Legal Insights and Perspectives for the Healthcare Industry

On a fourth go-around, the Trump administration has issued another set of proposed tariffs on an additional $300 billion of goods related to China, this time adding a range of commercial goods across industries. With respect to healthcare products, this round affects medical devices and their components, certain chemicals and precursors that can be used in pharmaceuticals and dietary supplements, and other FDA-regulated products. The administration continues to try to use tariffs as a means of balancing the trade deficit with China and to bring the Chinese government to the negotiating table on a longstanding set of issues related to intellectual property (IP), cyber, and technology transfer. There are two steps to the tariff process:

The CMS draft guidance for state survey agency directors on hospital co-location arrangements offers insight into how CMS will evaluate hospitals that partner with other providers under the Medicare conditions of participation, or CoPs. Co-location occurs when two hospitals or a hospital and another healthcare entity are located on the same campus or in the same building and share space, staff, or services. Areas that CMS will review when surveying co-located facilities include staffing, contracted services, distinct and shared spaces, and emergency services.

In an unanticipated but welcome move, CMS is soliciting comments on the draft guidance by July 2. Stakeholders should be sure to use this opportunity to raise their compliance concerns associated with the proposed rules governing shared space and staffing arrangements under the Medicare program.

Read the full LawFlash for more details on the draft guidance.

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.