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Legal Insights and Perspectives for the Healthcare Industry

Highlighting the US Department of Health and Human Services’ (HHS) efforts to transform the US healthcare system to a value-based model, the Office of the Inspector General (OIG) and the Centers for Medicare and Medicaid Services (CMS) have issued two proposed rules that seek to alter the landscape of healthcare program integrity and fraud and abuse regulation, as part of what HHS calls the “Regulatory Sprint to Coordinated Care Initiative.”

The HHS Regulatory Sprint identifies four lanes to better coordinate care:

  • Improving a patient’s ability to understand his/her treatment plans and be empowered to make decisions
  • Increasing providers’ alignment on end-to-end treatment
  • Providing incentives for providers to coordinate and collaborate care with their patients
  • Encouraging information sharing among providers, facilities, and other stakeholders in a manner that facilitates efficient care while preserving and protecting patient access to data

New York’s Stop Hacks and Improve Electronic Data Security Act, or SHIELD Act, which makes significant changes to the state’s data breach notification requirements, impacts healthcare organizations that hold computerized data with private information from New York residents. In this LawFlash, our privacy and cybersecurity team analyzes the law’s expanded definition of “private information” and offers key business takeaways for assessing compliance with the SHIELD Act, which becomes effective October 23, 2019.

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The Nuclear Regulatory Commission (NRC), which regulates the medical use of radioactive materials, relies on the Advisory Committee on the Medical Use of Isotopes (ACMUI) to identify and evaluate the common causes of medical events that are reported by licensees. In an Up & Atom blog post, Morgan Lewis partner Lewis Csedrik and associate Roland Backhaus detail the ACMUI’s most recent review of reported medical events and discuss the NRC’s Information Notice with recommendations to prevent their reoccurrence.

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It’s October 1, and that means this month is the deadline for the US Drug Enforcement Agency (DEA) to issue its final rules on special registration for telemedicine. The SUPPORT Act, signed into law on October 24, 2018, gave the DEA one year to promulgate regulations specifying the circumstances under which special registration may be obtained and the procedure for doing so. When finalized, special registration should give telehealth providers significantly more flexibility to prescribe controlled substances without first performing in-person exams.

Our prior post discussed three potential enhancements to cyber-related liability insurance policies designed to maximize their potential responsiveness to actions initiated by consumers or the state attorney general under the California Consumer Privacy Act (CCPA). Today, we offer four additional suggested coverage enhancements for consideration in advance of the CCPA’s January 20, 2020, effective date:

The California Consumer Privacy Act (CCPA) is a game-changer. Taking effect on January 1, 2020, the data privacy law creates new statutory rights governing the handling, storage, and sale of personal information. It broadens significantly the definition of “personally identifiable information” over prior statutory enactments. It reaches companies inside and outside of California based on revenue or the number of consumers whose personal information is bought, sold, shared, or received by a company. It creates private rights of action permitting the potential recovery of statutory or actual damages for consumers, and a new public form of action for the assessment of fines by the state attorney general.

Will typical cyber-related liability insurance policies respond to actions initiated under the CCPA? In their current form, many likely will not. This post suggests enhancements to existing cyberliability policies to maximize their potential responsiveness to CCPA actions.

The Open Payments program established by the Physician Payments Sunshine Act (Sunshine Act) requires manufacturers of covered drugs, medical devices, biologicals, and medical supplies (applicable manufacturers) to report annually to the Centers for Medicare and Medicaid Services (CMS) certain payments and other transfers of value made in the previous calendar year to “covered recipients,” which currently are defined as US-licensed physicians and teaching hospitals. Applicable manufacturers and Group Purchasing Organizations also must report any ownership or investment interests held by physicians or members of their immediate family. CMS makes this information available to the public on the agency’s Open Payments webpage and refreshes it annually.

The US Department of Health and Human Services (HHS) recently announced more than $1.8 billion in funding to support the prevention and treatment of opioid addiction. This latest round of funding, authorized in conjunction with the continuing implementation of the 2018 SUPPORT Act, will be awarded by the Centers for Disease Control and Prevention (CDC) and the Substance Abuse and Mental Health Services Administration (SAMHSA) to states and local communities.

The CDC will provide more than $900 million to help state and local governments track overdose data “as closely to real-time as possible.” Packaged as a three-year cooperative agreement “to scale-up prevention and response activities,” the CDC will distribute $301 million in funding for the first year to states, localities, and some territories beginning in September 2019.

We hope you were able to join us for last month's Fast Break on the Physician Fee Schedule proposed rule. If not, you missed a great session featuring Eric Knickrehm discussing the important changes the proposed rule would have on Medicare Part B. 

Eric provided an overview of the most important aspects of the proposed rule, which was published on August 4, 2019. A number of these changes highlight CMS's increasing emphasis on preventive and low acuity care. For instance, CMS has continued to incentivize Transitional Care Management services and Chronic Care Management services to ensure that patients who were either recently hospitalized or are very likely to be hospitalized have effective care management to avoid further hospitalization.

The US Court of Appeals for the Eleventh Circuit has issued its much awaited decision in United States v. Aseracare, and for those who question how mere differences clinical opinion can ever support punitive False Claims Act (FCA) liability, the opinion is especially informative. The decision is significant for hospice providers and all healthcare providers that have battled government enforcers on its theory that evidence of subjective lack of medical necessity is fraud for the last decade. The decisions should be a bellwether for the US Department of Justice (DOJ), as well as an opportunity for DOJ to revisit its enforcement initiatives related to medical necessity, which have gone off the rails in recent years with the pursuit of cases that do not reasonably suggest fraud has actually occurred.

Rejecting DOJ’s signature theory of liability that falsity may be established by mere clinical disagreement divined from a cold retroactive review of the record, the court held that the trial court was right to grant a new trial to Aseracare based on erroneous jury instructions that allowed mere clinical disagreement to be the only evidence of falsity to find punitive FCA liability against the national hospice provider. The district court had granted a new trial on the basis that the instructions were wrong and the Eleventh Circuit agreed. The court further held that the summary judgment subsequently granted to Aseracare should be vacated and reconsidered to give the government an opportunity to present other falsity evidence related to the sample claims, if the government has such actual evidence to be considered. So, procedurally, the case stays alive, but is on thin ice at best.

The court noted that the trial record was devoid of any evidence that physicians had lied regarding their certifications of eligibility or that hospice services were not provided to the patient, and pointed out that much of the evidence showed Aseracare’s compliance with Medicare’s hospice regulatory scheme. The opinion noted that CMS and the Medicare contractor at trial supported the view that the Medicare hospice benefit was structured to consider good-faith, subjective clinical opinions based on the common sense reality that death is an inexact science, and that two physicians could hold different views of a patient’s prognosis and eligibility. Even the government’s expert changed his mind on patient eligibility over time—an incredible situation given that his testimony was the sole evidence to support the jury’s verdict and punitive liability in excess of $200 million.

There are many gems in this well-reasoned and scholarly opinion, the first at the appellate level to consider the government's FCA theory. Some key takeaways for practitioners include the following:

  1. To properly state a claim alleging hospice fraud under the FCA, the government must show facts surrounding a physician’s certification of eligibility that are inconsistent with the proper exercise of a physician’s clinical judgment. Mere differences of reasonable opinion concerning a patient’s likely longevity are not sufficient to allege FCA liability.
  2. Falsity evidence must be linked to the government’s actual samples of false claims. General anecdotal information of business practices untethered to the proffered false claims is not evidence of falsity for FCA purposes.

DOJ’s medical necessity initiatives over the last several years have focused on hospice and therapy providers, virtually all with the same playbook: cold record retrospective review, often by a nurse reviewer, to allege falsity based on alleged inadequate documentation conclusions as to clinical eligibility. There is often no evidence of actual fraud or material noncompliance. Often, the physicians who certify eligibility are not even interviewed regarding their certifications before catastrophic punitive liability is asserted. DOJ’s theory of liability does not require actually developing evidence of falsity, only evidence of clinical disagreement. Many of these investigation matters are founded on clinical disagreement, lightly sprinkled with general anecdotal complaints regarding business practices, or with C-suite emails that look bad but had no influence on the physician’s certification or were even known to the clinicians caring for the patient.

This opinion powerfully reasons why the government’s approach is inconsistent with the FCA statute and the Medicare hospice benefit regulatory scheme. Its reasoning applies with equal vigor to the medical necessity fraud initiative DOJ has developed over the years against other healthcare providers. The opinion also highlights the danger of not developing the right evidence to show fraud and relying on evidentiary shortcuts to assert liability under a highly punitive statute.

Finally, the opinion lays bare the reality that government enforcement practices sometimes ignore the regulations and rationale for the regulatory scheme at issue in order to fashion a more pliable account of how regulations are intended to work—even if that account is contrary to what has been legislated by Congress and implemented by the regulatory agency. In Aseracare, the government enforcers ignored the regulatory scheme as explained by its own Medicare agency witnesses to assert punitive liability under the FCA. This has a chilling and negative effect on all hospice providers, which is the exact opposite of what is right for the patients and their families who need this important benefit.