Category: Health Law Highlights

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Health Law Highlights

PE-Owned Health Care Saw Surge in 2023 Bankruptcies, Report Says

Summary of article from Mergers & Acquisitions, by Bloomberg News:

Private equity (PE)-backed businesses accounted for about 20% of the 80 bankruptcies in the healthcare sector in 2023, according to the Private Equity Stakeholder Project. Additionally, venture-capital backed companies made up another 15% of these filings. The report predicts this trend of healthcare bankruptcies will continue in 2024, especially among companies owned by PE firms. Two of the largest bankruptcies in 2023 were KKR Group’s Envision Healthcare Corp. and GenesisCare. The report also highlighted that increased regulation, high expenses, and the impact of the pandemic have contributed to the distress in the healthcare sector.

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Health Law Highlights

Change Healthcare Faces Another Ransomware Threat—and It Looks Credible

From Ars Technica, by Andy Greenberg and Matt Burgess:

Change Healthcare, a prominent healthcare company in the U.S., has been embroiled in a significant ransomware debacle, initially victimized by the group AlphV, which encrypted the company’s network and received a $22 million ransom payment. Now, a new ransomware group, RansomHub, claims to possess 4 terabytes of Change Healthcare’s stolen data and is demanding its own ransom. While the origins of RansomHub’s data are unclear, security analysts suggest that the threat may be legitimate. This situation highlights the risk of re-extortion in ransomware attacks and the untrustworthiness of cybercriminals, even after ransoms are paid. The ongoing attack has caused severe disruptions across U.S. medical practices, with 80% of clinicians reporting revenue loss and many facing potential bankruptcy.

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Health Law Highlights

CMS Issues Hospice Proposed Payment Rule

From King & Spalding, by Kate Karpenko:

The CMS has issued a proposed rule for fiscal year 2025 to update Medicare hospice payments and aggregate cap amount, which includes a 2.6% increase in payments and an updated aggregate cap of $34,364.85. The proposal also introduces changes to the Hospice Quality Reporting Program (HQRP), including the addition of two new measures and the use of the Hospice Outcomes and Patient Evaluation (HOPE) tool for patient data collection. It also suggests changes to the Hospice Consumer Assessment of Healthcare Providers and Systems (CAHPS) Survey, including a web-mail mode and a simplified survey. Technical changes are proposed to the Conditions of Participation (CoPs) to clarify language around the roles of a medical director and physician designee. Stakeholders are encouraged to submit comments on the proposed rule by May 28, 2024.

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Health Law Highlights

Online Tracking Technologies: Updated HIPAA Guidance Creates Uncertainty

From Morgan Lewis, by W. Reece Hirsch, Amy M. Magnano, Michael J. Madderra, Sydney Reed Swanson:

The US Department of Health and Human Services’ (HHS’s) Office for Civil Rights (OCR) updated its guidance on the use of online tracking technologies, causing further uncertainty for HIPAA-covered entities. OCR acknowledges that tracking technologies, such as cookies and web beacons, can unintentionally capture protected health information (PHI), thus implicating HIPAA. The updated guidance states that individually identifiable health information (IIHI) collected on a regulated entity’s website or app is generally considered PHI, even without specific treatment or billing details. The guidance differentiates between authenticated and unauthenticated pages, warning that PHI could be accessible even on unauthenticated pages. The update presents a compliance challenge for HIPAA-regulated entities, as discerning the subjective intent of website visitors is difficult, and entities must also consider other federal and state laws where HIPAA does not apply.

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Health Law Highlights

Forecasting the Integration of AI into Health Care Compliance Programs

From Robinson Cole, by Kathleen Healy, Josh Yoo:

Healthcare entities need to incorporate AI standards into their compliance programs to manage and mitigate legal risks. Executive Order No. 14110 outlines key principles for AI including confidentiality, security, transparency, governance, and non-discrimination. The National Institute of Standards and Technology (NIST) provides a Risk Management Framework for AI and a playbook to help organizations manage AI risks. Key federal privacy and security laws like HIPAA and Section 5 will impact the use of AI in healthcare. It’s vital for healthcare entities to monitor evolving AI laws and regulations, inventory existing and upcoming AI use, educate themselves on updates, and adapt their compliance plans accordingly.

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Health Law Highlights

Pandemic Fraud Suits Have Yielded Over $100 Million, Report Says

From Bloomberg Law, by Daniel Seiden:

The Covid-19 Fraud Enforcement Task Force has reported that over $100 million has been reclaimed by the US government through False Claims Act (FCA) cases related to pandemic fraud. These funds have been recovered from more than 400 settlements and judgments, including cases of Paycheck Protection Program fraud, Economic Injury Disaster Loan fraud, health-care fraud, and agricultural program fraud. The report indicates a steady rise in new whistleblower actions under the FCA alleging pandemic relief fraud from 2020 to 2023. In 2023 alone, the Department of Justice (DOJ) recovered a record $2.68 billion from 543 FCA settlements and judgments.

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Health Law Highlights

“Stark” Differences: DOJ’s Renewed Focus on Stand-Alone Stark Law Violations

From Arnold & Porter, by Murad Hussain, Allison W. Shuren, Loreli (Lori) Wright:

The Department of Justice (DOJ) has recently increased enforcement of the False Claims Act (FCA) based on the Stark Law, also known as the Physician Self-Referral Law. This law focuses on financial relationships between physicians and health care entities, particularly when compensation exceeds fair market value (FMV) or varies with the volume or value of referrals. Violations of Stark Law can lead to FCA claims, requiring less proof than Anti-Kickback Statute (AKS)-based FCA claims. This trend has been evident in a series of new FCA enforcement actions and resolutions involving large health care providers since early 2023.

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Health Law Highlights

Healthcare Highlights from FTC’s 2024 PrivacyCon

From SheppardMullin, by Carolyn Metnick, Carolyn Young:

The Federal Trade Commission’s annual PrivacyCon highlighted three healthcare privacy research projects: tracking technology use by healthcare providers, women’s privacy concerns post Roe era, and bias propagation through large language learning models (LLMs). One key finding was the extensive use of tracking technologies on hospital websites, which can reveal personal health information and potentially be exploited. Despite serious implications, healthcare data privacy concerns are largely overlooked by users. The event also underscored how biases in LLM training data can lead to biased healthcare outcomes. The key takeaway was the need for transparency in handling healthcare data, including clear policies around data collection and usage, compliance with HIPAA and FTC rules, and the need for accurate privacy notices for users.

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Health Law Highlights

CMS Again Settles Record Stark Self-Disclosures in 2023

From McGuireWoods, by Gretchen Heinze Townshend, Timothy Fry, Kristen H. Chang, Varsha Gadani, Micaela Enger:

The Centers for Medicare & Medicaid Services (CMS) reported a record 176 settlements of voluntary self-disclosures related to past or potential violations of the physician self-referral law (Stark Law) in 2023, with settlements totaling over $12 million. This represents an increase from 103 self-disclosures and over $9 million in settlements in 2022. Despite the increase in total settlements, the average settlement amount in 2023 was $71,363.73, one of the lowest on record. The CMS’ self-referral disclosure protocol (SRDP) allows healthcare providers to self-disclose violations to resolve overpayment liability. The data suggests that CMS is focusing on processing SRDP submissions more quickly, with average settlement amounts remaining consistent with previous years.

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Health Law Highlights

Fair Market Value and Commercial Reasonableness Considerations Amid CMS Radiopharmaceutical Reimbursement Challenges

From VMG Health, by Carla Zarazua, Preston Edison, and James Tekippe, CFA:

Radiopharmaceutical drugs (RPs) are crucial for diagnosing and treating diseases. However, the current pricing structure by the Centers for Medicare and Medicaid Services (CMS) places a financial strain on hospitals and health systems and potentially restricts patient access to these vital resources. The existing CMS payment structure categorizes diagnostic RPs as supplies, bundling their cost into the overall procedure rate, causing a disconnect between the cost of acquiring RPs and the reimbursement received, particularly for high-cost drugs. 

The CMS encourages hospitals to use cost-effective resources while ensuring patient care. A temporary exception allows for separate pricing for new and high-cost drugs for two to three years, but this is a finite period. The current pricing model may force hospitals to limit the use of high-cost or newer RPs, potentially leading to suboptimal patient care and stifling innovation in drug development.

In response to these challenges, the CMS proposed five alternative payment models in 2024, including paying separately for diagnostic RPs with per-day costs above a certain threshold, restructuring the ambulatory payment classification (APC), and adopting codes that incorporate the disease state being diagnosed. Stakeholders, including the Medical Imaging & Technology Alliance (MITAS) and the American College of Radiology (ACR), advocate for separate payment for diagnostic RPs based on the average sales price (ASP) + 6% methodology.

However, the CMS has not yet decided on a new reimbursement structure for RPs, leaving hospitals to navigate the financial implications of using these drugs. To remain compliant with fair market value (FMV) and commercial reasonableness (CR), hospitals need to review and negotiate vendor agreements, document the necessity of higher-priced drugs, and establish a process for deciding which RPs to use.

In conclusion, while awaiting a resolution from the CMS, hospitals and health systems must proactively develop compliance protocols and negotiate agreements to minimize the financial impact and ensure optimal patient care. The proposed changes to the reimbursement structure for RPs represent a significant step towards addressing the economic challenges faced by healthcare providers and improving patient access to essential diagnostic and therapeutic resources.