Courts May Now Stop Medicare from Recouping Payments

By Michael P. Gennett on Posted in Healthcare Law, Medicare & Medicaid

In recent years, many Medicare providers who have received significant overpayment determinations from Medicare contractors have gone out of business while waiting to be heard before an Administrative Law Judge (ALJ) for a hearing. That is the result of 2 factors. The first is that there is currently a 3-5 year backlog of appeals waiting for an ALJ hearing. The second is that Medicare is entitled to start recouping all of a provider’s payments after the 2nd level of appeal and apply them to the overpayment. For large overpayments and providers that are heavily dependent on Medicare, this is a lethal combination. However, a recent appeals court decision offers hope for providers in this position.

The Fifth Circuit Court of Appeals, in Family Rehabilitation v. Azar, 2018 WL 1478052, just issued a decision holding that courts do have jurisdiction to enter an injunction prohibiting Medicare from recouping a provider’s payments while the provider is waiting for an ALJ hearing. While in the instant case the appeals court did not actually issue an injunction, it did remand the case back to the trial court with strong arguments for doing so. Historically, courts have often dismissed cases on jurisdictional grounds, deciding that most disputes regarding overpayments and claims denials must be decided in the Medicare administrative appeals system. But in this case, the appellate court noted that the plaintiff home health agency was not asking the court to decide whether or not the claims in the overpayment should be paid. Instead, the plaintiff was simply asking the court to order Medicare not to take their money while they wait for an ALJ hearing. The court was quick to seize on the fact that ALJ hearings are required by law to take place in 90 days of a request, and it is not the appealing provider’s fault that Medicare cannot comply with its own regulations. Companies that are in this position, or believe they may soon find themselves in this situation, should discuss this development with their healthcare legal counsel.

Partial Summary Judgment Granted to Plaintiffs in the In re Blue Cross Blue Shield Antitrust Litigation MDL Proceeding

By James M. Burns on Posted in Antitrust, Health Insurers & Managed Care Organizations, Healthcare Law, Healthcare Litigation

On April 5, United States District Judge David Proctor (N.D. Alabama) granted partial summary judgment to the plaintiffs in the In re Blue Cross Blue Shield Antitrust Litigation, ruling that a network of trademark licensing agreements between the Blue Cross Blue Shield Association and its member insurance companies (referred to as the ‘Blues’), which plaintiffs characterized as “horizontal market allocation agreements,” are properly assessed under per se antitrust principles, and not the “rule of reason.” The decision is of considerable significance because, as Judge Proctor’s decision explains, in a per se case a defendant is not permitted to defend the claim by showing that its alleged conduct failed to cause anticompetitive harm or that it had countervailing procompetitive benefits (defenses that the Blues had asserted in the case). Instead, antitrust liability attaches to the conduct upon a finding by the Court that the alleged agreement existed, leaving only the issue of damages for trial.  Continue Reading

Outpatient Surgery Center Avoids Dismissal of Antitrust Action Through an Assist from the DOJ

By James M. Burns on Posted in Antitrust, Healthcare Law, Healthcare Litigation, Hospitals & Health Systems

In 2012, Marion Healthcare, an outpatient surgery center in southern Illinois, commenced an antitrust action against Southern Illinois Healthcare (“SIH”), a multi-hospital system operating in the same market. Marion alleged that SIH had negotiated exclusive dealing relationships with several area health insurers, and that these agreements made it difficult, if not impossible, for Marion to compete for surgical patients in southern Illinois. While Marion’s first and second attempts to state an actionable antitrust claim were unsuccessful, it appears that its third amended complaint was the proverbial “charm,” as Magistrate Judge Stephen Williams (S.D. Illinois) ruled on March 14, 2018 that Marion’s allegations that the alleged exclusive dealing contracts violated Sections 1 and 2 of the Sherman Act were sufficient to state a claim. Continue Reading

Class III Hospital Permits – Efficient Drug Management May Become a Reality

By Martin R. Dix on Posted in Healthcare Law, Hospitals & Health Systems, Pharmacy, Drugs, Medical Devices & Equipment

At the close of the 2018 session, the Florida Legislature passed Senate Bill (SB) 675, which if allowed to become law by the Governor, will help hospitals and their facilities that are under common control manage their patients’ drugs much more efficiently. Under prior law, the hospitals had to obtain a restricted drug distributor-health care entity permit to allow the hospitals to distribute manufactured drugs throughout the facility. SB 675 shifts the regulation of internal hospital drug distribution from the Department of Business and Professional Regulation, Division of Drugs, Devices and Cosmetics (“DDC”) to the Board of Pharmacy and eliminates the requirement for at least one permit in the process. It also allows the hospitals to deal with only one agency’s requirements, fees and inspectors.  Continue Reading

New Jersey Congressman Calls for a Hearing on the Proposed Cigna/Express Scripts Merger

By James M. Burns on Posted in Antitrust, Health Insurers & Managed Care Organizations, Healthcare Law, Healthcare M&A, Joint Ventures, Transactions & Health Ventures

Recently, Cigna announced its plan to purchase pharmacy benefit manager (“PBM”) Express Scripts. In a March 14, 2018 letter to the chair of the House Committee on Energy and Commerce, Gregory Walden (R-Oregon), Congressman Frank Pallone (D-New Jersey) called for a hearing on the proposed merger. In the letter, Congressman Pallone notes that the combination would combine the nation’s largest PBM with one of the nation’s largest health insurers, and that the deal would be “just one of many recent mergers and acquisitions in American health care delivery.”

Indeed, as Congressman Pallone states, the proposed Cigna/Express Scripts transaction is only the latest in a recent string of significant proposed “vertical mergers” that would combine a health insurer with a PBM; other recently announced transactions include the pending CVS/Aetna and Centene/RxAdvance deals. In addition, all of these proposed deals follow UnitedHealth’s previously completed acquisition of a PBM, Catamaran, in 2015, and the creation of Prime Therapeutics – another PBM – by a group of Blue Cross Blue Shield entities over the last ten years.

While “vertical mergers” — transactions in which the merging parties do not currently compete with one another — have not typically been a significant cause for concern for antitrust regulators, such mergers have become an increasingly significant area of interest under the Trump administration. Continue Reading

Florida Clinic License Exemptions Subject to Change

By Sheryl D. Rosen on Posted in Hospitals & Health Systems, Physicians

Holders of Florida healthcare clinic license exemptions take note. Exemption certificates, which currently bear no expiration date, will expire every two years if a bill recently passed by the Florida Legislature becomes law. Senate Bill 622 will require exemption holders to renew their clinic license exemption biennially.

The bill is silent as to treatment of existing certificate holders, but businesses that have current exemptions should not be surprised if they receive a renewal notice from the Florida Agency for Health Care Administration as early as this summer. Governor Rick Scott has until March 27, 2018 to sign the bill into law, veto it in full or in part, or allow it to become law without his signature. If the bill becomes law, it takes effect July 1, 2018.

Clinic licenses (rather than exemptions) are required for entities that provide paid healthcare services to individuals and that are not already licensed as another facility type. A host of exemptions to the license requirement apply, including an exemption for practices owned by licensed providers such as physicians and their spouse, parents, children, or siblings. Payors often require either a clinic license or proof of exemption from licensure, leading many exempt entities to apply for an exemption certificate from AHCA. A lapse in a needed exemption certificate could lead to interruptions in reimbursement.

Providers that are unsure whether they need – or need to maintain – an exemption certificate should contact legal counsel.

Cigna Announces Proposed Acquisition of Express Scripts, Quickening the Pace of Vertical Mergers in the Healthcare Industry

By James M. Burns on Posted in Antitrust, Health Insurers & Managed Care Organizations, Healthcare Law, Healthcare M&A, Joint Ventures, Transactions & Health Ventures

Late last year, CVS and Aetna announced a merger, combining one of the nation’s largest health insurance companies and a large pharmacy benefits management company (a “PBM”), that being CVS’ Caremark division. The trend continues, as on March 8, Cigna announced its intention to acquire Express Scripts, another PBM, in a deal reportedly valued at $67 billion. Both transactions, if approved by antitrust regulators, would create “vertically integrated” entities that combine the services of a health insurer with those provided by a PBM, potentially reshaping the way in which healthcare is delivered to consumers.

“Vertical” mergers like these proposed transactions, where the merging parties are not currently competitors, are becoming increasingly common since the passage of the Affordable Care Act, as healthcare entities at all levels of the distribution chain – providers, payors, PBMs and others – have been exploring ways to create more efficient delivery models, designed to try to reduce the ever-escalating cost of healthcare.  These efforts have included major hospital systems creating their own payors, proposed combinations between payors and PBMs (including the CVS/Aetna and Cigna/Express Scripts) and the recently announced RiteAid/Albertson’s transaction. Notably, if the CVS/Aeta and Cigna/Express Scripts deals are approved, it would presumably put them on more equal footing with another payor, UnitedHealth, which acquired the PBM, Catamaran, in 2015 and merged it into its existing entity, Optum Rx. Continue Reading

House Judiciary Subcommittee Holds Hearing on Proposed CVS/Aetna Merger

By James M. Burns on Posted in Antitrust

On February 27, the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing to consider the implications of the proposed CVS/Aetna merger.  The transaction, valued at approximately $69 billion, was announced in December and is currently under regulatory review by the United States Department of Justice Antitrust Division and antitrust and insurance regulators in a number of states.

If consummated, the transaction would combine one of the nation’s largest pharmacy benefits manager (PBM) entities, CVS’s Caremark subsidiary, with one of the nation’s largest health insurers, Aetna. However, unlike some of the recently proposed insurance industry mergers (such as Anthem/Cigna and Aetna/Humana), the proposed CVS/Aetna merger is largely a “vertical” merger between two entities that currently do not compete with one another in any significant way. In assessing the competitive consequences of a vertical merger, antitrust regulators typically focus on whether the combined entity would have the ability to increase barriers to entry in any of the markets in which the combined entity would operate and/or whether the combined entity could effectively foreclose competitors in those markets from competing effectively. These principles are based upon guidance in the DOJ/FTC 1984 Merger Guidelines.  Continue Reading

CMS Expands Reimbursement for Telehealth Services

By Stacey L. Callaghan on Posted in Healthcare Law, Healthcare M&A, Joint Ventures, Transactions & Health Ventures, Medicare & Medicaid

Despite telehealth’s significant expansion over the past ten years, it has been plagued by a historically unstable regulatory and reimbursement landscape. While the reimbursement environment may still have room for improvement, the Centers for Medicare & Medicaid Services (CMS) Medicare physician fee schedule (PFS) Final Rule for CY 2018 (Final Rule) marked some significant victories for those advocating for a more comprehensive reimbursement regime and for telehealth investors.

Beginning in CY 2018, CMS has both: (1) expanded the list of telehealth services that are reimbursed as “Medicare services”; and (2) decreased the burdens for physicians in billing the government for telehealth services. Continue Reading

New Consequences for Unpaid Medicare Overpayments

By Michael P. Gennett on Posted in Fraud & Abuse & False Claims Act, Healthcare Law, Healthcare Litigation

For years, CMS has had the authority to refuse to enroll new Medicare providers if they or their owners have an unpaid Medicare overpayment, but CMS was not exercising this authority. Now, it appears that CMS is going to start. In January, CMS published Transmittal 1998 announcing that it intends to begin denying provider enrollment applications, or change-of-ownership applications, where the provider, supplier or owner has an unpaid Medicare overpayment. The term “owner” includes any individual or entity that has a partnership interest in, or that has a 5% or more direct or indirect ownership interest in the enrolling provider. It is possible to foresee situations where an enrolling provider’s organization has an owner who previously owned another company that has an unpaid overpayment. This situation can create real headaches for companies and individuals who are actively involved in the acquisition of existing health care providers or the creation of new ones. Continue Reading

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