Healthcare Empowered

AI in Healthcare

• A recent survey found that healthcare professionals expect AI to have the greatest impact on administrative tasks (52.4%), followed by EHR management (47.6%) and diagnostic accuracy (41.9%). The survey of 105 professionals across 73 U.S. healthcare organizations revealed that 81.6% of physicians and 78.8% of administrators are eager to adopt AI tools to address workforce shortages and burnout. Nearly 64.8% of respondents view AI as critical for reducing workloads, while 37.1% believe it will improve decision-making in precision medicine, diagnostics, and treatment planning through real-time data insights.
• The National Academy of Medicine released a report comparing generative AI with conventional predictive AI in healthcare. The 15-page publication examines five key differences between these technologies: output evaluation methods, bias manifestation patterns, performance degradation characteristics, societal impacts, and compliance considerations. While predictive AI produces quantitative predictions with straightforward performance metrics, generative AI creates subjective content requiring monitoring for coherence and factual accuracy. The report also introduces a 4-point responsibility matrix categorizing stakeholders as “informed,” “consulted,” “accountable,” or “responsible” to guide implementation in clinical decision-making, administrative efficiency, and patient engagement contexts.

Antitrust

• States are requiring more premerger filings by enacting “baby-HSR” laws modeled after the federal Hart-Scott-Rodino Act, with Washington becoming the first state to expand beyond healthcare to cover all industries. Washington’s law requires parties to submit HSR filings to the state Attorney General if they have their principal place of business in Washington or if in-state annual sales exceed 20% of the HSR filing threshold ($126.4 million). Several other states including California, Colorado, Hawaii, Nevada, Utah, West Virginia, and DC have introduced similar legislation based on the Uniform Premerger Notification Act, while fifteen states already have laws requiring pre-transaction notification for healthcare-related mergers and acquisitions. State attorneys general are increasingly active in merger enforcement, with the National Association of Attorneys General Antitrust Committee chair warning companies to ignore state AGs “at your own peril.”
• A federal jury convicted a man for conspiring to fix wages for Las Vegas home healthcare nurses between 2016-2019 and for fraudulently concealing the investigation during his company’s sale. This marks the Department of Justice’s first antitrust jury conviction since announcing in 2016 that wage-fixing and no-poach agreements would be prosecuted criminally rather than civilly. The conviction follows three previous unsuccessful DOJ prosecutions in similar cases where juries declined to find illegal agreements. The DOJ reiterated in January 2025 that felony criminal charges remain appropriate for agreements affecting worker recruitment or wage terms.

Capital Assets

• Healthcare equipment leases come in two main types: operating leases (short-term agreements lasting 1-5 years with lower monthly payments) and capital leases (10-20 year agreements with purchase options). Healthcare organizations can benefit from leasing through improved cash flow management, avoiding large upfront costs, and gaining tax advantages as operating leases allow for interest and depreciation deductions. Leasing provides flexibility to upgrade equipment as technology evolves, with 60% of healthcare institutions reporting a 15% increase in equipment expenses over the past two years. Understanding lease structures, fair market value, and residual values helps healthcare organizations make informed decisions about equipment acquisition.

Data Privacy

• Three healthcare organizations reported data breaches affecting thousands of patients in recent months. Central Texas Pediatric Orthopedics experienced a network server hack on March 3, 2025, compromising personal and medical information of 140,000 patients, with the Qilin ransomware group claiming responsibility. Omni Healthcare Financial Holdings reported unauthorized network access between January 18-19, 2024, affecting 16,701 individuals, but only completed notifications on April 9, 2025, fifteen months after the breach. Community Dental Care in Minnesota discovered unauthorized access to their network on December 20, 2024, with confirmation on March 24, 2025 that names, addresses, Social Security numbers, and medical information were exposed, though the total number of affected individuals remains unclear.
• Six current and former employees have filed a class action lawsuit against University of Maryland Medical System Corporation and University of Maryland Medical Center. Former UMMC pharmacist Matthew Bathula allegedly installed keylogging software on approximately 400 hospital devices over a decade, obtaining credentials of at least 80 staff members and using them to access victims’ personal accounts, webcams, and home security cameras. The lawsuit claims UMMC had inadequate security that enabled Bathula to target primarily young female medical professionals, recording them in private moments including breastfeeding and intimate activities. After terminating Bathula, UMMC replaced compromised computers and implemented additional cybersecurity controls, but the lawsuit alleges the hospital was aware of potential hacking for years without identifying the perpetrator.
• Data privacy and data security represent distinct concepts that organizations often mistakenly treat as interchangeable. Data privacy focuses on individual control over personal information and regulatory compliance with laws like GDPR and HIPAA, while data security involves technical protections against unauthorized access through measures like encryption and fraud detection. The DOGE incident, where unauthorized access was gained to Treasury Department records, demonstrates how compliance with privacy regulations does not guarantee security from breaches. Organizations must establish separate teams with clear responsibilities—privacy oversight by compliance teams and security management by IT security professionals—to prevent vulnerabilities. Companies that fail to distinguish between these concepts risk regulatory penalties, consumer distrust, operational disruptions, and financial losses from both privacy violations and security breaches.

Equity

• Health care entities managed or funded by HHS face approaching deadlines for Section 1557 compliance, with requirements to review decision-making tools for bias, adopt new policies, and train employees by May 1, 2025, while providers receiving only Medicare Part B funds have until May 6. By July 5, 2025, covered entities must distribute notices about non-English assistance availability, replacing previous foreign language taglines. The enforcement outlook remains uncertain as key components of these regulations conflict with the current administration’s policy goals, particularly regarding transgender protections and foreign language assistance requirements, following executive orders that established English as the official U.S. language.

Fraud & Abuse

• The Seventh Circuit Court of Appeals overturned a landmark Anti-Kickback Statute conviction. Mark Sorensen, the owner of SyMed Inc., had been sentenced to 42 months in prison for allegedly paying kickbacks to marketing firms, a DME manufacturer, and a billing company in connection with Medicare-billed orthopedic braces. The appellate court ruled that Sorensen’s payments did not violate the law because there was insufficient evidence that any recipients influenced healthcare decisions, noting that 80% of prescriptions were rejected by physicians who maintained independent decision-making authority. This ruling clarifies that marketing recommendations are not necessarily illegal referrals and that percentage-based compensation structures are not automatically unlawful under the Anti-Kickback Statute.

Laboratories

• Recent False Claims Act litigation demonstrates critical compliance risks for medical laboratories. In Jensen ex rel. United States of America v. Genesis Laboratory, the court dismissed qui tam claims that Genesis submitted false claims to Medicare for unnecessary tests and violated the Anti-Kickback Statute by waiving copayments to induce referrals, citing insufficient evidence. The takeaway is that laboratories must exercise independent judgment on medical necessity despite physician certifications, ensure requisition forms comply with Medicare regulations, review copayment waiver policies, and maintain documentation of compliance efforts. Laboratories should implement robust compliance programs, provide staff training, document processes thoroughly, and consult legal counsel to mitigate regulatory risks.

Medicare

• CMS issued the fiscal year 2026 Medicare Hospital Inpatient Prospective Payment System proposed rule on April 11, 2025, with comments due by June 10, 2025. The rule proposes a 2.4% increase in operating payment rates for qualifying acute care hospitals, creates several new MS-DRG categories while deleting others, and increases uncompensated care payments to $7.29 billion for FY 2026. Special rural designations including the Medicare-dependent hospital program and low-volume hospital payment adjustment are set to expire on September 30, 2025, with hospitals previously qualifying for MDH status to be paid based on the federal rate thereafter. The rule also proposes updates to the Transforming Episode Accountability Model, which will begin as a five-year mandatory model on January 1, 2026.
• The Trump administration released two final regulatory documents for Medicare Advantage (MA) for 2026, with CMS finalizing a basic payment update of +5.06% that will increase MA payments by $25 billion. CMS did not finalize proposals to expand coverage of anti-obesity medications or implement health equity requirements for utilization management policies, but did codify IRA provisions requiring $0 cost sharing for ACIP-recommended vaccines and $35 monthly caps for insulin. The final rule also includes provisions for Dual Eligible Special Needs Plans, inpatient setting protections, and guardrails for supplemental benefits, while the new risk model will be fully implemented in 2026, saving Medicare trust funds approximately $13 billion.

Pharmacy Benefit Managers

• Arlington-based Texas Health Resources is suing six drugmakers and pharmacy benefit managers, alleging they colluded to raise insulin prices by up to 1,000% over two decades while collecting secret rebates and fees. The nonprofit system filed the federal lawsuit on March 26 in New Jersey District Court against Express Scripts, CVS Caremark, Optum Rx, Sanofi, Eli Lilly, and Novo Nordisk, claiming violations of the RICO Act and Texas consumer protection laws. Texas Health Resources, which covers about 40,000 beneficiaries through its self-funded insurance plan, joins more than 400 other entities that have filed similar lawsuits against these companies. All defendants have denied the allegations, with CVS Caremark, Sanofi, Novo Nordisk, Optum Rx, and Eli Lilly each issuing statements calling the lawsuit baseless or meritless and defending their pricing practices.

Private Equity

• Texas’ Corporate Practice of Medicine doctrine prohibits corporations and non-physicians from practicing medicine or employing physicians to provide medical services. Private equity firms use Management Service Organization models to invest in healthcare while attempting to comply with CPOM restrictions, but many management service agreements contain provisions that transfer excessive control to non-physician entities. Courts have identified several red flags that indicate CPOM violations, including excessive fee structures, control over medical personnel, financial control, influence over clinical decision-making, and restrictive clauses that limit physicians’ ability to terminate relationships. Contracts that violate the CPOM doctrine are likely unenforceable under Texas law, giving physicians potential legal grounds to terminate problematic MSO relationships without penalty.ata Privacy
• Three healthcare organizations reported data breaches affecting thousands of patients in recent months. Central Texas Pediatric Orthopedics experienced a network server hack on March 3, 2025, compromising personal and medical information of 140,000 patients, with the Qilin ransomware group claiming responsibility. Omni Healthcare Financial Holdings reported unauthorized network access between January 18-19, 2024, affecting 16,701 individuals, but only completed notifications on April 9, 2025, fifteen months after the breach. Community Dental Care in Minnesota discovered unauthorized access to their network on December 20, 2024, with confirmation on March 24, 2025 that names, addresses, Social Security numbers, and medical information were exposed, though the total number of affected individuals remains unclear.

Ransomware

• Ransomware group Qilin posted 42 gigabytes of data stolen from Central Texas Pediatric Orthopedics on the dark web in February, with the practice now notifying 140,121 affected individuals. The unauthorized access occurred between January 23-26, 2025, compromising patient information including names, government IDs, medical data, insurance details, birth dates, and X-ray images of minors. CTPO has reported the breach to the FBI and implemented security enhancements including endpoint detection software, password resets, and server rebuilding. Experts warn that pediatric healthcare records are particularly valuable targets due to children’s pristine credit histories, with several law firms already investigating the incident for potential class action litigation.

Reimbursement

• An estimated 450 million medical claims are denied annually in the US, with Texas having a 22% denial rate for in-network ACA claims. The American Medical Association reports that AI tools used by insurers can produce denial rates up to 16 times higher than typical. The Texas Senate has advanced bill SB 815 to restrict insurers from using AI for claim decisions, while new AI platforms like Claimable and Fight Health Insurance have emerged to help patients appeal denials. These AI appeal tools aim to level the playing field against insurers who have established an early advantage in using technology for claims processing.

Skilled Nursing Facilities

• CMS has extended the deadline for Skilled Nursing Facilities (SNFs) to submit Medicare revalidations to August 1, 2025, following a previous extension from the original deadline to May 1, 2025. The extension comes as AHCA/NACL reports less than 20% of SNFs had submitted applications by mid-March, with many applications being returned with requests for additional information. The revalidation process now includes Attachment 1, which collects new categories of information on ownership, management, organization, and administration. CMS updated its guidance on April 9, 2025, with additions to Section IV and FAQs regarding requirements for reporting Additional Disclosable Parties.

OIG Advisory Opinion No. 25-02

Favorable opinion regarding an arrangement whereby Requestor— designated as a community health center pursuant to Section 330 of the Public Health Service Act—proposes, during the provision of certain social services to individuals, to: (1) identify individuals in need of primary care services; (2) inform them of the availability of such services; and (3) schedule an appointment for them to receive primary care services from Requestor or refer them to a local primary care provider.

🔍 What’s the Issue?

A federally designated Community Health Center (the “Requestor”) asked the Office of Inspector General (OIG) if it could legally do the following as part of its community outreach:

1. Identify individuals in need of primary care during their visits for social services (like childcare, food, or safety support).
2. Inform them about available primary care providers.
3. Help them schedule appointments—either with the Health Center itself or another local provider.

They wanted to make sure this setup wouldn’t violate federal anti-kickback laws or other rules meant to prevent improper patient referrals.

🏥 Background on the Health Center

• Offers free or low-cost medical and social services to underserved communities.
• Also gives out non-healthcare goods, like diapers, books, and help for crime victims.
• Many people come for the social services but don’t realize they can also get affordable medical care there.

⚖️  Legal Concerns

two key laws at play:

1. Anti-Kickback Statute – Prohibits giving something of value to induce someone to use federally funded healthcare services.
2. Beneficiary Inducements CMP – Prohibits offering free stuff to patients to influence their choice of healthcare provider.

✅  OIG’s Conclusion: Allowable with conditions

OIG said they will not impose penalties because:

• The Health Center does not push patients to choose them—they provide a neutral list of providers in alphabetical order.
• Other providers can be included on the list (“any willing provider” rule).
• People can still get social services even if they don’t want or need healthcare.
• The goal is to connect underserved people with care they might otherwise skip due to cost or confusion.

OIG found the setup aligns with the Health Center’s mission to help underserved populations and isn’t a scheme to inappropriately gain more patients.

🚦 Bottom Line

The arrangement is legally allowable as long as it’s carried out fairly and transparently. The Health Center must stick to the safeguards they promised—neutral lists, no pressure to choose them, and full freedom for individuals to pick any provider or none at all.

Data Privacy

• A dental management firm is notifying 173,400 people across six states about an email hack that exposed sensitive information including names, Social Security numbers, and medical data. The Nashville-based firm, which provides HR and finance services to 60 dental practices and 10 group practices, faces at least four federal class action lawsuits alleging negligence in safeguarding patient information. The breach was discovered on September 11, 2024, when suspicious activity was detected in an employee’s email account, making it the largest of three major dental-related data breaches reported in 2025. In 2024, about two dozen dental practice breaches affected more than 1.2 million individuals, highlighting the sector’s vulnerability to cyberattacks.
• HIPAA compliance faces significant changes in 2025 as HHS implements new security measures following a 264% increase in ransomware attacks in 2024. The Office for Civil Rights is enforcing stricter security risk analysis requirements while proposing updates to the HIPAA Security Rule that would mandate technical improvements like encryption and multifactor authentication. Patient access rights remain a priority with multiple enforcement actions in 2024-2025, alongside new information blocking rules effective December 2024. Additionally, HHS issued a final rule protecting reproductive health care information privacy in December 2024, though this faces legal challenges from Texas in federal court.

False Claims Act

• A Fifth Circuit Judge has questioned the constitutionality of the False Claims Act’s qui tam provision in a concurring opinion in United States ex rel Montcrief v. Peripheral Vascular Assocs., P.A. Justice Duncan argues the provision violates the Appointments Clause by allowing private citizens to exercise executive branch power without proper appointment, echoing a 2024 ruling by Florida District Judge Kathryn Mizelle in United States ex rel. Zafirov v. Fla. Med. Assocs., LLC. Both judges cite Justice Clarence Thomas’s dissent in Polansky, which contends that Congress cannot authorize private relators to represent United States interests in civil litigation. The Fifth Circuit remanded a $28.7 million Medicare fraud judgment against PVA while Duncan noted that when the government declines to intervene in qui tam cases, private relators exercise government power without executive branch oversight.

Medicare Reimbursement

• A new Medicare policy aims to combat fraud in the skin substitutes market where spending quadrupled in four years, costing taxpayers nearly $10 billion annually. The Local Coverage Determination (LCD) ensures Medicare only covers treatments with clinical evidence while maintaining access to over a dozen proven skin substitutes. The policy targets companies that exploited loopholes to generate nine-figure revenues without research or FDA review, and will take effect April 13, 2025. Medicare Administrative Contractors implemented this measure to proactively prevent fraud rather than relying on lengthy investigations after damage is done.

Mergers & Acquisitions

• The U.S. Department of Health and Human Services is closing six of its ten Office of the General Counsel regional offices and reducing its workforce by 20,000 employees. This consolidation will likely cause disruptions to Change of Ownership approvals needed for healthcare mergers and acquisitions, as well as delays in enforcement actions and compliance determinations. The four remaining OGC offices will redistribute workload across larger geographic areas, potentially resulting in loss of localized expertise and creating challenges for Medicare contractors. Healthcare investors and providers are advised to consult with experienced attorneys to navigate these changes and minimize transaction disruptions.
• The Texas House of Representatives introduced House Bill 2747, requiring health care entities to provide 90-day advance notice to the Texas Attorney General for transactions resulting in material ownership, operations, or governance changes. The bill, which would take effect September 1, 2025 if passed, applies to a broad range of health care entities including providers, facilities, provider organizations, and pharmacy benefit managers. The legislation grants the Texas Attorney General power to conduct market studies on health care market conditions and transaction impacts, with violations potentially resulting in a $10,000 civil penalty. Texas joins numerous states implementing increased oversight of health care transactions, with common focus on competition, market concentration, and care quality.

Antitrust

• The Department of Justice announced the formation of an Anticompetitive Regulations Task Force aimed at eliminating state and federal laws that undermine market competition. The Task Force will focus on five key sectors: housing, transportation, food and agriculture, healthcare, and energy, while taking a whole-of-government approach with attorneys and economists from across the Antitrust Division and other agencies. Public comments will be accepted until May 26, 2025, to help identify problematic regulations, with the initiative following a similar effort from the first Trump administration in 2018. Questions remain about the Task Force’s jurisdiction over state laws and regulations, particularly regarding the state action immunity doctrine that protects state and local governments from federal antitrust claims.

Compliance, Audits, and Enforcement

• Healthcare experts emphasize that proper documentation and regular internal audits are essential for medical billing compliance. Medical billers, coders, and nurse reviewers provide critical services including medical record reviews, billing analysis, and assessment of treatment appropriateness for healthcare providers, attorneys, and insurance companies. Healthcare providers remain responsible for billing accuracy even when using third-party billing services, making practice managers with compliance expertise a valuable investment that can prevent claim denials and expand revenue. In litigation contexts, these specialists can identify billing discrepancies, evaluate standard of care, and help establish links between injuries and medical events, transforming what begins as malpractice cases into fraud investigations when necessary.
• The Office of Inspector General (OIG) recently released a report identifying 287 audit issues across all twelve Medicare Administrative Contractor (MAC) jurisdictions during fiscal years 2019-2021, with each jurisdiction failing to meet the 95% performance threshold for Review and Audit Quality standards in at least one year. The report categorized issues into five areas: improper reviews, inadequate oversight of medical education reimbursement, improper review of cost allocations, improper calculations for nursing programs, and inadequate review of bad debts. OIG recommended that CMS provide MACs with better explanations of evaluation results, update audit programs with revised requirements, and offer additional training, to which CMS responded that it already meets weekly with MACs and is working to incorporate updated guidance into audit programs.
• President Trump issued an Executive Order on February 25, 2025 to strengthen enforcement of healthcare price transparency regulations, building upon a 2019 order and rooted in the Affordable Care Act’s 2010 amendments. A 2024 audit revealed only 46 percent of hospitals were compliant with transparency rules, with penalties ranging from $300 to $5,500 per day depending on hospital capacity. Healthcare organizations face increased risks including administrative penalties, civil enforcement actions, and potential criminal liability, prompting recommendations for internal audits, enhanced compliance programs, legal counsel engagement, and robust reporting mechanisms.

Cybersecurity and Data Protection

• Biosensors in healthcare face complex regulatory challenges across different regions, with the FDA in the US using a three-tier risk classification system while the EU implements stricter Medical Device and In Vitro Diagnostic Regulations. Data security remains problematic with 40% of FDA-approved wearables lacking robust encryption, while ethical concerns persist regarding data ownership and privacy, exemplified by a study showing 60% of diabetes apps sell user data without clear consent. Technological innovation outpaces regulatory frameworks, creating validation bottlenecks for startups and highlighting the need for global harmonization, as only 15 countries have adopted the WHO’s Global Model Regulatory Framework. Market access varies significantly between countries, with reimbursement policies and affordability creating barriers to equitable distribution of biosensor technology.
• Data privacy is a major concern when implementing AI in managed care pharmacy, particularly regarding how HIPAA-protected information interacts with large language models. Current expectations suggest liability for AI errors will primarily fall on healthcare providers rather than vendors, though this model could evolve as the technology develops. Organizations cannot guarantee AI systems are completely free from bias, making continuous data review and human oversight essential. Colborn recommends that organizations establish clear frameworks for AI use, disclose which entities receive patient data, and commit to rigorous oversight to address patient concerns.
• According to CIO’s 2024 Security Priorities study, 40% of tech leaders prioritize strengthening confidential data protection as organizations implement comprehensive security frameworks including encryption, Zero Trust Architecture, and multi-factor authentication to combat cyber threats. Security experts recommend data governance frameworks with clear standards for quality, accuracy, and relevance, alongside Master Data Management to create a single source of truth for critical business entities. Organizations must address human error through regular cybersecurity training, simulated threats, and interactive awareness programs to transform employees into a strong defense line. AI technologies are being deployed to detect and mitigate cyber threats in real time while also optimizing operations through intelligent automation and enabling personalized customer experiences.

Drug Regulation

• The popularity of GLP-1 drugs for weight loss and diabetes has triggered multiple litigation fronts in the U.S.. FDA drug shortages led to legal battles between brand manufacturers and compounding pharmacies, with recent cases challenging FDA decisions to remove drugs like tirzepatide and semaglutide from shortage lists. Patent litigation follows the Hatch-Waxman framework with varying timelines based on FDA exclusivity periods – liraglutide’s first generic was approved in December 2024, semaglutide faces ongoing patent challenges through 2025, and tirzepatide’s exclusivity extends to 2027. The International Trade Commission provides another venue for enforcement, with Eli Lilly pursuing action against online pharmacies selling compounded tirzepatide, potentially resulting in import bans.
• The Eastern District of Texas vacated the FDA’s Laboratory Developed Test (LDT) Final Rule, ruling in favor of laboratory plaintiffs who argued that LDTs are services rather than devices under the Federal Food, Drug and Cosmetic Act. The court determined that LDTs are “proprietary methodologies” outside FDA jurisdiction, as the agency can only regulate tangible goods like test kits, not professional medical services. The ruling establishes that Congress gave the Centers for Medicare and Medicaid Services authority to regulate clinical laboratories and their tests under the Clinical Laboratory Improvements Act, not the FDA. The decision prevents nearly 80,000 existing LDTs and over 1,100 laboratories from falling under FDA’s regulatory framework that was scheduled to take effect in May 2025.

Medical Malpractice

• While AI can reduce medical errors, experts debate who bears liability when AI-assisted healthcare goes wrong. The Federation of State Medical Boards recommends holding clinicians responsible for AI errors, not technology creators, with 3 in 5 physicians now using AI in their practice. Medical liability insurer Indigo believes AI will ultimately reduce malpractice rates, though legal experts note there’s no clear framework for determining fault in AI-related medical mistakes. Healthcare organizations are urged to establish AI usage guidelines for staff, as clinicians face challenges verifying AI recommendations amid time constraints and staffing shortages.

Mergers & Acquisitions

• The physician practice M&A market is experiencing a revival with pharmaceutical companies, pharmaceutical services providers, and insurers emerging as strategic buyers in the physician practice management space. Despite headwinds including regulatory pressure, macroeconomic challenges, and operational difficulties, major transactions have occurred such as Cencora’s $4.6 billion acquisition of Retina Consultants of America and Cardinal Health’s $2.8 billion stake in GI Alliance. Strategic buyers pursue these acquisitions to diversify their businesses, achieve vertical integration, and gain control over care delivery, with future consolidation likely driven by buyers with available capital and interest in diversification.

Veterinary Medicine and Telehealth

• A Texas State Senator has proposed legislation to expand telehealth practices to veterinary medicine, which would update Texas law to allow veterinarians to establish client-patient relationships electronically without requiring initial physical examinations. The Texas Veterinary Medical Association opposes the bill, warning that serious conditions could be misdiagnosed without physical examinations, potentially threatening animal health and the state’s $15 billion animal agriculture industry. Supporters argue telehealth would benefit rural areas with limited veterinary access.

Abortion

• Senate Bill 31, known as the Life of the Mother Act, aims to clarify medical exceptions to Texas abortion laws that currently permit the procedure only when the mother’s life or major bodily function is at risk. The bill would specify that doctors need not delay treatment if doing so increases risk to the pregnant woman, broadens definitions for ectopic pregnancy and premature water breaks, and protects physician-patient discussions about abortion options from being considered “aiding and abetting.” With bipartisan support including 12 Republican senators and Lt. Gov. Dan Patrick’s backing, the legislation would require the Texas Medical Board to offer educational courses about physicians’ rights under the law. Texas doctors have reported confusion about existing laws, with 29% lacking clear understanding of abortion regulations, leading to delayed care and increased complications for pregnant women.

Artificial Intelligence

• Healthcare organizations implementing LLMs face eight critical challenges including over-reliance on AI without domain expertise integration, unresolved data quality issues across fragmented systems, and ethical risks in handling sensitive healthcare data. Additional pitfalls include poor workflow integration, inadequate model validation post-deployment, neglect of regulatory requirements, overpromising AI capabilities to stakeholders, and failure to customize models for specific healthcare needs. Healthcare companies must maintain human expertise in the loop, implement robust data governance, ensure regulatory compliance, and set realistic expectations to successfully deploy LLMs that enhance rather than compromise patient care and operational efficiency.

Compliance Programs & Audits

• Compliance auditing has become mandatory in today’s regulatory environment, with federal and state laws requiring companies to conduct regular reviews of their practices. The Office of Inspector General’s Compliance Program Guidance identifies auditing as a core element that helps organizations detect fraud, assess policy adherence, and mitigate risks before they escalate into enforcement actions. Recent settlements demonstrate the consequences of inadequate compliance monitoring, with companies like Pfizer, Teva, Innovasis, and Endo Health Solutions paying millions or billions in penalties for violations related to kickbacks, improper marketing, and other infractions. Companies should prioritize auditing high-risk areas including speaker programs, healthcare professional arrangements, promotional materials, and patient assistance programs using a risk-based approach.

Contracting

• Healthcare AI vendor contracts require thorough pre-negotiation preparation, including comprehensive risk assessment and stakeholder engagement. Organizations must evaluate AI tools within a governance framework using resources like HEAT maps and the NIST AI Risk Management Framework to categorize risks. Contract negotiations should address data rights, with customers seeking ownership of inputs and outputs while vendors aim to retain rights to their services and products. Key contract provisions include privacy, security, regulatory compliance, indemnification, and liability limitations, with special attention to HIPAA compliance when patient health information is involved.

Cybersecurity & Privacy

• Healthcare cyberattacks have increased dramatically, with annual large breaches nearly tripling from 242 (2010-2014) to 713 (2020-2024), with 81% caused by hacking or IT incidents in 2024 alone. The 2024 Change Healthcare breach affected 190 million individuals, making it the largest healthcare data breach to date. When protected health information is compromised, organizations must notify affected individuals, media outlets, state agencies, and the Office for Civil Rights, potentially facing investigations, enforcement actions, and costly settlements. Healthcare entities must strengthen defenses through annual security risk assessments, multi-factor authentication, and comprehensive incident response plans, with HHS proposing updates to the HIPAA Security Rule to mandate these protective measures.
• [The Office for Civil Rights has announced a $3 million settlement with Solara Medical Supplies for HIPAA violations](HHS Settles HIPAA Security Breach Stemming from Phishing Cyberattack for $3 Million). A phishing attack compromised eight employee email accounts, exposing protected health information of over 100,000 individuals, followed by a second breach when notification letters were sent to incorrect addresses affecting 1,500 more people. OCR investigation determined Solara failed to conduct proper risk analysis, implement adequate security measures, and notify affected parties in a timely manner. The settlement includes a corrective action plan requiring risk analysis, implementation of a risk management plan, policy development, and staff training on HIPAA compliance.
• The Seventh Circuit ruled in Hulce v. Zipongo that communications promoting free services do not qualify as “telephone solicitations” under the TCPA. Plaintiff Hulce received approximately 20 calls and texts from Foodsmart about services available at no cost through his healthcare plan, with payment coming from the insurer rather than Hulce. Foodsmart successfully argued that since their communications encouraged use of free services rather than purchase of services, they fell outside the TCPA’s definition of solicitation. The court determined that encouraging use of a service available at no cost to the recipient does not constitute encouraging a purchase, even when a third party pays for the service.

Fraud & Abuse

• A federal court in the Northern District of Texas ruled that False Claims Act penalties totaling $299-449 million would violate the Constitution’s Eighth Amendment Excessive Fines Clause. The case involved Healthcare Associates of Texas, found liable for $2.7 million in damages across 21,844 false Medicare claims averaging $126.06 each. Instead of applying the statutory penalty range of $13,946 to $27,894 per false claim, the court imposed penalties equal to the trebled damages, resulting in a $16 million judgment. This ruling establishes a precedent for FCA defendants to invoke constitutional protections against disproportionate penalties.
• A bipartisan congressional proposal aims to combat healthcare fraud by requiring states to check Social Security Death Master Files to prevent deceased physicians’ identifiers from being misused. The proposal comes amid increased scrutiny of Medicare and Medicaid programs, with Colorado reportedly paying $7.3 million to insurance companies for deceased recipients and California facing a $9.5 billion Medi-Cal price tag that exceeded initial estimates. According to the Government Accountability Office, improper payments totaled $54.3 billion for Medicare and $31.1 billion for Medicaid in fiscal year 2024.

GLP-1 Weight Loss Drugs

• The FDA has removed popular GLP-1 weight-loss drugs from its shortage list, with semaglutide (Ozempic/Wegovy) removed on February 21, 2025, and tirzepatide (Mounjaro/Zepbound) on December 19, 2024. This removal means compounding pharmacies must cease producing copies of these medications, with specific deadlines: immediate cessation for tirzepatide under section 503A, March 19, 2025 for tirzepatide under section 503B, April 22, 2025 for semaglutide under 503A, and May 22, 2025 for semaglutide under 503B. The Outsourcing Facilities Association challenged the FDA’s decision in court but lost when the court ruled that requiring notice before removing drugs from the shortage list would prevent the FDA from maintaining an “up-to-date” list as mandated by Congress.

Health and Human Services

• The Department of Health and Human Services plans to cut 10,000 full-time jobs as part of a larger reduction that will decrease total headcount by 20,000 employees, saving $1.8 billion annually according to HHS. The cuts will affect multiple agencies including 3,500 workers at FDA, 2,400 at CDC, 1,200 at NIH, and 300 at CMS, though HHS claims the reductions will not impact core services like Medicare, Medicaid, or food and drug reviews. The reorganization includes consolidating 28 redundant offices into 15 new divisions, reducing regional offices from 10 to five, and creating new entities like the Administration for a Healthy America, which will combine multiple existing health offices. Democratic lawmakers and health advocates have criticized the cuts, warning they could harm vulnerable populations and disrupt essential services.

Immigration

• Hospitals and healthcare systems nationwide are experiencing increased random inspections by USCIS targeting H-1B visa holders. Immigration officers from the Fraud Detection and National Security Directorate conduct unannounced site visits to verify compliance with H-1B program requirements, focusing on Public Access Files, work location accuracy, and position/salary verification. Non-compliance can result in fines, program debarment, operational disruption, and reputation damage. Healthcare facilities are advised to conduct system-wide compliance reviews, train staff on inspection protocols, collaborate with immigration counsel, standardize recordkeeping, and stay informed about policy changes to maintain compliance.

Taxation

• Continuing Care Retirement Communities (CCRCs) provide comprehensive senior care from independent living to skilled nursing, with entrance fees averaging $400,000 and monthly fees around $3,450. Residents can deduct portions of these fees as medical expenses on their taxes if their total medical costs exceed 7.5% of their adjusted gross income. The deductible percentage varies by facility and is calculated based on the community’s aggregate healthcare costs, not individual usage. This tax benefit applies from day one of residency regardless of current healthcare needs and requires itemizing deductions on Schedule A of Form 1040. Alternative senior living arrangements like assisted living facilities and home modifications may also qualify for similar tax advantages if they meet IRS criteria for medical necessity.

Telehealth

• The DEA has further delayed the effective dates of two telemedicine prescribing rules until December 31, 2025. The rules would expand prescribing of buprenorphine for opioid use disorder and controlled substances for VA patients via telemedicine. Originally scheduled to become effective February 18, 2025, then delayed to March 21, 2025, the Department of Justice now seeks additional time to review questions of fact, law, and policy despite some commenters requesting immediate implementation. Meanwhile, practitioners can continue prescribing controlled medications via telemedicine without prior in-person visits under COVID-19 flexibilities through the end of 2025.

Texas Health and Human Services Commission

• An OIG audit found that the Texas Health and Human Services Commission failed to comply with federal and state requirements in overseeing Day Activity and Health Services facilities. The investigation revealed 253 instances of noncompliance across 20 audited providers, with 19 facilities violating health and safety requirements and 19 failing to meet administrative standards. OIG recommended that Texas correct these violations, enhance oversight of providers, and help facilities improve their operations. Texas has agreed with all recommendations and outlined plans to address the issues.

Transparency

• Healthcare price transparency laws implemented since 2021 require hospitals and health plans to publish pricing information online and prohibit gag clauses that restrict sharing of cost and claims data. The Consolidated Appropriations Act of 2021 codified these prohibitions, requiring annual attestation of compliance through the Gag Clause Prohibition Compliance Attestation process, with the first submission deadline on December 31, 2023. Healthcare providers can leverage these regulations by requesting comprehensive pricing data, benchmarking against competitors, and highlighting value metrics to negotiate better reimbursement rates with payers. Despite these regulatory advances, challenges remain including limited enforcement, complex data formats, and the need for stricter penalties to ensure compliance from health plans.

Abortion

• Texas Attorney General Ken Paxton announced the arrest of Maria Margarita Rojas, a 48-year-old midwife who operated multiple clinics in the Houston area. Rojas, known as “Dr. Maria,” was charged with performing illegal abortions and practicing medicine without a license, both serious offenses under Texas law. Her network included three clinics—in Waller, Cypress, and Spring—where unlicensed individuals allegedly posed as medical professionals. The Attorney General’s office has filed for a temporary restraining order to shut down these facilities and may seek civil penalties of at least $100,000 per violation under the Texas Human Life Protection Act of 2021. Texas law specifically holds abortion providers, not patients, criminally responsible for unlawful procedures.
• A second person has been arrested in connection with illegal abortion services at clinics operated by a midwife near Houston. Jose Manuel Cendan Ley, a 29-year-old medical assistant, faces charges of performing an illegal abortion and practicing without a license, while Rojas was previously arrested for operating three clinics that allegedly performed illegal abortion procedures. Texas Attorney General Ken Paxton announced that Rubildo Labanino Matos was also arrested for practicing medicine without a license in connection to the investigation. Texas law bans abortion at all stages of pregnancy with exceptions only for life-threatening conditions, with those convicted of performing illegal abortions facing up to 20 years in prison. This case represents the first criminal charges filed under Texas’s near-total abortion ban.

AI in Healthcare

• AI healthcare models trained on limited institutional data face challenges in broader applications. Healthcare institutions currently train AI models using data from their own populations, creating systems that work well locally but fail when deployed in different settings due to variations in practice patterns, genetic factors, and lifestyle differences across regions. The isolation of medical data in institutional silos prevents AI from reaching its potential to standardize and improve healthcare globally. To address this, healthcare organizations must implement cross-institutional data sharing frameworks and ensure AI models are trained on diverse populations. The solution requires collaboration between health systems, regulatory support, and transparent validation processes to create AI models that can be trusted and effective across all healthcare settings.
• A Harvard Medical School study found that an open-source AI model called Llama 3.1 405B performed equally well as GPT-4, a leading proprietary model, in diagnosing complex medical cases. Researchers compared both models on 92 challenging cases from The New England Journal of Medicine, with results published March 14 in JAMA Health Forum. The NIH-funded research was conducted by Harvard Medical School in collaboration with clinicians from Beth Israel Deaconess Medical Center and Brigham and Women’s Hospital. Open-source models offer advantages by allowing hospitals to keep patient data in-house rather than transmitting it to external servers required by closed-source models.
• Google is developing multiple AI healthcare initiatives, including TxGemma for drug discovery, Articulate Medical Intelligence Explorer for patient data collection, and a “co-scientist” chatbot for research assistance. The company has partnered with medical centers like Beth Israel Deaconess in Boston and Princess Maxima Center in the Netherlands, where doctors report tasks that once took days now complete in seconds. Meanwhile, Congress continues to extend pandemic-era telehealth rules through short-term solutions rather than permanent legislation, causing concern among healthcare providers about long-term investment in remote care technologies.
• The FUTURE-AI framework provides international consensus guidelines for developing trustworthy healthcare AI systems through six guiding principles: fairness, universality, traceability, usability, robustness, and explainability. Developed by a consortium of 117 experts from 50 countries over a two-year period, the framework includes 30 detailed recommendations covering the entire AI lifecycle from design to deployment. FUTURE-AI is designed as a dynamic framework that will evolve with technological advancements and stakeholder feedback to ensure AI tools are technically robust, clinically safe, ethically sound, and legally compliant.

Cybersecurity

• HIPAA regulations require healthcare providers and business associates to protect patient information in electronic communications. When communicating PHI to patients via email or text, covered entities must either encrypt the information or warn patients about security risks and obtain their consent to proceed with unsecured communications. For communications from patients, providers can assume email is acceptable if initiated by the patient, though warning about risks is recommended. Communications with other providers or third parties require stricter security measures, as simply warning about risks is insufficient; these messages must comply with Security Rule standards through encryption or other safeguards.
• Healthcare data breaches reached record levels in 2024, with a 9.96% increase from 2023. The healthcare sector ranks second to finance in sensitive data volume, with 68% of medical devices expected to be connected by 2025, creating increased security risks through wireless communication and cloud storage. The industry faces future challenges from quantum computing threats, with NIST developing post-quantum cryptography standards while organizations still struggle with basic security measures like multi-factor authentication.
• A vulnerability in ChatGPT identified last year is being exploited to target healthcare organizations, with 35% of analyzed organizations unprotected due to security misconfigurations. A recent report documented over 10,000 cyberattack attempts in one week, despite the vulnerability being classified as medium severity. The American Hospital Association warns these attacks could lead to data breaches, unauthorized transactions, and regulatory penalties. Healthcare remains the costliest sector for cyberattacks, with the average breach costing nearly $11 million—more than three times the global average.
• The U.S. Department of Health and Human Services’ Office for Civil Rights has reached a $227,816 settlement with Health Fitness Corporation for HIPAA Security Rule violations. The settlement, which marks the fifth enforcement action in OCR’s Risk Analysis Initiative, resolves an investigation triggered by four breach reports filed between October 2018 and January 2019, where electronic protected health information became discoverable online due to a server misconfiguration. Health Fitness failed to conduct a thorough risk analysis until January 2024, affecting approximately 4,304 individuals whose data was exposed beginning in August 2015 but not discovered until June 2018. Under the agreement, Health Fitness must implement a corrective action plan including annual risk analyses, risk management planning, and policy development, which OCR will monitor for two years.

Dentistry

• [The Texas Health and Human Services Commission has adopted an amendment to the Texas Government Code](Adopted Rules Title 25) that requires providers to be reimbursed for teledentistry services. This amendment allows dentists to use synchronous audiovisual technologies to conduct oral evaluations of established clients. As a result, oral evaluations are now more accessible, reducing unnecessary travel for clients in the Texas Health Steps Program.

FDA

• FDA regulations prohibit compounding pharmacies from creating “essentially a copy” of commercially available drugs unless the modification produces a “significant difference” for an individual patient. Adding B12 to name brand weight loss drugs does not automatically exempt them from being considered copies under Sections 503A and 503B of the Federal Food, Drug, and Cosmetic Act. For a compounded drug to be permissible, the prescribing practitioner must document that the modification creates a significant difference for the specific patient. The FDA established these rules to prevent compounders from circumventing regulatory requirements by making minor changes to commercially available medications.

Medicaid

• Medicaid program integrity involves both federal and state responsibilities, with states handling day-to-day administration while the federal government provides support and oversight. There is no comprehensive measure of fraud in Medicaid, though most fraud is committed by providers rather than beneficiaries, with the Health Care Fraud and Abuse Control program recovering $3.4 billion across Medicaid and Medicare in FY 2023. Improper payments, which had a 5.1% rate in 2024, are not equivalent to fraud, as 79.1% resulted from insufficient documentation or administrative errors rather than payments to ineligible recipients. HHS and CMS develop strategies to address program integrity issues, focusing on prevention and early detection rather than just recovery of misspent funds.

Mergers & Acquisitions

• The IRS workforce has reached its lowest level since the 1970s, with outdated systems still relying on fax machines for communications. Healthcare organizations involved in M&A transactions must prepare for extended processing times for tax documents, determination letters, and name changes. The IRS will take longer to process powers of attorney forms, provide guidance on complex issues, and review tax-exempt status applications. State tax-exempt status applications will face delays since they depend on federal approval.
• Texas House Bill 2747, introduced on February 12, 2025, would require healthcare entities to provide 90-day advance notice to the Texas Attorney General for transactions resulting in material changes to ownership, operations, or governance structure. The bill covers six types of material change transactions and applies to a broad range of healthcare entities including providers, facilities, organizations, health carriers, and pharmacy benefit managers. Violations could result in civil penalties up to $10,000 per violation, with the AG authorized to recover penalties, attorney fees, and enjoin entities from violations. Unlike similar requirements in California and Massachusetts, information provided to the AG would remain confidential, only released with consent or to contracted experts for market studies.

Privacy

• HIPAA was designed to balance privacy protections with healthcare efficiency but was never intended as a comprehensive health information privacy law. The healthcare privacy landscape has become increasingly complex due to the explosion of non-HIPAA health data from mobile apps, wearables, and tech platforms that remain largely unregulated. States have created overlapping privacy laws with inconsistent requirements, while the FTC and state attorneys general use general consumer protection authority to fill regulatory gaps. Federal legislation is unlikely to resolve these issues as proposals typically exempt HIPAA-covered entities, potentially creating dual regulatory systems that complicate compliance and impede medical research, public health initiatives, and healthcare innovation.
• Senators have reintroduced the Genomic Data Protection Act (GDPA) to regulate genetic data collected by direct-to-consumer testing companies not covered by HIPAA Rules. The legislation would require these companies to provide consumers with mechanisms to access their genomic data, delete accounts, and request destruction of biological samples. GDPA would mandate clear notices explaining consumer rights, including notification at least 30 days before a company acquisition. The bill aims to establish federal protections while not preempting state laws unless they conflict with GDPA, with non-compliant companies facing penalties under the FTC Act.

Tax Exemption

• [The Fifth Circuit Court of Appeals affirmed that Memorial Hermann Accountable Care Organization does not qualify for tax-exempt status under Section 501(c)(4)](Accountable Care Organization Denied Tax-Exempt Status | Gordon Feinblatt LLC). The court applied the “substantial non-exempt purpose” test, determining that Memorial primarily benefited healthcare providers and insurance companies rather than promoting social welfare. Memorial had argued for the application of the “primary purpose test” from Treasury Regulations, but the court rejected this approach while noting it would have reached the same conclusion under either standard. Though currently binding only in Louisiana, Mississippi, and Texas, the ruling suggests Accountable Care Organizations elsewhere may face similar tax treatment.

🚨Are Your Vendors Protecting Patient Data? 🚨

If you’re a healthcare provider, you likely rely on vendors who handle patient information—your EHR system, billing company, IT support, and more. But how well do you know their security practices?

Before entrusting them with PHI (protected health information), conduct due diligence. Here are some red flags to watch for:

🔴 No mention of HIPAA compliance on their website? That’s a problem.

🔴 Misspelling HIPAA as “HIPPA”? If they can’t spell it, they probably don’t understand it.

🔴 No third-party security certifications? That’s a risk.

🔴 Small vendor with no resources for security audits? That could be a liability.

Don’t assume vendors know what they’re doing—ask tough questions. At the end of the day, your practice is responsible for protecting patient data, and a reckless vendor could expose you to massive penalties.

Have questions? Drop a comment or email me at wade@texashealthlaw.com.

🔒 Privacy is everyone’s responsibility. Take it seriously.

340B

• Multiple legal developments occurred in 340B program litigation across the United States. Two amicus briefs were filed supporting a state in a contract pharmacy law appeal case, while a court permitted withdrawal of a preliminary injunction motion in an HRSA audit process case. In a Medicare Advantage payment dispute, the court issued a split decision on accessing damages documentation. Six cases challenging HRSA’s rejection of drug manufacturers’ rebate models saw various legal actions, including the granting of intervention motions and the filing of amicus briefs supporting the defendant. Intervenors in one rebate model case filed supplemental authority, prompting responses from both the plaintiff and supporting amici.

Abortion

• Texas and Louisiana have filed lawsuits against a New York physician for providing telehealth abortion services across state lines. The cases challenge shield laws designed to protect out-of-state clinicians who prescribe abortion medication via telehealth, with New York Governor Hochul refusing to comply with extradition requests. Several states including Vermont, Maine, California, Colorado, Massachusetts, and New York have enacted shield laws to protect clinicians from legal consequences when providing abortion care to out-of-state patients. The outcomes of these cases could impact the broader landscape of telemedicine by setting precedents for how states can enforce healthcare laws beyond their borders.

Biometric Data

• Texas Representative Capriglione has introduced a bill (HB 3755) aimed at amending the state’s biometric privacy legislation. This bill seeks to include a definition of artificial intelligence and clarifies that the law does not pertain to AI or associated training, processing, or storage, unless conducted for the purpose of uniquely identifying a specific individual.

Data Breaches

• A new report analyzing 180 healthcare email breaches from 2024 to 2025 reveals that 43.3% of incidents involved Microsoft 365 misconfigurations. Healthcare organizations face an average breach cost of $9.8 million, with ransomware attacks increasing 264% since 2018. The HHS Office for Civil Rights has intensified enforcement, issuing significant fines including a $9.76 million settlement with Solara Medical Supplies. Despite a 50% increase in cybersecurity spending since 2018, 98.9% of breached organizations lacked basic email security protocols, and only 1.1% maintained a low-risk security posture. The OCR continues to push for proactive HIPAA compliance as email remains the primary attack vector in healthcare.
• Central Texas Pediatric Orthopedics, an Austin-based medical practice filed a data breach notice with the Texas Attorney General on March 6, 2025. The breach exposed sensitive patient information including names, medical information, health insurance details, and government-issued identification for at least 90,000 people. The practice has begun sending notification letters to affected individuals, though they have not posted a website notice or press release about the incident. The source of the breach remains unclear, as it could have originated from either CTPO directly or one of their vendors.
• In 2024, healthcare data breaches affected 53% of the U.S. population, with 13 breaches impacting over 1 million records each, including a record breach affecting 100 million individuals. In response, the Department of Health and Human Services issued a Notice of Proposed Rulemaking to modify HIPAA’s Security Rule, addressing AI systems and electronic protected health information for the first time. The new requirements mandate regulated entities to develop technology asset inventories, conduct risk analyses, and monitor vulnerabilities related to AI systems handling health data. Healthcare organizations must now implement AI governance programs that include maintaining lists of AI tools, reviewing data access protocols, and addressing security gaps. The proposed changes aim to protect against emerging threats like offensive AI, which can mutate and evade detection while learning from its environment.

Emerging Technologies

• A research paper published in the Journal of Theoretical and Computational Advances in Scientific Research presents a framework combining blockchain and AI technologies for healthcare data integration. The blockchain component provides a secure platform for sharing medical records between healthcare providers, patients, and researchers. AI algorithms process the integrated data to enable predictive analysis, automated diagnostics, and personalized treatment recommendations. The framework addresses challenges in healthcare data privacy, interoperability, and efficiency through secure data integration and intelligent decision-making.

Fraud & Abuse

• A Plano pharmacist was sentenced to 17.5 years in prison and ordered to pay $115 million in restitution for orchestrating a $145 million healthcare fraud scheme. Between 2014 and 2017, Dehshid Nourian and his co-conspirators paid bribes to doctors who prescribed unnecessary compound creams to federal workers, which were mixed by teenagers for $15 but billed to the Department of Labor for up to $16,000 per prescription. The pharmacies collected $90 million through this scheme while attempting to evade $24 million in taxes through money laundering operations. A federal jury convicted Nourian on multiple counts of healthcare fraud, money laundering, and tax evasion, leading to the forfeiture of $405 million in assets including brokerage accounts, real estate, and vehicles. The case represents the largest healthcare fraud forfeiture in Department of Justice history.
• An El Paso physician has agreed to pay $468,626 to resolve allegations under the Federal False Claims Act. The United States alleged that Dr. John Patterson received kickbacks from Nursemind Home Care Inc. to falsely certify ineligible patients for hospice services, resulting in fraudulent claims to federal healthcare programs. Patterson received cooperation credit for assisting with the investigation and agreeing to testify in related criminal cases. The investigation led to the criminal prosecution of Nursemind Home Care owner Zenia Chavez, who pleaded guilty to conspiracy charges.
• Texas has secured a $40 million settlement from Molina Healthcare through the state’s Healthcare Program Enforcement Division. The case involved Molina Healthcare, a Fortune 500 company that manages care for Medicaid STAR+PLUS program members who are disabled, blind, or over 65 years old. The settlement stems from allegations that Molina failed to conduct timely assessments of Medicaid beneficiaries and hid this non-compliance from Texas authorities. A whistleblower initiated the case under the Texas Health Care Program Fraud Prevention Act’s qui tam provisions.
• Healthcare fraud enforcement will remain a priority despite potential regulatory rollbacks under a second Trump administration, according to a new report. The COVID-19 Fraud Enforcement Task Force has pursued over 3,500 criminal cases and secured $1.4 billion in seizures, with nursing homes facing scrutiny over false claims and misuse of relief funds. Recent court decisions, including Zafirov which ruled whistleblower-led False Claims cases unconstitutional, and Loper Bright which eliminated deference to regulatory agencies, may provide new defenses for healthcare providers. The Supreme Court’s Jarkesy decision, requiring jury trials for civil penalties, could impact 20 pending cases before the HHS Departmental Appeals Board.

Office of Inspector General

• The U.S. Department of Health and Human Services Office of Inspector General has released updated compliance guidance for nursing facilities, marking its first revision since 2008. The guidance focuses on preventing fraud and abuse through proper billing practices, documentation requirements, and monitoring of financial arrangements between facilities and referral sources. Nursing facilities must implement robust compliance programs that include regular audits, staff training, and oversight from responsible individuals including investors. The OIG specifically highlights concerns about joint ventures, pharmacy arrangements, hospice relationships, and “tunneling” practices that could violate anti-kickback laws.
• A federal audit found that Texas failed to fully comply with federal waiver and state health, safety, and administrative requirements at all 20 adult day activity and health service facilities examined. The Office of Inspector General (OIG) reported 253 instances of provider noncompliance, including deficiencies in facility maintenance, staff qualifications, and regulatory adherence. Of the 20 audited providers, 19 failed to meet one or more health and safety requirements, while 19 also violated administrative regulations. The report recommended corrective actions, improved oversight, and enhanced facility staffing and training. Texas agreed with the recommendations and outlined steps to address the issues.

Patents

• A Federal Circuit addressed the patentability of “obvious” pharmaceutical dosing methods, In the case of  ImmunoGen, Inc. v. Stewart, the parties agreed that a method of using the recited immunoconjugate (also known as IMGN853) to treat FOLR1-expressing ovarian cancer or cancer of the peritoneum was known in the art at the time of filing. Therefore, whether the claims were patentable from an obviousness perspective turned on whether the recited dosing limitation of “6 mg per kg of AIDW of the patient” would have been obvious to a person of ordinary skill in the art (POSITA) at the time of filing. The Court determined that the dosing method would have been obvious to try since it overlapped with known dosing schemes, and therefore, was not patentable. The ruling sets a high bar for proving non-obviousness of dosing regimens for known drugs, even when dealing with unpredictable effects.

Weight Loss Drugs

• A U.S. District Court ruled in favor of the FDA on March 5, 2025, denying the Outsourcing Facilities Association’s motion for a preliminary injunction and stay regarding tirzepatide compounding. The case emerged after tirzepatide products Mounjaro and Zepbound were placed on the drug shortage list in December 2022 due to high demand, allowing compounding facilities to produce copies under specific regulations. The FDA declared the shortage resolved, ending the compounding permission for 503A pharmacies immediately and setting a March 19, 2025 deadline for 503B facilities. The OFA filed an appeal on March 10, 2025, while questions remain about whether modified compound versions of the drug could continue under patient-specific need provisions. The FDA has not yet taken a position on these modified compounds, though their status may depend on whether they are considered copies of commercially available products.

False Claims Act

• Dr. David Young, 61, of Fredericksburg, Texas, has been sentenced to 10 years in prison for Medicare fraud. The physician signed thousands of fake prescriptions and medical records for orthotic braces and cancer genetic testing for over 13,000 Medicare beneficiaries, resulting in more than $70 million in fraudulent healthcare program billing. Young received $475,000 for signing the fake prescriptions and must pay $26,622,522 in restitution.

FDA

• A U.S. District Court has allowed Novo Nordisk to intervene in a case between the FDA and compounding pharmacies. Compounders sued the FDA for removing weight loss drugs from its shortage list, which had previously allowed them to produce copycat versions of Novo’s semaglutide products. The compounders claim the agency’s decisions were arbitrary and that shortages persist. Novo Nordisk cited safety concerns and investment protection in its motion to intervene, which was unopposed by both the FDA and the compounders. Eli Lilly has also filed a motion to intervene in the ongoing legal proceedings.

Medicare

• CMS has revised its Medicare overpayment rule, replacing the “reasonable diligence” standard with a “knowingly” standard that only requires action when providers are aware of overpayments. The update extends the investigation timeline, giving healthcare organizations 180 days to conduct investigations before the 60-day repayment clock begins. Organizations must keep documentation of compliance efforts and implement processes for identifying, reporting, and returning overpayments. Healthcare providers who fail to address identified overpayments risk penalties under the False Claims Act, which can include treble damages and civil penalties. The new framework tries to streamline compliance while maintaining accountability through structured investigation protocols and documentation requirements.
• Medicare reimbursement rates for radiologists have declined by 24.9% from 2005 to 2021 after inflation adjustments, while the average starting salary for radiologists reached $472,000 in 2023, representing a 17.7% increase since 2020. The workforce faces significant pressures with 56.4% of diagnostic radiologists being 55 or older, while new trainees are only increasing by 2.5% annually. The implementation of the No Surprises Act has complicated reimbursements for out-of-network services, and healthcare cybersecurity costs have reached $10.93 million per data breach in 2023. These challenges are pushing independent radiology groups to seek financial subsidies from hospital partners to maintain operations.

Nonprofits

• Nonprofit healthcare organizations are increasingly pursuing mergers to address economic challenges and improve care delivery. These mergers can take the form of either member substitutions, where one organization becomes a controlling member while both entities remain separate, or true mergers that combine organizations into a single legal entity. The consolidations try to achieve cost efficiencies, increase bargaining power with insurance companies, and improve access to capital for technology investments and facility improvements. Mergers also enable organizations to expand their geographic reach, enhance quality of care, and invest in innovations like telemedicine and data analytics. The process requires careful consideration of mission alignment, organizational culture, and governance structures to ensure the merged entity can effectively serve its community while maintaining financial stability.

Physician-Patient

• Healthcare providers who wish to terminate a patient relationship must follow specific protocols to avoid patient abandonment claims. The process requires providers to notify patients in writing of the termination, explain the reasons professionally, and give patients reasonable time (typically 30 days) to find new care. During the transition period, providers must continue necessary care and facilitate the transfer of medical records to the new provider. While providers can terminate patient relationships for valid reasons like non-compliance or non-payment, they must follow applicable laws regarding discrimination and emergency care, with exceptions only for situations posing immediate safety risks.

Ransomware

• Cybersecurity firm Cyble reports 599 new ransomware victims in February 2025, up from 518 in January, with U.S. organizations experiencing a 149% increase in attacks compared to 2024. North American targets face increased attacks due to their perceived likelihood of paying ransoms, despite overall ransom payments declining by 35% year-over-year according to Chainalysis. The ransomware landscape has shifted as LockBit’s dominance waned following law enforcement intervention, while Cl0p now leads with 81 attacks, followed by Akira, Lynx, and Qilin. Construction, professional services, and healthcare remain primary targets, with construction experiencing 50 attacks, professional services 47, and healthcare 33 attacks in 2025. IT services companies continue to face attacks due to their potential as gateways to downstream clients.

Security

• The U.S. Department of Health and Human Services has proposed new HIPAA Security Rule requirements for healthcare organizations using artificial intelligence systems that interact with electronic protected health information. The proposed rules would require organizations to maintain technology asset inventories, conduct risk assessments of AI systems, and monitor for vulnerabilities. Healthcare entities would need to incorporate Business Associate Agreement risk assessments when contracting with AI developers and ensure vendors meet security requirements. A HIMSS survey reveals that most healthcare organizations currently allow AI use but lack formal approval processes, with only 31% actively monitoring AI systems, while HHS has also finalized rules requiring providers to address discrimination risks in AI-powered decision support tools.
• Healthcare organizations have sent a letter to President Trump and HHS requesting the withdrawal of proposed HIPAA Security Rule updates. The healthcare sector has experienced 5,887 large data breaches since 2009, with hacking incidents increasing by 239% between 2018 and 2023, now accounting for 79.7% of all breaches. Healthcare groups cite concerns about financial burdens, conflicts with the HITECH Act, and implementation timeline challenges in their opposition to the proposed security updates. The Office for Civil Rights currently has 857 data breaches under investigation, with limited progress in clearing the backlog due to funding constraints. While earlier breaches primarily resulted from lost or stolen records, the current threat landscape shows a shift toward hacking and ransomware attacks as primary security challenges.

Stark Law

• The Centers for Medicare & Medicaid Services settled 314 Stark Law self-disclosures in 2024, collecting $24.7 million in settlements. The number of settlements in 2024 exceeded the combined total of the previous two record years and represented over one-third of all settlements in the program’s 14-year history. The average settlement amount was $78,781.39, consistent with trends from recent years, while 51 submissions were withdrawn during 2024. CMS has increased its processing speed for settlements, with some cases now resolved within the same calendar year as submission, marking a significant improvement from previous processing times. The smallest settlement in 2024 was $4, while the largest settlement on record remains $1,196,188 from 2018.

Transparency

• On February 25, 2025, President Trump signed an executive order focusing on healthcare price transparency. The order instructs the secretaries of Treasury, Labor, and Health and Human Services to implement new requirements within 90 days, mandating disclosure of actual prices rather than estimates. The directive tries to standardize pricing information across hospitals and health plans while updating enforcement policies for transparent reporting. Under current rules, hospitals must publish machine-readable files of standard charges using Centers for Medicare & Medicaid Services templates and provide price estimator tools for shoppable services.