Ten Hot Button Legal Issues to Watch in 2015

Jan 12, 2015 at 04:48 pm by Staff

Expert Insights for the Coming Year

Already one of the most highly regulated industries in America, 2015 looks to be another active year across healthcare’s legal landscape. Two past presidents of the American Health Lawyers Association, Elisabeth Belmont and Joel Hamme, took time to share insights and predictions for the coming year on a variety of topics ranging from the Affordable Care Act to fraud and abuse enforcement.

Subsidies in the Health Insurance Exchanges

Under the Affordable Care Act, individuals with incomes between 100 and 400 percent of the federal poverty level are eligible to receive federal tax credit subsidies for purchasing health insurance on the exchanges. Hamme noted that in King v. Burwell, the Fourth Circuit court ruled the IRS acted lawfully in interpreting such subsidies were permissible not only for state exchanges but also for federally run exchanges and those that are a federal-state partnership. However, the Supreme Court has agreed to review this decision.

Hamme explained, “Of the 50 states and the District of Columbia, only 17 have state established exchanges; 7 have partnership exchanges and the remaining 27 are federally operated. Thus, if the Supreme Court were to overturn the Fourth Circuit’s decision, individuals in two-thirds of the 51 jurisdictions would be ineligible for subsidies for purchasing health insurance on the exchanges.” He added that while there was some debate as to how detrimental such a decision would prove to be to the ACA, certainly it would be a major setback. “The King case essentially represents the last major legal hurdle for the ACA. If the subsidies challenge fails, ACA opponents will be relegated to trying to repeal or significantly modify the ACA by legislative and executive branch actions.”

Fraud and Abuse

On Oct. 31, 2014, the U.S. Department of Health and Human Services Office of Inspector General (OIG) released the FY-2015 Work Plan. Always eagerly anticipated, the document gives insight into the OIG’s planned reviews and activities with respect to HHS programs and operations. Belmont noted, “In the introduction to the Work Plan, OIG stated that, in the coming year, the agency plans to continue to focus on issues such as emerging payment, eligibility, management, IT security vulnerabilities, care quality and access in Medicare and Medicaid, public health and human services programs, and appropriateness of Medicare and Medicaid payments.”

Belmont highlighted a few areas of interest for this year:

Hospitals: With 22 substantive areas under review, the OIG is deeply engaged with hospital reviews both on the billing and payment side, and quality of care issues, which are a particular priority for current Department of Justice (DOJ) and OIG enforcement efforts. OIG continues to scrutinize CMS contractors’ implementation of outlier reconciliation (of which the OIG has been critical for many years) and remains intensely interested in inpatient versus outpatient payments, the “two midnight” rule for inpatient admissions, and cardiac catheterizations.

Hospice: Hospice billings for general inpatient care, a focus of relators and the DOJ, is under close review by the OIG.

Freestanding Clinic Providers: OIG continues to examine certain payment systems such as provider-based services and freestanding clinic payments, with an eye toward reducing disparity of payments based on site of service.

Laboratories: OIG added a review of independent clinical laboratory billing requirements, without further specifying the billing requirements at issue.  This may coincide with increased local coverage determinations by contactors, OIG enforcement against clinical laboratories under its Civil Monetary Penalties Law authority, and OIG’s general heightened scrutiny of technical billing and payment compliance by clinical laboratories, especially specialty laboratories.

Accountable Care Organizations: OIG intends to conduct a risk assessment of CMS’ administration of the Pioneer ACO Model.

Medicaid Managed Care: OIG added a review of state collection of rebates for drugs dispensed to Medicaid managed care enrollees. 

Medicare Part D: This is an area where there will be continuing scrutiny of the quality of Part D data submitted to CMS. The OIG also plans to follow up on the steps CMS has taken to improve its oversight of Part D sponsors’ Pharmacy and Therapeutics Committee conflict-of-interest procedure in the wake of the OIG’s critical 2013 report.

Private Rights of Action to Enforce Medicaid Program Requirements

Whether or not Medicaid beneficiaries and providers have private rights of action to sue state officials for alleged violations of Medicaid Act provisions has been hotly contested for many years. Now the Supreme Court has agreed to review at least part of the debate.

Hamme said, “In Armstrong v. Exceptional Child Center, the Supreme Court granted certiorari to decide whether the constitutional Supremacy Clause affords Medicaid providers a private right of action to enforce the ‘equal access’ provision of the Medicaid Act. This provision states that Medicaid rates for fee-for-service providers must be consistent with efficiency, economy, and quality of care and be sufficient to enlist enough providers so that care and services are as available to Medicaid patients as they are to the general public in the same geographic area.”

In Exceptional Child Center, a group of Medicaid providers in Idaho who furnish services to individuals with intellectual disabilities sued state officials alleging inadequate Medicaid rates. The state had failed to increase the rates even though several studies commissioned by the Medicaid agency concluded the rates were insufficient. Hamme noted both a federal district court in Idaho and the Ninth Circuit concluded the Supremacy Clause could be used as a basis to enforce the equal access provision privately and that the Medicaid rates in this case contravened that provision. He added, the Supreme Court has confined its review to the Supremacy Clause – private right of action issue only.

“The case is highly important to Medicaid providers and beneficiaries because an unfavorable ruling would mean that they would be generally unable to seek judicial enforcement of numerous provisions of the Medicaid Act relating to rates, services, and program administration,” Hamme said. “Without such a right, they would, instead, be dependent on federal government program oversight through proposed state plan amendment reviews and general enforcement mechanisms and/or on the willingness of states to police themselves. From the perspectives of Medicaid providers and beneficiaries, neither of those has proven to be sufficient historically.”

Health Information & Technology

A huge area of growth and potentially thorny legal issues, Belmont said providers must look at all aspects of HIT applications. She predicts telemedicine and remote patient monitoring will continue to emerge as a care and cost-savings solution in 2015, particularly as healthcare consumers become increasingly comfortable relying on electronic devices and remote monitoring to manage chronic diseases. However, Belmont continued, using such technology raises a number of legal issues including provider compensation, ensuring referrals to hospitals or additional services are in compliance with the Stark Law and federal and state anti-kickback statutes, compliance with state licensing and practice standards, and compliance with federal and state privacy and security requirements.

‘Big Data,’ she said, is rapidly becoming the new normal. Belmont pointed to two reports addressing the public policy implications of the proliferation of big data by the White House. Rather than trying to slow the accumulation of data or place barriers on its use in analytic endeavors, the reports called for the development of policy initiatives and a legal framework to foster innovation and promote the exchange of information to support public policy goals while limiting harm to individuals. “In the coming year, healthcare providers’ compliance efforts should focus on: (i) how is the increased use of data changing the compliance landscape; (ii) what are the risks of Big Data; (iii) what role do compliance officers have in the shift to quality-based healthcare; and (iv) how is Big Data changing compliance?” Belmont suggested.

“Data now is recognized as one of a healthcare organization’s most valuable assets, especially as a result of the transition to a more analytically driven industry,” she continued. “Given the increasing importance of data to a healthcare organization, it is advisable for the organization to implement appropriate data governance best practices.”

With the accumulation of data also comes an obligation to make sure protected health information (PHI) stays protected. “In 2015, healthcare privacy and security compliance will continue to expand with respect to the scope, number of enforcement bodies and increased enforcement activity, and overlapping sets of requirements,” Belmont said. “In addition to the requirements of the HIPAA Privacy and Security Rules, healthcare providers also will need to navigate requirements promulgated by the Federal Trade Commission, Centers for Medicare and Medicaid Services, Office of the National Coordinator, and state attorney generals. Additionally,” she continued, “increasing exposure for privacy and security breaches may occur as the result of state common or statutory law, despite there being no private right of action with regard to HIPAA violations. As a consequence, healthcare organizations and practitioners need to manage the complex daily operational processes required to maintain appropriate privacy and security of protected health information and devote necessary resources to ensure regulatory compliance. “

M&A, Acquisitions and Joint Ventures

Belmont predicted the healthcare sector could expect to see an increase in various forms of organizational and clinical integration this year as a result of continuing payment pressures to reduce operating expenses and maximize operational efficiencies; the need to grow market share and diversify service offerings including expensive but competitively desired technologies; and requirements of federal and state health reform initiatives to achieve higher-quality patient outcomes. She added providers might also seek to participate in population and care management arrangements such as ACOs, shared service arrangements or telehealth outreach initiatives. Those collaborative partnerships, she pointed out, might be limited to certain lines of business rather than the full merger or acquisition of an entire enterprise.

“Mergers, acquisitions, joint ventures and other innovative arrangements in an increasingly integrated market present legal and regulatory issues that depend on the nature of the parties, the legal and business structure of the particular affiliation and the nature of the services to be provided by the new or surviving entity,” Belmont explained. “Healthcare providers thus will need to will need to be aware of evolving structural, legal and business issues including: compliance with the Stark law and the Anti-Kickback statute; antitrust requirements; tax status and potential liability; applicable state laws that restrict the corporate practice of medicine and the splitting of professional fees; and applicable state laws that require regulatory notices or approvals (e.g., transfer of specialty provider license).”

Medicaid Eligibility Expansion

Since the Supreme Court ruling that mandatory Medicaid expansion wasn’t permissible, 29 states voluntarily have authorized Medicaid eligibility expansion or obtained federal approval of an alternate expansion plan to take advantage of generous federal financial support tied to the program. However, Hamme pointed out, the 2014 election results impacting governorships and state legislatures seem to have strengthened the numbers of those opposing such expansion in several states that were still weighing the options. “In at least one state, it is conceivable that Medicaid eligibility expansion will be rescinded after having been implemented,” he said.

Hamme continued, “For 2015, the key Medicaid eligibility expansion development will be whether the slow erosion of state opposition to expansion continues as states decide that they do not want to forego the financial advantages of expansion or whether this erosion is abated by those fiercely opposed to the ACA.” He added it will be interesting to see how flexible the federal government might be with respect to work and work search requirements and beneficiary cost-sharing obligations for states that are seeking waivers for alternate expansion models.

Corporate Governance

“The business of governing acute care health systems has become increasingly complex as board governance and industry structure have worked to keep with the pace of reform and consolidation,” Belmont pointed out. She added governing boards are grappling with the push for consolidation as new care models and the economics of healthcare delivery move toward larger organizations.

“Most boards receive a significant volume of input on the general trend of consolidation but less input on the full range of strategic alternatives that exist and the processes and tactics that can realize the board’s desired outcome — typically the long-term security of high-quality, efficient care across a range of desired services for the community,” Belmont said. “Significant innovation has occurred in the variety of structures that hospitals and healthcare systems are using to collaborate. To maximize the outcomes of each of these strategic options, board members must have a general understanding of the purpose and use of each structure, and the factors that influence feasibility,” she continued. “Healthcare organizations thus need to ensure that their boards are equipped with knowledge of these innovative structures in order to appropriately execute their fiduciary duties within an increasingly complex operating environment.”

Regulation and Monitoring of the 340B Drug Discount Program

For more than 20 years, certain healthcare providers serving a significant number of indigent, uninsured and under-served patients have qualified to participate in the 340B Program as covered entities, which has made them eligible for steep discounts on prescriptions for individuals receiving outpatient services. However, the program has grown substantially over the last two decades and led critics to charge the Health Resources and Services Administration (HRSA) has been lax in oversight and failed to issue regulations clarifying key program requirements or features such as defining ‘eligible patient.’

Hamme said that as a result of this criticism, HRSA planned to issue proposed regulations, and Congress had been urged to investigate and reform the 340B Program. Before that could happen, however, drug manufacturers sued HRSA over regulations concerning the purchase of orphan drugs. “A federal court later invalidated the orphan drug rule, but in doing so, explained that under the 340B statute, HRSA’s authority to issue substantive rules is confined to a number of narrow areas such as civil money penalties, administrative dispute resolution, and ceiling prices,” he explained.

Hamme added HRSA has announced it will issue interpretive guidance on key criteria of the 340B Program in 2015 and will confine its notice and comment rulemaking to the narrow areas outlined by the court. Hamme said to expect Congress to intensify scrutiny of the program this year, as well.

Quality of Care

With an emphasis on adopting performance improvement strategies to achieve higher-quality patient outcomes while maximizing operational efficiencies, Belmont said she expected quality of care initiatives to accelerate in 2015. “New models of care that emphasize care coordination across hospitals and health systems, other providers, and the community are a critical element for quality improvement,” she said. With that comes a need for an interoperable HIT infrastructure that aligns clinical decision support and clinical quality measurement. Belmont suggested reading the 10-year vision report for leveraging health IT by the Office of the National Coordinator for Health IT and the ONC's 10-year roadmap for achieving an interoperable health IT infrastructure. For more information, go to healthit.gov.

ACA Going Forward

As Hamme pointed out, the ACA has already generated several legal decisions and navigated a number of political and operational obstacles in its relatively short life. However, a number of hurdles … including the decision on exchange subsidies and the law’s unpopularity among large swaths of the public … remain.

“During 2015, interested observers should look to various barometers to assess whether the ACA is working … and equally important … whether it is gaining the public acceptance needed to assure its political survival,” Hamme said. He added some of those measures would include the administration of the exchanges, whether offerings to consumers were deemed acceptable in terms of plan choices and affordability, a continued decline in the number of uninsured, and whether or not the ACA could continue to withstand legal and political assaults.

“Like 2013 and 2014, the coming year will witness numerous developments that will lead either to the ACA’s long-term viability or its premature demise,” Hamme concluded.

About the Experts

Elisabeth Belmont, Esq. serves as corporate counsel for MaineHealth, ranked among the nation’s top 100 integrated healthcare delivery networks. She is a member of the Board on Health Care Services for the Institute of Medicine and its Committee on Diagnostic Error in Health Care. Belmont is also a member of the National Quality Forum’s Health IT Patient Safety Measures Standing Committee. In addition to serving as a past president of the American Health Lawyers Association, she is also the former chair of the organization’s HIT Practice Group and the current chair of the Inhouse Counsel Program. In 2007, Modern Healthcare named her to their list of “Top 25 Most Powerful Women in Healthcare.”

Joel Hamme, Esq. is a principal with Powers, Pyles, Sutter & Verville in Washington, D.C. He joined the firm in 1998 and focuses his practice on long term care, Medicare and Medicaid reimbursement issues, provider licensure and certification matters, and litigation in his areas of expertise. He is a member of the District of Columbia and Pennsylvania bars, as well as the bars of the Supreme Court of the United States and numerous federal appeals courts. A past president of AHLA, Hamme is a frequent speaker and lecturer on healthcare issues and has authored numerous articles and book chapters relating to healthcare law.

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