news release, CMS announced it will be implementing the court’s order and making whole the affected hospitals. CMS says it has just “installed a revised Hospital Outpatient Prospective Payment System Pricer to update the rates being applied to claim lines” and in early 2020 “the Medicare Administrative Contactors will automatically reprocess claims paid at the reduced rate; no provider action needed.”

Even though this issue looks like it is going to be resolved for 2019, affected hospitals should, as a precaution, consider taking measures to preserve their right to protest this issue.  In addition, and despite its reversal for 2019, CMS still plans to continue with these site-neutrality cuts for 2020, which are already being challenged in court.

The Solicitor General Weighs In on ERISA Preemption Battle Over PBM State Statutes

In Rutledge v. Pharmaceutical Care Management Association, No. 18-540, the United States Supreme Court invited the Solicitor General to provide the position of the United States through what is often referred to as a “Call for the Views of the Solicitor General” or “CVSG.” The Supreme Court’s request for a CVSG could signal the Supreme Court’s interest in Arkansas’ petition for certiorari. However, a CVSG is not unusual for cases implicating the interests of the federal government or cases involving complex regulatory or statutory schemes, such as ERISA. Indeed, in recent months, the Supreme Court invited the Solicitor General to submit a CVSG in two other potentially significant ERISA-related petitions for certiorari. See Thole v. U.S. Bank, N.S., 139 S. Ct. 306, 202 L. Ed. 2d 16 (2018) and Putnam Investments, LLC v. Brotherston, No. 18-926, 2019 WL 1756671 (U.S. Apr. 22, 2019).

On December 4, 2019, the Solicitor General submitted his brief, which recommends that the Supreme Court accept the Attorney General of Arkansas’ petition for certiorari, and recommends that the Court overturn the appeals court decision.

At issue in Rutledge is whether an Arkansas statute that regulates the rates charged by Pharmacy Benefit Managers (PBMs), is preempted by the Employee Retirement Income Security Act (ERISA). Among other requirements, the Arkansas law required PBMs to reimburse pharmacies for generic drugs at a price at least equal to what the pharmacy had paid for the drug. Continue Reading

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.