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Legal Insights and Perspectives for the Healthcare Industry

HB 2536 requires pharmaceutical manufacturers to disclose to the Texas Health and Human Services Commission (HHSC) when a drug’s price increases 15% or more compared to the previous year, or 40% or more over three calendar years. The new law also requires annual reporting of detailed price information by manufacturers, pharmacy benefit managers, and health benefit plans, and charges the HHSC with making this information available online to the public.

Two Texas cities—Dallas and San Antonio—will soon require employers to offer paid sick leave effective August 1, 2019. While it appeared almost certain the 86th Texas legislature would act to stop the local ordinances, the legislation failed to pass by the end of the regular session on May 27, 2019. A similar ordinance adopted by Austin, Texas, and enjoined by the state’s Third Court of Appeals remains in litigation. A ruling on the Austin ordinance, which will likely also impact Dallas and San Antonio, may not come until the end of the year. Given this current state of affairs, what are employers in Dallas and San Antonio to do? Prepare to comply with the ordinances’ requirements by August 1, 2019.

Read the full LawFlash.

Summer is almost upon us. And in between the BBQs, pool parties, and baseball games, you might be trying to understand the risks involved in offering healthcare services through telehealth. Whether you're an independent physician or practitioner, part of a hospital or physician group, or working for a telehealth platform provider, there are a number of things to consider.

In CMS’s continuing effort to take “a strategic approach to protecting taxpayer dollars and reducing regulation to put patients over paperwork,” Administrator Seema Verma recently highlighted changes to the Recovery Audit Program that are intended to make the program more provider friendly. Recovery Audit Contractors (RACs) review payments made to healthcare providers under Medicare Fee-for-Service plans. RACs have been controversial among providers due to concerns about their accuracy. In addition, although they are charged with identifying both overpayments and underpayments, unlike UPICs and MACs, RACs receive a percentage of the overpayments they recover, which historically has caused some disgruntled providers to characterize RACs as “bounty hunters” that are less concerned with program integrity than with their own bottom lines. Administrator Verma acknowledges that CMS has received many complaints in the past from providers that have found the audits to be time consuming and expensive.

In an opinion of significant importance to the administration of the Medicare program, the US Supreme Court issued a 7–1 decision requiring the Centers for Medicare & Medicaid Services (CMS) to follow notice and comment rulemaking when adopting a “statement of policy” that establishes or changes a “substantive legal standard.” The near unanimous Court[1] upheld the DC Circuit Court’s decision in Allina Health Services v. Price, 863 F.3d 937, 939 (DC Cir. 2017), which highlighted an important distinction between Medicare Act and Administrative Procedure Act (APA) rulemaking requirements.

The APA establishes a statutory exemption from notice and comment rulemaking procedures in the case of “interpretive rules, general statements of policy . . . or agency . . . practice.” 5 USC § 553(b)(A) (emphasis added). CMS relied on an assumption that this “interpretive rule exception” applied to the policy it adopted in order to include Medicare Part C patient days in the Medicare fraction of the payment formula used to calculate the qualification for, and amount of, the Medicare disproportionate share hospital (DSH) payment adjustment. The policy resulted in the reduction of Medicare DSH payments for hospitals until 2013, when the agency furnished notice and comment. Like the DC Circuit, the Supreme Court rejected the government’s argument that the Medicare Act rulemaking requirement in 42 USC § 1395hh(a)(2) implicitly incorporated a similar interpretive rule exception permitting such a policy.

What do you associate with the month of May? Warmer weather, Mom, graduations, and Memorial Day? Or perhaps who seized control of the Iron Throne after eight seasons of watching Game of Thrones? For Health Law Scan, May ushered in a number of noteworthy developments, from a Supreme Court decision that expanded the ability of whistleblowers to bring False Claims Act (FCA) cases to the government’s creative uses of the Travel Act in healthcare fraud prosecutions. In between, we examined the DOJ’s criteria for cooperation credit in FCA matters and its updated guidance on what makes an effective compliance program. On the policy front, we analyzed bipartisan legislation on drug price transparency approved by the House Ways and Means Committee and efforts by the Florida legislature to deregulate healthcare. And in this month’s “Tele-Tuesday” feature, we took a closer look at the Medicare Advantage telehealth flex rule.

Could a new FDA regulatory approach for postmarket changes to artificial intelligence (AI)/machine learning (ML)–based software devices be in our future? A recent discussion paper offers important insight into the FDA’s thinking on reducing postmarket burdens for FDA cleared or approved AI/ML technologies. Given that the FDA has yet to develop clear guidance on when AI/ML technologies are subject to regulation, could the FDA’s proposal to address postmarket changes for these technologies be putting the cart before the horse?

Read the full LawFlash for more in-depth analysis on FDA’s discussion paper.

Did you catch our most recent edition of Fast Break? If not, we had an awesome extended session with Michele Buenafe on May 16 that was also part of our annual Technology May-rathon series. Michele described how the FDA is treating various types of software and hardware that may have healthcare functions as well as certain clinical decision support systems. Michele discussed some of the new and innovative ways that the FDA is trying to regulate—perhaps with a lighter hand—various AI and software systems that have historically had challenges with FDA oversight.

Healthcare partners Al Shay and Howard Young and associate Jake Harper recently contributed to the Health Care Compliance Legal Issues Manual, a publication by the American Health Lawyers Association (AHLA).

The latest edition of AHLA’s Health Care Compliance Legal Issues Manual gives readers an up-to-date look at issues critical to healthcare compliance, including tips for conducting internal investigations; audit basics; overviews of the False Claims Act, Stark Law, and Anti-Kickback Statute; healthcare privacy; and more.

The US government continues its focus on healthcare fraud through criminal actions. It has demonstrated its willingness to pursue physicians and investors alike and to take creative approaches in order to secure convictions. When it comes to alleged healthcare fraud, the government not only focuses on fraud in connection with government payers, but also uses the statutes in its arsenal to target purported fraud against private payers.