Stoel Rives recently continued its long-time sponsorship of the Portland Business Journal Health Care of the Future awards. A special publication for the awards includes a collaboration by Stoel Rives’ attorneys Todd Hanchett, Tim Hatfield, Kelly Knivila and Sarah Oyer on an article addressing four current trends in health care. Topics covered include behavioral health services, value-based purchasing, telehealth and employment-related issues. Read the full article here.
Part 2 Amendments Facilitate Care Coordination Activities of Substance Use Disorder Treatment Programs
On July 15, 2020, the Substance Abuse and Mental Health Services Administration (SAMHSA) made substantial changes to the permitted uses and disclosures of substance use disorder (SUD) records for programs covered by 42 C.F.R. Part 2. The stated intent of the final rule is to facilitate the provision of well-coordinated SUD care. The rules do indeed appear to remove regulatory barriers that have made it difficult for SUD providers to engage in the type of care coordination activities that are increasingly common outside the substance abuse context.
Perhaps the most significant change to the rules is the expansion and clarification of the permitted uses and disclosures for the purposes of “health care operations.” A Part 2 program has long been able to obtain patient consent for the use and disclosure of substance abuse information for “payment and/or health care operations.” Previously, however, the relevant rules explicitly stated that “health care operations” cannot include disclosures “to carry out other purposes such as substance use disorder patient diagnosis, treatment, or referral for treatment.” 83 Fed. Reg. 239-01, 243 (Jan. 3, 2018). SAMHSA specifically advised that this language meant that the term “health care operations” is “not intended to cover care coordination or case management.” Id.
Through these recent rule changes, SAMHSA effectively has reversed this guidance and now defines the term “health care operations” to include any “payment/health care operation activities not expressly prohibited,” including “care coordination and/or case management services.” This more closely aligns with the definition of “health care operations” found in HIPAA and will allow the disclosure of SUD records to entities that perform care coordination services. It also will allow such entities to disclose such records to its contractors or legal representatives for health care operations. We note, however, that any disclosure for health care operations still will require specific patient authorization. 42 C.F.R. § 2.31.
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COVID-19 Update: FCC Accepting Applications for Its $200M Telehealth Program; Red Light Rule Waived
In a previous client alert, Stoel Rives’ health care team provided responses to certain frequently asked questions regarding the Federal Communications Commission’s (“FCC”) COVID-19 Telehealth Program (“Program”). At the time of that earlier client alert, FCC was awaiting the Office of Management & Budget’s approval of the Program application (“Application”) before beginning the application
FCC Releases $200M COVID-19 Telehealth Program Guidance: Your Questions Answered
On April 2, 2020, the Federal Communications Commission (“FCC”) released its Report and Order 20-44 outlining how it plans to distribute $200 million appropriated to it by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The COVID-19 Telehealth Program (the “Program”) will allow eligible providers to be reimbursed for “telecommunication services, information services, and devices necessary to enable provision of telehealth services, on a temporary basis.”
The FCC will make the COVID-19 Telehealth Program Application and Request for Funding Form (the “Application”) publicly available as soon as the Office of Management and Budget (the “OMB”) approves the Program’s information collection requirements, and will begin accepting Applications immediately thereafter. Program funds will be distributed on a first-come, first-served basis and are capped at $200 million. Thus, early applicants will have a better chance of receiving the limited funding. Providers who are interested in seeking funding should familiarize themselves with the Program’s requirements and take steps to ensure they are prepared to submit their applications once the process is opened.
As discussed below, eligible providers will be able to use Program funds to purchase a range of eligible devices and services including internet connectivity services, smart phones or tablets, asynchronous audio/video platforms, and devices used for remote patient monitoring. The Program will terminate when the funding is exhausted or when the pandemic ends, whichever occurs earlier. While more guidance is needed to fully understand the reimbursement mechanics, it appears that an eligible provider will be awarded a certain amount of money based on projected costs of eligible services or devices described in the provider’s Application. After purchasing the eligible services or devices, the eligible provider will be required to submit an invoice supporting the costs of its purchases. The FCC will then reimburse the eligible provider an amount supported by the invoices.
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COVID-19 Leads to Liberalization of e-Prescribing of Controlled Substances, May Presage Permanent Rulemaking
In light of the COVID-19 pandemic, the Drug Enforcement Agency (“DEA”) recently issued guidance permitting the use of telemedicine to prescribe controlled substances (schedule II to V) for the duration of the public health emergency declared by the Secretary of Health and Human Services.
Specifically, if (a) the prescription “is issued for a legitimate medical purpose” in the usual course of professional practice; (b) “audio-video, real-time, two-way interactive communication system” is used for the telemedicine encounter; and (c) the practitioner complies with applicable state and federal laws, then controlled substances may be prescribed via telemedicine without first conducting an in-person medical evaluation. DEA FAQ. Nonetheless, if the practitioner has previously conducted an in-person examination, then telemedicine may be used to prescribe controlled substances regardless of whether a public health emergency has been declared as long as the prescription is made in compliance with state law and within the usual course of the provider’s professional practice. Id.
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CMS Takes Significant Action to Spur Use of Telehealth Services for Duration of COVID-19 Emergency
On March 13, 2020, President Donald Trump issued a proclamation declaring a national emergency concerning the novel coronavirus disease (the “Emergency Declaration”). The president framed the emergency declaration as empowering the Secretary of Health and Human Services (“HHS”) to waive “laws to enable telehealth,” which gave providers hope that the administration would remove some of the primary regulatory barriers to the broad implementation of telehealth services. In the days since the declaration, the administration has taken increasingly significant steps to do just that.
The Emergency Declaration authorized the Secretary of HHS to exercise his waiver authority under Section 1135 of the Social Security Act (42 U.S.C. § 1320b–5). Section 1135 empowers the Secretary to waive or modify only certain provisions under Medicare, Medicaid, the Children’s Health Insurance Program (“CHIP”), and the Health Insurance Portability and Accountability Act (“HIPAA”) during a national emergency. Congress broadened these waiver authorities in the emergency supplemental appropriations bill, signed into law on March 6, which gave the Secretary additional authority under Section 1135 to loosen Medicare’s telehealth billing standards. It also specifically allowed the Secretary to waive the requirement that the beneficiary live in a rural area and receive the services at an approved remote site, such as a rural hospital.
AKS and Medicare Advantage Plans: Don’t Kickback and Relax!
Health care attorneys have long questioned whether there are significant Anti-Kickback Statute (AKS) risks associated with financial transactions between Medicare Advantage plans and their participating providers. An ongoing case in the Northern District of Illinois could provide Medicare Advantage organizations with a clear answer regarding the nature of such risks.
United States ex rel. Derrick v. Roche Diagnostics Corp., brought by a qui tam relator under the False Claims Act, involves Roche Diagnostics Corp. (“Roche”), a manufacturer of glucose monitoring products, and Humana, Inc. (“Humana”), an issuer of Medicare Advantage plans (collectively the “Defendants”). United States ex rel. Derrick v. Roche Diagnostics Corp., 318 F. Supp. 3d 1106 (N.D. Ill. 2018). The relator alleges that the Defendants violated the AKS when Roche agreed to settle an overpayment owed by Humana for pennies on the dollar in exchange for the exclusive placement of Roche products on Humana’s formularies. This litigation has been ongoing since 2014 and the trial is set for early 2020.
Prior to the events giving rise to this action, Roche sold glucose monitoring products via Humana’s Medicare Advantage formularies. The relator alleges the following sequence of events. First, in March 2013 Humana notified Roche that it would be terminating its supplier contract with Roche and removed Roche’s products from its formularies. After protracted settlement negotiations, Roche agreed to accept only $11 million of the $45 million overpayment. That same week, Humana placed Roche products back on the Humana formularies and, crucially, also agreed to remove from its formularies all products that competed with Roche. Additionally, Roche “reserved the right to recover the full amount owed if Humana did not satisfactorily perform its obligations” under the debt forgiveness agreement. The relator claims that this exchange of debt forgiveness (remuneration) for formulary placement (recommendation/referral) amounted to an AKS violation.
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Ruling in the Eleventh Circuit Highlights Both the Breadth and Potential Limitations of AKS’s Employment Safe Harbor
Health care lawyers have long debated whether the AKS safe harbor provides full protection for employees who are paid to market a supplier’s services. In Carrel v. AIDS Healthcare Foundation, 898 F.3d 1267 (Aug. 7, 2018), the Eleventh Circuit might have come a step closer to answering this question. The Carrel court affirmed the dismissal of a False Claims Act suit against the AIDS Healthcare Foundation, Inc. (the “Foundation”), holding that the Anti-Kickback Statute (“AKS”) safe harbor for employment relationships protected bonuses the Foundation paid to employees who referred HIV/AIDS patients to the Foundation for treatment. The outcome of this case was unsurprising given the facts and relevant precedents in the Eleventh Circuit, but highlights an important potential limitation to the AKS’s employment safe harbor.
Carrel Put the Strict Terms of the Employment Safe Harbor to the Test
The AKS criminalizes knowingly and willfully offering, paying, soliciting, or receiving any remuneration to induce or reward referrals of items or services reimbursable by a federal health care program (e.g., Medicare or Medicaid). 42 U.S.C. § 1320a-7b(b). One of the most common AKS safe harbors protects “any amount paid by an employer to an employee (who has a bona fide employment relationship with such employer) for employment in the provision of covered items or services.” 42 U.S.C. § 1320a-7b(b)(3)(B). Regulations provide a parallel exemption for “any amount paid by an employer to an employee … for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs.” 42 C.F.R. § 1001.952(i).
The plaintiffs in Carrel alleged that the Foundation violated the AKS by paying its employees bonuses for each HIV-positive individual they referred to the Foundation for treatment. Specifically, the Foundation had a contract with the State of Florida under which it conducted HIV testing. The contract (funded by the federal Ryan White Act) required the Foundation to refer clients with positive test results to health care providers for treatment, and compensated the Foundation for such referral services. In an apparent effort to incentivize these referrals, the Foundation offered cash bonuses to employees for each HIV-positive patients they successfully directed to the Foundation for follow-up medical care. The bonuses were allegedly not available if the patients received follow-up care from a provider that was not affiliated with the Foundation.
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Welcome to Health Law Insider!
Welcome to Stoel Rives’ newest blog: Health Law Insider. Health Law Insider will provide insights from our team of experts on the full spectrum of legal issues that are shaping the health care industry, including data privacy and security, fraud and abuse, health care transactions, antitrust, taxation, and insurance regulation.
The health care delivery system
Ninth Circuit Takes Broad View of What Is Required for a Licensee to Be “Independent”
On July, 23, 2018 a three-judge panel in the Ninth Circuit issued a decision in Obidi v. Wal-Mart Stores, Inc. (Case No. 17-55539), holding that a class-action suit against Wal-Mart and FirstSight Vision Services, Inc., a vision-only health care plan, can proceed on the theory that the defendants violated various California consumer protection laws by advertising “Independent Doctors of Optometry” that were, in fact, controlled by Wal-Mart and FirstSight. Though the decision is a narrow one (addressing only whether the plaintiffs have standing to sue), its reasoning could be relevant for how retail clinics and other corporate entities structure their relationships with physicians and other licensees to comply with state corporate practice of medicine (“CPOM”) rules.
Background of the Case
Wal-Mart stores across the country include on-site “Vision Centers” that offer basic eye exams, contacts, and prescription glasses. In California, Wal-Mart is registered as an optician and leases space in its stores to FirstSight, a licensed vision health plan. FirstSight, in turn, subleases this space to individual optometrists who charge patients directly. Wal-Mart and FirstSight advertised that the Vision Centers were staffed by “Independent Doctors of Optometry.” A former patient filed a putative class-action suit alleging Wal-Mart and FirstSight violated California’s Unfair Competition Law because (a) the defendants falsely advertised that the optometrists were “independent” and (b) the business arrangement between Wal-Mart and FirstSight was an unlawful relationship between an optometrist and an eyeglass retailer.
The plaintiff alleged that she would not have purchased an eye exam if she had known that the optometrist was not “independent.” The Ninth Circuit considered the key question to be whether the plaintiff had “adequately alleged that her optometrist lacked independence.” The court answered in the affirmative, relying on various provisions in the leasing arrangement that, as a whole, indicated that “Wal-Mart and FirstSight were able to exercise undue influence over all their resident optometrists.” Evidence of such “undue” influence included Wal-Mart “setting rent as a percentage of revenue, prescribing minimum operating hours, and permitting the lessor to terminate leases at will.” The court also noted that there was anecdotal evidence that optometrists at other Wal-Mart locations were constrained in the rates they could charge and the therapies they could recommend.
However, the Ninth Circuit affirmed the dismissal of the claims based on violations of California laws that prohibited, among other things, retailers from directly or indirectly employing or maintaining an optometrist in stores that sell eyewear. The court reasoned that the plaintiff “fail[ed] to establish how her injury was fairly traceable to the purported statutory violations.”
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