Health Law Highlights

D.C. Circuit Holds 340B Program Does Not Prohibit Drug Manufacturers from Imposing Contract Pharmacy Restrictions

Summary of article from Foley Hoag LLP, by Patrick Brennan, Andrew London, Ross Margulies, Kian Azimpoor:

On May 21, 2024, the U.S. Court of Appeals for the District of Columbia Circuit affirmed a lower court’s decision in United Therapeutics Corporation v. Carole Johnson and Novartis Pharmaceuticals v. Carole Johnson, rejecting the government’s position that the 340B statute prohibits drug manufacturers from imposing contractual conditions on drug distribution. The court upheld that the manufacturers’ conditions imposed on contract pharmacies did not violate the 340B statute, but noted that some restrictions might. This follows a similar decision by the Third Circuit in Sanofi Aventis U.S. LLC v. HHS. There is still an ongoing case in the Seventh Circuit that could influence whether the case goes to the Supreme Court or if the Health Resources and Services Administration (HRSA) reconsiders its contract pharmacy policy. This decision is a significant win for drug manufacturers, but its immediate impact on the Section 340B program remains uncertain pending other appellate court rulings and potential Supreme Court review.


Top Ten Health Law Myths

I have been practicing health law for more than 25 years and have had the benefit of working with a lot of healthcare providers. My clients will often repeat myths about the practice of healthcare they have heard from their colleagues. There are also occasions when my fellow attorneys will make assumptions about healthcare law that are not accurate.

There is a lot of confusion and misinformation floating around about the legalities of healthcare. Let’s debunk the top 10 myths right now.

Myth No. 1: Everyone is doing it, so it must be okay.

Truth: There is no strength in numbers. The more people doing things the wrong way, the more they attract the attention of enforcement agencies and licensing boards.

This is perhaps the most pervasive myth there is. I can’t tell you how many times I explain to clients how their business should be structured or some restriction or requirement they must observe. They will often ask how their competitors are getting away with doing things differently.

The truth is, they probably misunderstand what their competitors are doing. Some healthcare providers have only a vague understanding of how their business is structured. Just because some other provider told you their business functions a certain way doesn’t mean it is true.

But even if other people are doing things a certain way, that doesn’t make it correct or legal. Remember the question your mother would ask you: “If everyone was jumping off a cliff, would you do it too?” The truth is, many people are jumping off the proverbial cliff. Don’t follow them.

This is particularly important when it comes to governmental billing. CMS has established the Center for Program Integrity that uses big data to identify fraudulent billing. If everyone else is doing something wrong, Medicare is more likely to take notice.

There is no strength in numbers, only exposure. If you need any convincing, read my recent article on the government’s attempts to recoup funds paid out for neurostimulators.

Myth No. 2: If you don’t see Medicare patients, you can’t violate the Anti-Kickback Statute or the Stark Law.

Truth: You can violate the fraud and abuse rules even if you don’t see Medicare patients.

People are rightfully concerned about submitting false claims to the federal government given the significant civil and criminal penalties involved. However, too many providers think they are safe from these penalties if they don’t see Medicare patients.

The truth is there are other federal laws, and even state laws, which carry civil and criminal penalties that apply to all patients, even if they are not Medicare beneficiaries.

Consider the Federal Travel Act. The use of the Travel Act in healthcare prosecutions is a hot topic nationally, and especially in North Texas following the Forest Park Medical Center case.

The Travel Act was passed in 1961 at the behest of Attorney General Robert F. Kennedy to combat the prevalence of organized crime and racketeering syndicates. Despite the name, you don’t have to travel to violate the Travel Act. The Travel Act makes it a federal crime to use facilities of interstate commerce to promote, manage, establish, or carry on specific, statutorily defined “unlawful activity.”

These unlawful activities are can be any state law crime. As it relates to healthcare fraud and abuse, state crimes such as commercial bribery can form the basis for Travel Act liability. By co-opting these state law offenses, the Travel Act effectively federalizes state law violations.

State also have their own laws which apply. The Texas Patient Solicitation Act (TSPA) is sometimes called the Texas Anti-Kickback Statute or the Texas Stark Law because it has elements of both. You violate the TPSA by offering to pay or agreeing to accept anything of value to secure or solicit a patient or patronage for or from a licensed professional. Called an “All-Payor” statute, a TPSA violation is not limited to referrals for services paid by government health programs.

By default, a TPSA violation is a Class A misdemeanor, but it can become a third-degree felony if the person has violated the TPSA previously or was employed by a federal, state, or local government at the time of the offense.1

Just because you don’t see Medicare patients, or your arrangement doesn’t involve Medicare patients, don’t think you are beyond the reach of anti-referral laws.

Myth No. 3: Sales representatives are a good source of legal advice

Truth: Sales representatives are not attorneys and may not be familiar with the latest developments in health law. Plus, they are incentivized to sell products and don’t necessarily have your best interests at heart.

I’m not disparaging sales representatives. I am admonishing the providers to beware of their motivations. Their job is to sell you supplies and equipment, and like any good sales representative, they will put their product in the most favorable light. They do not necessarily have the legal expertise to analyze the legalities of reimbursement, business structures, patient disclosures, or your licensing board requirements.

Invariably, the sales representative will start the conversation by saying, “I’m not an attorney but…”, then they proceed to give the provider legal advice regarding a complex application of an Anti-Kickback Safe Harbor. I have been on phone calls where the sales representative provided the client with incorrect advice and which I had to gently correct.

Even in the best of situations, legal advice in the healthcare context can be complex and nuanced. Coupled with the fact that most of the sales representatives are not attorneys and you’ve got a recipe for confusion and misinformation. Providers should consider the source of any legal advice they receive and discerning about the advice they choose to accept.

Myth No. 4: All lawyers are well-versed in healthcare law, or the corollary, that health law is just like business or corporate law.

Truth: Healthcare is the most regulated industry. As a result, health law is expansive and nuanced. Many attorneys are not equipped to offer comprehensive advice on health law topics.

This myth manifests itself in several ways. Some providers have business or family attorneys (or CPAs) they rely on for advice on various health law issues. Perhaps, that is better than no advice at all, but oftentimes healthcare issues turn on a complicated framework of federal and state statutes and regulations. Most attorneys do not take health law classes in law school and are therefore not familiar with all of the issues at play.

I’ve also seen this issue arise with unscrupulous businesses who, to entice physicians to enter into a deal, will hire lawyers to draft “opinion letters” that the deal is legal. Some of these opinion letters are nothing more than marketing propaganda. As with sales representatives, you should consider the source of the information. Recognize that the attorney is being paid to write the letter and does not represent you. If you get into trouble, that attorney will be nowhere to be found.

At the very least, providers should have their own health law attorney review the arrangement rather than taking someone else’s word for it.

Myth No. 5: Non-compete provisions are not enforceable against physicians.

Truth: Non-compete provisions are enforceable against physicians and other healthcare providers. Do not sign any restrictive covenant without the advice of competent counsel.

Noncompete provisions are common in healthcare and are routinely enforced. Unfortunately, some physicians think the opposite is true and incorrectly reason they can agree to anything without fear of repercussion.

Perhaps this myth stems from a unique statute in Texas. Based on the theory that a private contract should not unreasonably restrict a patient’s right of access to the physician of their choice, Texas has some unique requirements for noncompetes to be enforceable. One such requirement is that the noncompete must include a buyout provision, meaning, the physician must be allowed to pay a fee to “buyout of” the restriction.2

Texas also limits the scope and geographic area of noncompetes to the most narrow restriction necessary to accomplish the business purpose of the restriction. If the restrictions are reasonable, courts will enforce the provision. If the restrictions are not reasonable, courts have broad discretion to revise them as appropriate.

Myth No. 6: Medical school prepares physicians to handle the business and legal aspects of practicing medicine by themselves.

Truth: Legal concepts in healthcare are complex and dynamic. Great physicians are not necessarily great lawyers.

Schools do a great job educating healthcare providers to provide healthcare. And while many of them also offer courses on business and Texas jurisprudence, it is simply impractical to instill in the provider all the information he or she will need to navigate the legalities of modern healthcare. Even lawyers who specialize in health law must constantly stay up-to-date on recent developments.

I’ve met some wonderful physicians over the years, but a common trait among them is that they will sign or enter into an agreement without reading the agreement or truly understanding what they are getting themselves into.

I once came across a physician who tried to sell my client her medical practice, not realizing she had sold it to someone else. Two years prior, she sold the practice to a “management company” and didn’t realize she was just an employee and not the owner. This example may be extreme, it is a consistent theme.

The practice of law is as technical as the practice of medicine. Lawyers shouldn’t practice medicine and physicians shouldn’t practice law. You will save yourself a lot of money and heartache if you retain competent legal counsel rather than trying to go it alone.

Show me a physician who tries to handle legal problems themselves and I’ll show you a physician who is going to be a great client. It’s much better to avoid the problem in the first place than to fix the problem after the fact.

Myth No. 7: There is a way around any legal prohibition or restriction.

Truth: The government has broad discretion to prosecute fraud and abuse. The Department of Justice will closely scrutinize arrangements designed to circumvent the law.

It is not uncommon for initial conversations with clients to begin, “I want to practice ethically and do everything above board, but is there a way around… [fill in the blank.]” This attitude is dangerous.

Federal and state healthcare and reimbursement statutes are broad and sweeping. The anti-kickback statute, for example, applies to any remuneration, that is, anything of value. And it applies to both sides of the transaction whether soliciting kickbacks or paying kickbacks. The government has broad discretion to review business arrangements and identify possible kickbacks. You may find yourself on the wrong side of a civil or criminal prosecution because the result of your arrangement is to pay you or someone else for the volume or value of referrals.

The Stark Law has a special penalty for “circumvention schemes” designed to avoid technical violations of the law. The Texas Patient Solicitation Act applies even more broadly than its federal counterparts.

The point is that you should avoid getting too clever with the types of arrangements you enter into. There are ways to structure deals legally, but there are also deals that can’t be structured in any way to make them appropriate.

Providers are right to want to stay above board, but that means saying no to certain questionable arrangements.

Myth No. 8: The government has better things to do than to focus on a single provider.

Truth: The government will investigate individual providers, but even if they don’t investigate you, your own employees may start legal action against you.

This is a corollary to the myth about strength in numbers. Once the government identifies the providers who have been involved with a particular scheme, they can and will go after single healthcare providers. Small clinics or large practices. It doesn’t matter. The government will target anyone who has been involved in the scheme.

But even if the government doesn’t seek you out, your employees are incentivized to turn you in.

The government provides incentives to turn people in who have submitted false claims to the government. Qui tam actions, also called “Whistleblower” actions, allow a citizen to file a lawsuit on behalf of the government and share in the money recovered. In the healthcare context, the False Claims Act allows private persons and entities with evidence of fraud against federal programs to sue the alleged wrongdoer on behalf of the government.

For 2018, the Department of Justice recovered over $2.5 billion in fraud judgments and settlements in the healthcare industry. $1.9 billion came from these whistleblower actions.

Don’t think your employees won’t turn you in. Disgruntled employees or competitors are rich sources of qui tam actions or unsolicited complaints to the government.

The government makes it easy to report fraud via various fraud hotlines. I have had clients whose disgruntled employees sent emails to the authorities outlining all the alleged fraudulent conduct. Just do a Google search on whistleblower attorneys in your area. You will be surprised at how many attorneys advertise this type of representation.

Don’t think for a minute that the government won’t focus on your small clinic. It will. But perhaps the government is not your biggest concern. Your employees or competitors can turn you in as well.

Myth No. 9: A new treatment, drug, or protocol, will make you a lot of money quickly.

Truth: There are no shortcuts to a profitable healthcare business. Watch out for those pushing such schemes.

One of the greatest joys of my practice is to be able to help healthcare providers be successful in their practices. Whether it is a new business venture or an ongoing practice, it’s great to see healthcare providers be successful. But there are times when clients think they are on the cusp of the next big thing. All we have to do is set up a business and do this or that, and they will catch the wave to financial prosperity.

There are very few get-rich-quick opportunities. That is even more true in healthcare. Because it’s so highly regulated, new and innovative products, treatments, or drugs often become the subject of fraud and concern. Even if it is effective, it takes years for the standard of care and the law to catch up. Coupled with the fact that the FDA monitors devices and drugs, and that the Texas Medical Board is concerned about unapproved treatments, being on the cutting-edge is usually not desirable.

A great example is stem cell therapies. Stem cells offer great promise. However, the science is still developing and many of these products are not yet approved by the FDA. The Texas Medical Board has taken a unique interest in stem cell therapies and the types of representations been made to the public about their efficacy.

Be very skeptical about embracing the “next big thing.” Focus on marginal improvements in your practice and business that compound over time to yield outstanding results. Address the legal liabilities and pitfalls immediately in front of you rather than taking on an entirely new set of risks.

Myth No. 10: If someone files a complaint against you with your licensing board, all you need to do is send a letter to the Board and explain your side of the story. The complaint will go away.

Truth: Providers often make the situation worse by failing to appreciate all the rules and regulations governing the practice of medicine in Texas.

The unfortunate reality of being a professional is that you may one day be faced with a complaint filed against you by a patient. Complaints are filed for many reasons. Sometimes, providers fall short of the expected standard of care. Other times, clients file complaints because they are angry about some aspect of their treatment or want their money back. Whatever the reason, complaints must be taken seriously and responded to timely and appropriately.

I’ve been called more than once by providers who tried to handle it themselves. They fired off an answer to the Board only to make the situation worse. Now, instead of facing a minor complaint, they are dealing with a more serious violation.

Besides the legal aspects of the case, there are practical considerations. As the provider, you may not be able to look at the situation objectively. You may not recognize some important element of the complaint, or appreciate how a casual explanation can raise questions about other statutes and regulations. I’ve had several clients who thought they were helping themselves by explaining their side of the story, but all they did was create additional questions about other potential violations.

Most providers don’t realize that once the Board starts an investigation, they are not limited to the specific complaint. Like the Camel’s nose, once they are in a little, they are all in. Nothing is off-limits. The Board will review all aspects of your practice and your care. While defending yourself against one violation, you might inadvertently admit to another.

Even if you feel like the complaint has no merit, you should hire experienced counsel to represent you throughout the complaint process. Your attorney can make sure you meet all the applicable deadlines and put you in the best position possible for a favorable outcome.

Also, an experienced attorney has been through the complaint and hearing process before and understands the expectations of the Board and what resolution is possible.


These are just a few health law myths. It is unfortunate that there is such misinformation. Healthcare practice in today’s environment is challenging enough, but doing so with the wrong understanding makes it more difficult.

Finding a good health law attorney to help you avoid costly mistakes can make your practice more profitable and less stressful.


The Shocking Truth About Neurostimulators and the Government’s Efforts to Recoup Payments

For much of the past decade, peripheral neurostimulator devices have been used liberally by some practitioners to treat chronic pain. In addition to pain relief, any manufacturers also promise providers that these devices are reimbursable by Medicare.

This combination of relief and reimbursement has proven irresistible. Why not use a device that gives patients relief from chronic pain? The fact that Medicare reimburses roughly $6500 for a device that only costs $250 – $700 makes it even more attractive.

The problem is that this simply is not true. Medicare rules do not allow for reimbursement of these devices and never have. Providers who submit these neurostim claims to the Centers for Medicare and Medicaid Services (CMS) are submitting false claims to the government.

The government has taken notice and is cracking down.

If you have billed Medicare for electro-acupuncture devices, such as P-Stim, ANSiStim, or Stivax, you will be audited by CMS or prosecuted by the OIG. If you have not yet been contacted by the government, there are proactive steps you can take to try to minimize your exposure. If you have been contacted by the government, you need experienced counsel. Contact Wade Emmert at or (214) 855-3040 for experienced advice.

Types of Nerve Stimulation

Using mild electrical current to treat nerve pain is not new. There are several treatment modalities designed to focus electrical signals at pain-causing nerves to interfere with the way nerves relay information about pain to the brain.

One method is called TENS, which has been in use for decades and is well-proven. TENS stands for Transcutaneous Electrical Nerve Stimulation. Transcutaneous simply means that the electrical pulse is transferred across the depth of the skin.

Another modality is PENS, or Percutaneous Electrical Nerve Stimulation, which combines the concept of TENS with acupuncture. Percutaneous means that the electrical pulse is transferred through or into the skin by way of a needle. Instead of transferring the electrical pulse across the skin, PENS uses small needles to penetrate into the skin and deliver current closer to the nerves or the muscles beneath the skin, making the nerves less sensitive to pain. PENS is less proven and many insurance companies consider percutaneous neuromodulation therapy (PNT), to be investigational.

Patient getting electro dry needling on his back in clinic via

Auricular Peripheral Nerve Stimulation (APNS) takes the concept of PENS a step farther. With APNS, acupuncture needle electrodes are inserted into the patient’s ear to direct electric pulses to the nerve cluster in the ear.

Unlike PENS, where the needle electrodes are placed in proximity to the nerve serving the area of chronic pain, in APNS the placement of the needles is based on the flow of the person’s life-giving force called ‘qi’ (pronounced ‘chee’).

In concept, the ear has different zones and the placement of the needle electrodes in a particular combination of zones can treat conditions such as migraines, neck pain, occipital neuralgia, pelvic pain, insomnia, knee pain, tinnitus, TMJ pain, low back pain, mid back pain, post-surgical pain and edema, complex regional pain syndrome, shoulder pain, sphenopalatine ganglion neuralgia, chemical-induced peripheral neuropathy, chest wall / intercostal pain, foot pain, fibromyalgia, elbow pain, chronic fatigue, depression, and smoking cessation.

ANSiStim by DyAnsys is worn behind to relieve chronic pain without narcotics or side effects. Treatment typically takes ten to twelve weeks. (PRNewsFoto/DyAnsys)

The device is designed to be worn by the patient for several days. It is affixed by an adhesive behind the ear, on the neck, or shoulder. Electrodes run from the device to the patient’s ear where they are placed into the skin and secured by an adhesive covering. The protocols vary, but each device remains affixed for 4-14 days and patients can receive multiple devices in sequence over time.

APNS devices are sold under brand names like P-Stim™, ANSiStim®, and Stivax.1 Many of these devices are considered investigational, though a few have received marketing clearance by the U.S. Food and Drug Administration’s (FDA) for use in treating acute or chronic pain by a qualified practitioner of acupuncture.

That does not mean, however, that they are reimbursable by Medicare.

Obfuscation and Deception

The FDA classifies PENS and APNS devices as electro-acupuncture devices. Medicare does not cover acupuncture for any condition other than chronic low back pain.2 But that did not stop manufacturers from implying, or outright misrepresenting to providers, that these devices were legally reimbursable.

Providers were encouraged to use certain codes to report APNS to Medicare:3

  1. CPT 64555
  2. CPT 63663
  3. CPT 95970-95972
  4. HCPCS L8679

Unfortunately, none of these codes properly describe APNS because none of these procedures or devices involve implantation and because Medicare does not reimburse for electro-acupuncture.

CPT Code 64555

CPT Code 64555 is the procedure code for percutaneous implantation of the neurostimulator electrode array. This is the code to claim reimbursement for the physician to perform the procedure. Practitioners would bill around $1,000 per procedure using this code.

The American Medical Association (AMA) defines Code 64555 as a “percutaneous implantation of neurostimulator electrode array, peripheral nerve (excludes sacral nerve).” A percutaneous procedure is any procedure or method where access to inner organs or other tissue is performed via needle-puncture of the skin, rather than by using an “open” approach where inner organs or tissue are exposed (typically with the use of a scalpel.4

This code is used for neurostimulator treatments with electrodes implanted below the skin, not placed into the skin. National Coverage Determination (NCD) for Assessing Patient’s Suitability for Electrical Nerve Stimulation Therapy (160.7.1) states:

This diagnostic procedure which involves stimulation of peripheral nerves by a needle electrode inserted through the skin is performed only in a physician’s office, clinic, or hospital outpatient department. Therefore, it is covered only when performed by a physician or incident to physician’s service. If pain is effectively controlled by percutaneous stimulation, implantation of electrodes is warranted.

A similar description was provided in Local Coverage Determination (LCD): Peripheral Nerve and Peripheral Nerve Field Stimulation (L34328):

PNS refers to the placement of a lead by a physician (via open surgical or percutaneous approach) near the known anatomic location of a peripheral nerve. … It is preferable that the physicians performing the PNS trials will also perform the permanent implant. If the physician implanting the trial PNS does not or cannot implant the permanent neurostimulator(s), the patient should be informed of this in writing and given the name of the referral surgeon who will implant the permanent neurostimulator(s).

Neurostim treatments are recoverable only when the electrodes are implanted percutaneously by a physician, typically performed in an outpatient setting at an ambulatory surgical center. Even then, such procedures are recoverable only when other, less invasive procedures have failed.

APNS devices are never percutaneously implanted and therefore do not meet the definition for CPT 64555.

CPT 63663

CPT Code 63663 is the procedure code for the revision or replacement of percutaneous spinal neurostimulator electrodes. With spinal cord stimulation (SCS), mild electrical stimulation is delivered to nerves along the spinal column, modifying or blocking nerve activity to minimize the sensation of pain reaching the brain.

The pulse generator for SCS is a small device that is implanted near the spine in the same way a cardiac pacemaker might be implanted to treat abnormal heart rhythms.

As we discussed regarding CPT 64555, electro-acupuncture devices are not implanted and have little involvement with the spine. They do not meet the description for CPT 63663.

CPT 95970–95972

These procedure codes allow for the electronic analysis of implanted neurostimulator pulse generators/transmitters. As we discussed regarding CPT 64555, electro-acupuncture devices are not implanted. Since they are not implanted, providers cannot bill for analysis of the devices as if they were. These codes are not appropriate for electro-acupuncture devices.


HCPCS Code L8679 is the device code for an “implantable neurostimulator, pulse generator.”5 This is the code to claim reimbursement for the device itself. The device was priced at $10,000 for which Medicare reimbursed around $6,500.

Incidentally, these devices cost the provider only $250-$700 per device.

Similar to CPT 64555, to be reimbursable, the neurostimulator must be “implantable.” Again, neither the electro-acupuncture device nor the electrodes are implanted.

Some providers would also add Modifier 25 to Code L8679 procedures to increase reimbursement even more. Modifier 25 is defined as “a significant, separately identifiable Evaluation and Management (E/M) service by the same physician or other qualified health care professional on the same day of the procedure or other service.”6 It allows a provider to capture a separate, significant procedure performed on the same day as another procedure that would not otherwise be reimbursed.

Even if electro-acupuncture was properly coded as L8679, Modifier 25 would not be appropriate.

Providers in the Dark

Sales representatives for these electro-acupuncture devices knew they could sell more devices if the providers thought they could get reimbursed. When the providers started asking questions, some manufacturers doubled-down. They brought in consultants to coach providers on how to document the procedure in the medical records and code the treatment so that Medicare would pay the claim.

One sales representative, in response to “several inquiries recently from clients across the country regarding Stivax coding” offered a memo as “a way to proceed forward.” He stated:

After working closely with our compliance team over the past few weeks we are very happy to announce a new coding set that is to be used effective immediately.

The memo, entitled, “Coding for the Stivax Stimulator,” suggested tracts for Medicare billing using the codes previously debunked: L8679, 95970-95972, and 63663.

Other sales representatives suggested billing for the implantation of the electrodes rather than the device, by using CPT code 63650 and supply code E1399. Those codes require implantation too, which the APNS electrodes are not.

I have represented several providers who were duped into believing that these devices were legally reimbursable. While they were enticed by the opportunity to make money, none of them understood that these codes were improper. Some went as far as to hire a “compliance consultant” who was to make sure that everything they were doing was legal. Unbeknownst to them, this “compliance consultant” was also working with the manufacturer.

Medicare Crackdown

Based on these “stealth coding” practices advocated by some manufacturers, Medicare reimbursed many providers as if they had performed an implantation procedure of an implanted device.

CMS was slow to recognize the improper coding but responded early enough that manufacturers and sales representatives knew that these procedures and devices were not reimbursable by Medicare.

In August 2016, Novitas Solutions (a Medicare Administrative Contractor) issued Local Coverage Article: Auricular Peripheral Nerve Stimulation (Electro-Acupuncture Device) (A55240) specifically targeted at NeuroStim, P-Stim, ANSiStim, and E-Pulse. Novitas listed these brand names specifically and stated that these devices were not covered.

Coding Guidelines:

The CPT code 64555, does not describe the procedure of auricular acupuncture stimulation and it should be coded using the NOC CPT code 64999 – unlisted procedure, nervous system.

Novitas noted that the FDA classifies APNS as “electro-acupuncture devices” because they stimulate auricular acupuncture points. As such, they “are non-covered by Medicare in that Acupuncture is not a covered Medicare benefit[.]”

The article directs providers to bill these devices only with the CPT procedure code 64999, which describes an unlisted procedure for the nervous system. Using this CPT code properly conveys to Medicare that the service provided is not otherwise classified (NOC). In practice, this means that the procedure will not be reimbursed.

More recent CMS publications have warned against claims based on the other codes.

In January 2020, CMS published a Medicare Learning Network article entitled, Incorrect Billing of HCPCS L8679 – Implantable Neurostimulator, Pulse Generator, Any Type. Again, they call out P-Stim® devices specifically, but address all brands of electro-acupuncture devices:

The Centers for Medicare & Medicaid Services (CMS) is aware that some providers are submitting claims incorrectly to Medicare using HCPCS code L8679. This article reminds providers of Medicare policy regarding these devices. Make sure your billing staff are aware of the correct policy. …

Providers are inappropriately coding electro-acupuncture devices as implantable neurostimulators (HCPCS L8679 – implantable neurostimulator, pulse generator, any type), which are Medicare-covered devices that require surgical implantation into the central nervous system or targeted peripheral nerve, and are usually implanted via procedures performed in operating rooms (see CMS Publication 100-03, National Coverage Determination (NCD) Manual, Section 160.7). While both devices can be used to treat chronic pain, the electro-acupuncture devices are non-invasive (that is, do not require surgical implantation and/or an incision), and have an external battery source. Electro-acupuncture devices and implantable neurostimulators are two separate devices, and coding electro-acupuncture devices as implantable neurostimulators is incorrect.

And again in July 2020, Nordidian (a Medicare Administrative Contractor), published Implantable Neurostimulator, Pulse Generator, Any Type, HCPCS L8679 – Widespread Service Specific Targeted Review:

This article is to notify providers of the initiation of a widespread service specific targeted review for Healthcare Common Procedure Coding System (HCPCS) L8679, implantable neurostimulator, pulse generator, any type. The article further provides instruction on the use of the Noridian Medical Review website to facilitate proper submission of appropriate records and Medical Review contact information.

Recoveries by the Department of Justice and Office of Inspector General

CMS, the Department of Justice (DOJ), and the Office of Inspector General (OIG) have initiated False Claims Act prosecutions to recoup payments for electro-acupuncture treatments. The number and frequency of these actions are increasing.

In most cases, recoupment starts with a CMS audit of medical and billing records for claims involving CPT 64555 and HCPCS L8679. At the conclusion of the audit, CMS will either request recoupment of funds or turn the matter over to the OIG who, with the assistance of the DOJ, will prosecute a civil action (though sometimes criminal action) against the provider.

An Assistant United States Attorney assigned to the matter will issue one or more Civil Investigative Demands (CID) to the provider. A CID is a discovery device used to obtain written answers and documents relevant to their investigation or prosecution. These CIDs are often hand-delivered by OIG or FBI agents directly to the provider in the provider’s office.

The provider will need to hire competent legal counsel if they have not already done so. The provider’s attorney will either work to resolve the matter as cost-effectively as possible or prepare the case for trial.

In False Claims Act cases, the government can seek three times the amount of the Medicare reimbursement plus penalties per claim. For example, if the provider was reimbursed $500,000 for 80 devices, damages at trial could be:

Damages$500,000 x 3$1,500,000
Penalties80 claims x $23,000 per claim7$1,840,000
Total Liability$3,340,000

Depending on the facts of the case, the government will usually start settlement discussions at double damages with little or no penalties. With the specter of trial and significant damages, many providers are motivated to resolve the matter prior to trial.

The reported number of settlements over the past two years is steadily increasing and Texas has become fertile ground for recoveries. These types of cases have proven irresistible to politically motivated U.S. Attorneys as the cases involve significant recoveries and public opinion is on the government’s side.

  • February 2021, U.S. Attorney’s Office for the Southern District of Texas. Chiropractor in an integrated practice agreed to pay $273,000 to settle allegations that he improperly billed. Medicare for implantation of ANSiStim and Stivax devices.
  • January 2021, U.S. Attorney’s Office for the Northern District of Texas. Chiropractor in an integrated practice agreed to pay $90,000 to settle allegations that he improperly billed Medicare for implantation of ANSiStim and Stivax devices.
  • January 2021, U.S. Attorney’s Office for the Eastern District of Texas. Clinic agreed to pay $330,898 to settle allegations that it improperly billed Medicare for the implantation of 41 neurostimulator devices in an office setting.
  • January 2021, U.S. Attorney’s Office for the Middle District of Tennessee. Three healthcare providers agreed to pay $1.72 million to settle allegations that they improperly billed Medicare using the HCPCS Code L8649.
  • September 2020, U.S. Attorney’s Office for the Eastern District of Pennsylvania. A neurosurgery practice, its surgeon and director agreed to pay more than $1 million to resolve allegations that the practice, among other things, billed Medicare for the implantation of the P-Stim and Stivax devices. The neurosurgeon has since sued the marketers who allegedly pushed him to bill federal healthcare programs for the use of these devices.
  • August 2020, U.S. Attorney’s Office for the Southern District of Texas. A pain management physician had agreed to pay $530,000 to settle allegations that he improperly billed for the application of electro-acupuncture devices.
  • August 2020, U.S. Attorney’s Office for the Southern District of Georgia. A medical practice had been ordered to pay more than $4.3 million, and the practice’s owner and chiropractor ordered to pay $700,000, to resolve claims that they billed Medicare for implantation of hundreds of P-Stim devices.
  • June 30, 2020, U.S. Attorney’s Office for the Southern District of Texas. An anesthesiologist had agreed to pay $100,000 to resolve claims that he improperly billed Medicare for the application of electro-acupuncture devices.


Medicare rules do not allow for reimbursement of electro-acupuncture devices and never have. Providers who file these claims with CMS under the guise of implanted neurostimulators are submitting false claims to the government. The government has taken notice and is actively targeting providers to recoup payments. The number of False Claims Act settlements has increased and there is no reason to believe they will slow down.

If you have billed Medicare for electro-acupuncture devices, such as P-Stim, ANSiStim, or Stivax, you will be audited by CMS or prosecuted by the OIG. If you have not yet been contacted by the government, there are proactive steps you can take to try to minimize your exposure. If you have been contacted by the government, you need experienced counsel.

Contact Wade Emmert at or (214) 855-3040 for experienced advice.


New HHS Advisory Opinion Confirms Complete Federal Preemption for PREP Act Cases and Applicability of the Act’s Defenses in Non-Use Situations

The US Department of Health and Human Services (“HHS”) issued an Advisory Opinion (“21-01”) Friday, reinforcing how the Public Readiness and Emergency Preparedness Act (“PREP Act” or the “Act”) (1) provides complete preemptive federal jurisdiction and invites jurisdictional discovery; and (2) applies to cases where the alleged harm results from failure to use (and even refusal to use) a covered countermeasure when that failure arises out of the conscious allocation and prioritization of the countermeasures.

Advisory Opinion 21-01 expands on the language of the amended Declaration to clarify that the PREP Act provides complete preemptive federal jurisdiction for cases in which it is a defense. Once invoked, the PREP Act provides complete preemptive federal jurisdiction, and the federal court retains the case to decide whether the immunity and preemption provisions apply; if they do not apply, then the court would try the case as it would a diversity case.

Advisory Opinion 21-01 further clarifies that the PREP Act protections apply in cases where the complainant alleges harm from the defendant’s complete failure—or even refusal—to use covered countermeasures, particularly in those cases where such a failure arises from the conscious allocation of scarce resources among potential countermeasure recipients.

Source: New HHS Advisory Opinion Confirms Complete Federal Preemption for PREP Act Cases and Applicability of the Act’s Defenses in Non-Use Situations


HHS Issues Advisory Opinion on Contract Pharmacies Under the 340B Program

HHS/OIG released an advisory opinion concluding that drug manufacturers are obligated to deliver discounts under the 340B Drug Pricing Program on covered outpatient drugs when contract pharmacies are acting as agents of 340B covered entities.

Many covered entities enter into written agreements with pharmacies (contract pharmacies) to distribute their covered outpatient drugs to the entities’ patients. The covered entity orders and pays for the 340B drugs, which are then shipped from the manufacturer to the contract pharmacy. The contract pharmacy then sends the drug to the patient. The covered entity purchases the drug, and the contract pharmacy provides the pharmacy services to dispense the drug to a patient.

In the advisory opinion, the HHS Office of the General Counsel asserts that the plain meaning of Section 340B requires manufacturers to sell covered drugs to covered entities at or below the ceiling price.

Source: HHS Issues Advisory Opinion on Contract Pharmacies Under the 340B Program


CMS finalizes “reasonable and necessary” definition, expedited breakthrough device coverage process

On January 14, 2021, the Centers for Medicare & Medicaid Services (CMS) published a final rule that, for the first time, adopts a regulatory standard for determining whether a particular item or service is “reasonable and necessary” under section 1862(a)(1)(A) of the Social Security Act (SSA) and sets the stage for commercial insurance coverage to be considered in assessing such coverage in prescribed circumstances. In addition, the final rule establishes a “Medicare Coverage of Innovative Technology” (MCIT) pathway, which is a voluntary and expedited mechanism to obtain national Medicare coverage for medical devices designated with “breakthrough” device status by the Food and Drug Administration (FDA).

Source: CMS finalizes “reasonable and necessary” definition, expedited breakthrough device coverage process


Texas, Pennsylvania hospitals lose lawsuit challenging Medicare payments

The lawsuit was brought by Moses Taylor Hospital in Scranton, Pa., and Tomball (Texas) Regional Center. The hospitals said HHS wrongly calculated their Medicare disproportionate share hospital payments for fiscal year 2015, using the wrong data. As a result, the hospitals appealed the DSH payment decision to the HHS provider reimbursement review board, where it was dismissed. In its dismissal, the review board said it lacked jurisdiction to consider the hospitals’ objections to their payments.

Source: Texas, Pennsylvania hospitals lose lawsuit challenging Medicare payments


Hospital Price Transparency Rule in Effect

The Hospital Price Transparency Rule went into effect on January 1, 2021. The Rule requires all hospitals operating within the United States to make public a list of their standard charges for items and services via the Internet in a machine-readable format. Hospitals must also provide prices for a list of 300 shoppable services that must be made publicly available in a searchable, consumer-friendly format. The Rule’s intent is to enable healthcare consumers to make more informed decisions based on cost, increase market competition, and ultimately drive down the cost of healthcare services, making them more affordable for all patients.


CMS Provides Additional Expansion Opportunities for High Medicaid Physician-Owned Hospitals

Under the Affordable Care Act’s amendments to the Stark Law, a Physician Owned Hospital (POH) cannot expand the aggregate number of operating rooms, procedure rooms or licensed beds beyond the number for which the hospital was licensed on March 23, 2010.

The Secretary of Health and Human Services may grant an exception to this prohibition to POHs qualifying as either an “applicable hospital” or a “high Medicaid facility” (as those terms are defined in the regulations).

POHs meeting one of these two exceptions were nonetheless still limited in that they could only request an expansion once every two years and the expansion was limited to no more that 200% of the rooms or beds that existed as of March 23, 2010.

These new rules relax these expansion limitations for “high Medicaid facilities,” but not “applicable hospitals”.

Though there are other requirements, a “high Medicaid facility” POH is one that for the three (3) most recent 12-month periods for which data is available, has an annual percentage of total Medicaid inpatient admissions that is estimated to be greater than the percent of such admissions for any other hospital located in the same county in which the POH is located (as determined by the data sources approved by CMS.

The new Final Rule, removes the limitation on the number of times a high Medicaid facility can request an expansion so long as the POH only has one request under review at any given time.

CMS also removed the 200% capacity limitation that previously existed for high Medicaid facilities seeking expansion.

High Medicaid facility POHs can now expand off of their main campus, but must continue to comply with Medicare rules and regulations regarding distance limitations relative to off-campus facilities and provider-based departments.

Source: CMS Provides Additional Expansion Opportunities for High Medicaid Physician-Owned Hospitals


Cutting Out the “Middleman”? HHS Resurrects Anti-Rebate Rule for Medicare Part D

[T]he Final Rule will modify the federal health care program’s Anti-Kickback Statute (“AKS”) safe harbors in three key ways:

First, it will remove safe harbor protection under the AKS for rebates that a pharmaceutical manufacturer provides to Medicare Part D plan sponsors (either directly or indirectly through the PBMs with which they contract). In apparent recognition of how disruptive this change will be to current business models, the Final Rule postpones the effective date for this change until January 1, 2022.

Second, it will create a new safe harbor to protect certain price reductions given by pharmaceutical manufacturers that are passed through to beneficiaries at the point-of-sale. This new safe harbor will become available on January 29, 2021.

Third, it will create a new safe harbor, also effective as of January 29, 2021, that protects certain fixed fees paid by manufacturers to PBMs for PBM services.

Source: Cutting Out the “Middleman”? HHS Resurrects Anti-Rebate Rule for Medicare Part D