Legal Insights and Perspectives for the Healthcare Industry

Daniel Levinson, the HHS Inspector General (IG), tendered his resignation to President Donald Trump on April 2, effective May 31. Mr. Levinson was the longest serving HHS-IG and under his leadership, the watchdog managed a wide array of oversight, including checks on the implementation of the Affordable Care Act. The HHS-OIG is the largest inspector general office among federal agencies helping to police over 200 HHS programs as well as the massive Medicare and Medicaid programs. The current Principal Deputy Inspector General Joanne Chiedi will become the acting IG on June 1.

Undoubtedly the next HHS-IG appointee will be a staunch advocate of fraud and abuse enforcement, and likely will have years of government audit or enforcement experience, as was the case with previous HHS IGs. It remains to be seen, however, if the appointee will also have private industry experience and will bring to bear deep knowledge of an evolving healthcare delivery system.

In a March 19 letter to CMS and HHS-OIG, Senators Chuck Grassley (R-IA) and Ron Wyden (D-OR) continued their oversight efforts regarding physician-owned distributorship (POD) relationships by raising questions about US Sunshine compliance by PODs. PODs involve the ownership of medical device distributorships by surgeons who use or recommend those products in their surgical procedures. The senators are critical of CMS and OIG efforts to expose and deter POD arrangements, citing long-held concerns that POD arrangements are, as the OIG has suggested in a prior Fraud Bulletin, "inherently suspect” and abusive arrangements that promote medically unnecessary services. The March letter raises an often debated question regarding POD compliance with Physician Sunshine Rules and whether CMS or the OIG have taken sufficient steps to assure transparency compliance with these particular arrangements.

Emerging as an industry disrupter, the Office of Inspector General for the US Department of Health and Human Services (OIG) has waded knee-deep into health policy and economics in proposing dramatic changes to the anti-kickback discount safe harbor protection. Its latest move targets certain industry sectors, proposing to remove their protection from administrative and criminal prosecution in connection with rebates and price reductions for prescription drugs.

Under the proposed rule issued February 6, the OIG proposes to amend the language of the existing discount safe harbor to no longer protect price reductions from prescription drug manufacturers to sponsors, MA plans, or Medicaid managed care organizations (MCOs), or to pharmacy benefit managers (PBMs) under contract with those entities, in connection with the sale or purchase of prescription drugs (unless the price reduction is otherwise required by law). The proposal is elegant and simply excludes from the definition of a “discount” price reductions or other remuneration paid from a drug manufacturer to sponsors and MA plans, Medicaid MCOs, and PBMs. If a price reduction is not a discount, it is not excepted or protected and can be subject to enforcement. No other health industry sector is apparently targeted for this administrative rule change. 

The HHS OIG recently published a new Fraud Risk Indicator for False Claims Act (FCA) settlements on the risk spectrum for the first quarter of federal fiscal year 2019. Characterized as “an assessment of future risk posed by persons who have allegedly engaged in civil healthcare fraud,” the Fraud Risk Indicator purports to increase transparency by making public where an FCA defendant falls into one of five color-coded categories on a risk spectrum: Highest Risk – Exclusion (red), High Risk – Heighted Scrutiny (orange), Medium Risk – CIAs (yellow), Lower Risk – No Further Action (green); Low Risk – Self-Disclosure (blue).