The California Attorney General recently filed a precedent-setting antitrust action against Sutter Health, the largest health system in Northern California (People of the State of California v. Sutter Health, Case No. CGC-18-565398, San Francisco Superior Court), contending that Sutter Health’s contracting practices violate the antitrust laws. The action, filed in the San Francisco Superior Court, seeks to “restore competition in healthcare markets in California,” and claims that Sutter Health has “found a way to illegally control price and severely limit competition by compelling [insurers] to enter into contracts that improperly block any and all practical efforts to foster or encourage price competition between Sutter and any rival hospital systems.” To remedy the alleged violations, the State seeks, among other things, to have the Court require Sutter Health to terminate the challenged contracting practices, to “disgorge” previously received “overcharges” that Sutter Health received as a result of those practices, and to require Sutter Health to submit to mandatory arbitration to determine Sutter Health rates going forward. Continue Reading
On April 24 the Agency for Health Care Administration (“AHCA”) released its proposed contract awards for the Statewide Medicaid Managed Care (“SMMC”) Program. The determinations that AHCA made for this 5 year, $90 billion re-procurement were surprising to many and are likely to result in a significant reshaping of the program that currently exists. First, however, AHCA must resolve any potential challenges that may surface from disaffected parties. A listing of Proposed Awardees and a brief discussion of Florida’s Bid Protest requirements follows. Continue Reading
Three health insurers accused of having violated the antitrust laws in Academy of Allergy & Asthma in Primary Care v. Blue Cross Blue Shield of Louisiana, et al. (Eastern District of Louisiana), have filed motions seeking a swift win in the matter prior to the commencement of discovery. In support of their request, Humana, Blue Cross Blue Shield of Louisiana and Blue Cross Blue Shield of Kansas each contend that the allegations in the Complaint are implausible on their face, and thus fail to satisfy the test for pleading an antitrust conspiracy set forth by the United States Supreme Court in Ashcroft v. Iqbal (“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”) Continue Reading
It is safe to say that there has been much fear and confusion over the European Union (EU) General Data Protection Rule, or GDPR. With an effective date of May 25, 2018, and little guidance as to how the GDPR applies to organizations that do not have a physical presence in the EU or do not target their goods and services to EU residents, companies, including healthcare entities, with few, if any, business contacts with EU members are challenged to bring their companies into compliance. We have outlined below the fundamental questions that healthcare entities are likely asking themselves regarding GDPR, including whether they must comply with yet another data privacy regulation. Continue Reading
In what was a surprise result, on April 23, Judge William Smith (Chief Judge of the District of Rhode Island) reversed the “tentative” decision he had announced last November, in Steward Health v. Blue Cross & Blue Shield of Rhode Island, which would have granted defendant Blue Cross & Blue Shield of Rhode Island (BCBS-RI) summary judgment on all claims in the case. Instead, in a 101 page decision, Judge Smith ruled that this closely watched antitrust case, in which Steward Health alleged that BCBS-RI violated the antitrust laws in an effort to keep Steward Health, a Massachusetts-based health system, out of the Rhode Island market, will proceed to trial. In explaining the reason for his changed view on defendant’s motion, Judge Smith stated “…this is a complicated case, and the areas of antitrust law governing the claims [are], to put it kindly, confused and opaque.” Continue Reading
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.
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
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
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
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