Category: Health Care

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Senate Sets Timeline to Take up Repeal and Replace Legislation on ACA

With Congress returning to Washington, D.C. from its Memorial Day work period, Senators are focusing heavily on the timeline and details of legislation that would significantly alter the Affordable Care Act (ACA). Over the last week, many senior Senators have expressed skepticism regarding whether they can pass a bill, but Senate Republican Leader Mitch McConnell (R-KY) has laid out an aggressive timeline. Specifically, he would like the chamber to vote on a bill before the July 4th recess and use the rest of July to reconcile the House and Senate versions, leading to a final vote before the August recess. Congressional Republicans are eager to move beyond health care in order to take up tax reform and FY2018 federal government funding.

The Great Medicaid Expansion Divide

Senate Republicans are in agreement that their bill will be significantly different from what the House passed earlier this year, but that is where consensus ends. The main sticking point is how to appease Senators on both sides of the expansion – states that expanded and those that did not – in order to cobble together 50 votes (with Vice President Pence delivering the 51st). Those that did expand their Medicaid population don’t want to see their expansion population lose coverage, and those that did not expand, believe they are entitled to an additional financial benefit so they are not at a disadvantage as compared to the expansion states.

Achieving the required savings under reconciliation, while appeasing both factions, is proving extremely difficult. At this point, Democrats are not expected to vote for any Senate bill that significantly modifies the ACA so Republicans must rely entirely on their own Conference. Senators are also concerned about the alarming number of Americans projected to lose coverage under the House passed bill, and are developing a plan that would provide more generous tax subsidies for purchasing coverage. At this point, there is very little interest in including changes to the Essential Health Benefits package as was done in the House bill.

Still Awaiting the House-Passed Bill

In an interesting twist, the Senate parliamentarian is still in the process of reviewing the House-passed bill to make sure it does not violate Senate rules. Therefore, the legislative vehicle has still not officially been delivered to the Senate from the House. A ruling is expected this week.

Stay tuned for further updates as we eagerly await the first draft of the Senate bill, which could come as early as this week.

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New FDA Commissioner Hits the Ground Running


Fresh off his noticeably smooth confirmation, the new Commissioner of Food and Drugs, Dr. Scott Gottlieb, appeared before Congress last Thursday and unveiled his strategic initiatives and priorities for the Trump Food and Drug Administration (“FDA”).  These run the gamut from improving regulatory science and policies to streamlining clinical trials to spurring innovation on behalf of patients.  Two initiatives, in particular, merit closer attention and discussion: combating opioid abuse and addressing drug price increases through more, accelerated generic competition.

Opioid Regulation

In his first post to the FDA Voice blog, Dr. Gottlieb wrote:

As Commissioner, my highest initial priority is to take immediate steps to reduce the scope of the epidemic of opioid addiction. . . .  I believe it is within the scope of FDA’s regulatory tools – and our societal obligations – to take whatever steps we can, under our existing legal authorities, to ensure that exposure to opioids is occurring under only appropriate clinical circumstances, and for appropriate patients.

First among these steps, the Commissioner is establishing an Opioid Policy Steering Committee, comprised of “some of the agency’s most senior career leaders, to explore and develop additional tools or strategies FDA can use to confront this epidemic.”  The strategies under consideration include (1) mandatory education for health care professionals about (i) appropriate prescribing recommendations; (ii) how to identify the risk of abuse in individual patients; and (iii) how to get addicted patients into treatment; and (2) working more closely with provider groups to develop standards for prescribing opioids in different clinical settings, so that “the number of opioid doses that an individual patient can be prescribed is more closely tailored to the medical indication.”

Limiting the availability of prescription pain medication is a dicey proposition, however.  As Dr. Gottlieb acknowledged, certain situations “require a 30-day supply” and, “[i]n those cases, we want to make sure patients have what they need.  But there are plenty of situations where the best prescription is a two- or three-day course of treatment.”  The individualized medical judgments and circumstances that drive opioid prescribing likely mean that no single approach is likely to strike the proper balance between over-prescribing and ensuring sufficient access to adequate pain management.  Interestingly, the variability between opioid prescribers and patients did not stop the Centers for Medicare and Medicaid Services from proposing hard limits on opioid dosing for non-cancer pain or palliative/end-of-life care (i.e., chronic pain) for Medicare Advantage Organizations and Prescription Drug Plan Sponsors.

In fact, pain patients already have struggled under bright-line limitations on opioids.  As we previously reported, the State of Massachusetts enacted a new law in March 2016 that prohibits “a practitioner [from] issu[ing] a prescription for more than a 7-day supply . . . [w]hen issuing a prescription for an opiate to an adult patient for outpatient use for the first time [or] to a minor,” the first such limitation legislatively imposed by any state.”  Mass. Gen. Laws ch. 94C, § 19D (2016).  Massachusetts physicians surveyed following the law’s enactment complained that “the pendulum has swung too far, depriving pain patients of needed relief,” and that “regulations won’t solve the addiction problem . . . .  Instead, they make doctors reluctant to prescribe opioids.”

Broadly targeting opioids as a class of drugs also may cast too wide a net.  A recent article in the journal Substance Abuse reported “[t]he US opioid epidemic has changed profoundly in the last 3 years” in that “[h]eroin and fentanyl have come to dominate an escalating epidemic of lethal opioid overdose, whereas opioids commonly obtained by prescription play a minor role, accounting for no more than 15% of reported deaths in 2015.”  The article urged that the changing etiology of opioid overdose “require[s] substantial recalibration of the US policy response.”

What is clear—and what Dr. Gottlieb seems to recognize—is that opioid abuse and addiction are dynamic issues that differ from prescriber to prescriber and from one patient to another.  Those variables may make a one-size-fits-all strategy unviable.

Drug Prices

During a budget hearing before the House Committee on Appropriations, Dr. Gottlieb testified that, “while the FDA does not have a direct role in drug pricing, we can take steps to facilitate entry of lower-cost alternatives to the market.”  He identified policy challenges that the last Congress had attempted to address through legislation designed to expedite access to affordable drugs.  Such legislation included the CREATES Act, which we previously analyzed.  The proposed law sought to prevent brand-name drug companies from using FDA safety rules (i.e., Risk Evaluation and Mitigation Strategies (REMS) and requirements thereunder, e.g., Elements to Assure Safe Use (ETASU)) for medicines with higher risk potential to block or delay generic entry.  “FDA has an important role to play in making sure that its statutory and regulatory processes are working as intended,” Gottlieb told Congress, “not being manipulated in ways that FDA and Congress did not intend.”

In response to growing political pressure in Washington to expedite drug reviews, Dr. Gottlieb assured lawmakers that biomarkers, new technologies, and more efficient clinical trial designs would make it possible to shorten the regulatory process.  But accelerated approval of expensive, investigational (albeit life-saving) therapies has raised concerns among health policy experts.

A recent op-ed published by the New England Journal of Medicine (NEJM) cautioned that

accelerated approval can lead to situations in which private payers may choose not to cover a drug because of high cost and lack of evidence of clinical efficacy, thereby thwarting the pathway’s goal of getting potentially important therapies to patients earlier, while major government payers are forced to cover the product, directing substantial tax dollars to drugs not yet shown to have clinical benefit.

The NEJM article’s authors argue that any biopharma company granted an accelerated approval should be subject to certain price restrictions until the confirmatory trials are completed, reasoning that “the price paid by taxpayers should reflect the strength of the available evidence about the drug’s clinical impact.”  Additionally, they proposed that all drugs moving through an accelerated-approval pathway should be subject to formal economic impact analyses after one to two years on the market, possibly funded by an increase in the user fees for manufacturers that use this pathway.

Dr. Gottlieb is also evaluating the generic drug and biosimilar review and approval process.  More specifically, Dr. Gottlieb is looking at measures to facilitate communication between the industry and FDA, address complex molecules, and to speed up the approval of biosimilar products.

These recommendations are not without some appeal.  Despite seeking to deliver more “bang” for the taxpayer’s “buck,” however, prospectively capping the federal reimbursement for a high-cost drug product still subject to additional clinical trials and/or other R&D may create a financial disincentive to pharmaceutical manufacturers to foot the expense of developing breakthrough drugs to fill an unmet medical need.

Stay Tuned

To deliver on the promises of reducing the incidence of opioid abuse and lowering drug prices, Dr. Gottlieb’s FDA must navigate the competing interests and thorny health policy issues highlighted above.  Foley & Lardner will report further as the agency’s redefined mission unfolds.

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17 Measures Every Health Care Organization Should Consider to Reduce the Risk of Cyber-Intrusions


The importance of privacy in the health care industry starts at the most basic level between a patient, a doctor, and the doctor’s laptop computer. The levels of importance and complexity increase exponentially when you look at entire networks of payers and providers. The amount of data produced and stored in these organizations is staggering and keeping it secure is of the utmost importance. We have identified misconceptions about cybersecurity. We’ve covered some of the legal obligations the c-suite is under to secure its organization’s data. With the rise cyber-intrusions like ransomware, we know it’s important to effectively train employees and follow the guidelines provided by the Federal Department of Health and Human Services.

With the developments expected in this space under the Trump Administration, it is vital that every health care organization is prepared on the cybersecurity front.

Below is our list of 17 measures every health care organization should consider to reduce the risk of cyber-intrusions.

  1. Conduct internal compliance and risk assessments, to determine your organization’s vulnerability to cyber-attacks. This includes, but is not limited to, the security risk analysis required under the HIPAA Security Rule for covered entities and their business associates.
  2. Develop and implement corporate policies and procedures required for compliance with federal and state privacy and security laws.
  3. Develop quick-response teams to handle potential cyber-attacks, using pre-formulated decision trees and procedures so that you don’t have to develop them while under the fire of an ongoing attack.
  4. Establish secure data backup protocols to ensure that, even if your company is under attack, important company records are secure and available.
  5. Establish protocols to deal with common forms of cyber-attacks (denial of service, etc.).
  6. Line up outside experts, if necessary based upon the risk profile of your company, to swing into action if company processes are overwhelmed by a cyber-attack.
  7. Perform periodic audits of cybersecurity practices against industry norms, accepted best practices, and the risk profile of your organization.
  8. Implement information security best practices, reflect them in information security policies, records retention and management policies, and in internal controls/standard operating procedures.
  9. Make certain the CEO and executive leadership are properly informed about the cyber risks to your company and that they’re involved in oversight and the decision-making process related both to cyber-attacks and proactive cybersecurity measures.
  10. Review funding of all electronic security measures to ensure they are adequate to cover not only routine compliance measures but also to allow for proactive testing and probing of systems in light of increasingly sophisticated measures being used by hackers.
  11. Collect only that protected health information and personally identifiable information from clients, customers, or company personnel that is needed for identified business needs, with the retention of such information being only for as long as it serves those business needs, with storage being accomplished in a way that minimizes the chance of it being of any use outside the organization (encryption, etc.).
  12. Obtain cyber insurance and understand the coverage, including the legal counsel and other experts the company is permitted to engage under the policy.
  13. Coordinate cyber incident response planning across the entire company.
  14. Store sensitive information securely (encrypting where appropriate) and away from other data that does not require the same level of protection. Use a layered defense approach to protect “crown jewel” information.
  15. Conduct appropriate data security due diligence on third-party service providers with access to protected health information, personal identifiable information, and/or sensitive business information, and require them to enter into agreements that they are implementing robust data security procedures, following up to ensure these requirements are in fact implemented.
  16. Assess ways in which your company’s access vulnerabilities (website, VPNs, remote access, and so forth) are configured to minimize potential intrusion risk, with regular testing and probing to update and address identified risks.
  17. Perform companywide training, tailored to the personnel at issue, to ensure personnel understand the importance of following all security policies and procedures and reporting any suspected violations.

This list was generated as part of a Legal News: Cybersecurity newsletter by Greg Husisian, Chanley Howell and Jacob Heller titled, “Cybersecurity and the New Trump Administration: Your Top Ten Questions Answered.” Click here for the original publication.

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Republican Health Care Bill Moves Forward to the Senate


In a surprising reversal, last week the U.S. House of Representatives passed legislation that would significantly modify the Affordable Care Act. The legislation, known as the American Health Care Act (the “AHCA”, H.R. 1628), passed on Thursday with a 217-213 party line vote.  After cancelling an expected vote on AHCA in March, the House Republicans developed additional amendments to the AHCA which ultimately led enough House Republicans to support the bill.

While the AHCA would not fully repeal the Affordable Care Act, it does make significant changes to the insurance markets developed under the Affordable Care Act, and also includes numerous tax provisions and significant modifications to the Medicaid program. A summary of the initial AHCA legislation from early March is available here. The version of the legislation approved by the House of Representatives last week also includes key amendments that were introduced to help secure the votes to move the bill forward:

Amendments that Impact the Insurance Markets

  • Beginning January 1, 2018, would allow states to waive the ACA’s “community rating” (or medical underwriting) prohibitions, thereby permitting insurance companies to charge higher premiums for more complex health conditions.
  • Beginning January 1, 2020, would allow states to modify the ACA’s essential health benefits for plans offered in the state on the individual or group market, allowing such plans to offer more limited benefits, and potentially allowing all plans (including employer-sponsored insurance) to impose lifetime caps on benefits that are not essential health benefits.
  • Modifies the AHCA’s required premium increases for individuals who do not maintain continuous health insurance coverage (defined as all but 63 days in the last twelve months) to allow plans to instead consider the health status of such individuals when setting premiums for one year, but only if the state establishes a high-risk pool or other program to stabilize individual health market insurance premiums.
  • Additional funding for the Patient and State Stability Fund, including $8 billion per year from 2018 to 2023 to states who have applied for and been granted a waiver from the ACA’s community rating requirements. These funds must be used to provide assistance to reduce premiums or other out-of-pocket costs to individuals that:
    • reside in states with an approved waiver,
    • have a pre-existing condition,
    • are uninsured due to not maintaining continuous coverage, and
    • have purchased health care in the individual market.

Medicaid Amendments

  • New option for states to be paid a block grant for adult beneficiaries with dependents and child beneficiaries. The block grant would allow states to draw down the federal block grant funds at an enhanced rate, and would allow the state increased flexibility to reduce eligibility standards, benefits, and other Medicaid requirements.
  • New options for states to condition availability of Medicaid beneficiaries on satisfaction of a work requirement.
  • In addition to phasing out the enhanced federal matching funds for the Medicaid expansion for all states beginning in 2020, would include language prohibiting states that elect to expand after January 1, 2017 from receiving the enhanced matching funds.

Looking Forward

Now that the House has passed the AHCA attention turns to the U.S. Senate. Early Senate reactions indicate they will take some time to decide the best path forward and will write their own bill, rather than work off of the House bill.  While the House and Senate Republicans were working closely together on legislative language when the earlier version of the AHCA was released, that effort was abandoned in recent weeks once the House began to include changes to the ACA’s essential health benefits package and provisions related to coverage for people with pre-existing conditions. Those provisions have been met with opposition from some Republican Senators and are unlikely to be included in a Senate bill, in part because they do not have a federal budgetary impact, which is required when moving a bill under the chamber’s reconciliation rules. Moreover, Republican Senators have publicly stated their opposition to the AHCA’s changes to the Medicaid program and repealing funding for Planned Parenthood. To complicate matters further, Congress loses the ability to use the FY17 reconciliation vehicle once they pass a conferenced FY18 budget resolution. Just this week they have turned their attention to the FY18 budget so the clock is ticking.

Last week’s vote puts many House Republicans in districts which were won by Secretary Clinton on the hot seat for their re-election in 2018.  The dynamic is eerily similar to what occurred in 2009 and 2010 when Democrats passed the Affordable Care Act.

Stay tuned for further updates as we watch the Senate to see what happens to the AHCA and to the ACA.

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Payor/Provider Convergence: Joint Venture Health Plans



Health Plans and health care providers are getting into each other’s business.  This payor/provider convergence has taken different forms.  Health systems have ventured into the health insurance business by acquiring or starting their own health plans and by establishing joint ventures with payors, to jointly own and operate a health plan.  Health plans have also moved into the health care provider business by acquiring hospitals, surgery centers, medical groups, and other providers.  This blog post examines one aspect of this Payor/Provider Convergence – payor/provider joint ventures to operate health plans.

A recent study by McKinsey & Company recites that as of 2015 “13% of all US health systems offer health plans in one or more markets – commercial, Medicare Advantage (MA), or managed Medicaid,” with provider-led plans representing a higher percentage (23%) of the Medicaid Market. Consistent with this trend, there have been a number of joint ventures announced between health systems and health plans.  Many of these result in a health plan being owned on a 50/50 basis by a larger health insurer and the health system, though there are other percentage ownership arrangements.  These joint ventures may utilize narrow provider networks featuring the health system’s providers as the core of the provider network.  The health care media has reported a number of such joint ventures between larger health plans and health care systems in various markets across the country.

What is driving this is activity?

There are a number of reasons leading to this joint venture activity.  With the Affordable Care Act and new alternative payment models as a catalyst, health systems are keenly focused on the provision of efficient services and are increasingly assuming accountability for the cost and quality of their services.  These value-based programs require health systems to obtain data to analyze the care provided and to manage that care.  Such programs have also led health systems to develop and use technology and infrastructure to quickly analyze data and incorporate such data into the provision of care.  Such developments have given providers confidence that they can succeed in a managed care environment where they are at risk for some or all of the cost of care.  With such data and focus, health systems believe having a role in managed care operations and the opportunity to share in the health plan’s portion of the health care dollar are appropriate next steps.

The expected issuance of more and different alternative payment programs and increasing population health financial arrangements, encourage health systems to act.  Health systems also view participation in ownership as a way to share in the premium or administrative fee dollars earned by health plans.  This helps them diversify their business into an area they are beginning to understand and for which they are already taking some of the health care risk.

Health systems also seek a role in shaping the network for the health plan.  Through narrow networks which feature the health system’s providers exclusively or in the top tier, health systems hope to drive increased patient volume to the health system.  With a role in governance of a health plan, the health system also sees it as advantageous to target the markets it enters and the larger employers with whom it seeks to contract for services.

A joint venture with an existing health plan or health insurer that has experience and the tools to operate the back office functions of a health plan both reduces the risk and speeds the time to market as compared to a health system starting or acquiring its own health plan.  Many health systems have a history of trying unsuccessfully to own and operate a health plan on their own.  A joint venture provides an opportunity to share the risk and also brings an experienced and successful partner to the arrangement.

Health plans also see positive opportunities in partnering with health systems.  Joint ventures can create marketing advantages for a health plan by aligning with a health system that has earned loyalty from patients in certain markets through the care provided over the years.  Health plans also envision that sharing the operations and bottom line with a health system will incentivize the health system even more to provide efficient care, to eliminate any unnecessary services or waste, and to be accountable for cost of care provided.

Certain health plans also view such joint ventures as an opportunity to help jump start the health plan’s efforts to expand into a new market, with a strong network of the health system’s providers.  Health plans may also anticipate that the health system will furnish it with favorable pricing to allow it to compete effectively for new insurance or self-funded employer business.

What are the more significant issues in structuring such arrangements?

Such joint venture health plans present a myriad of challenging issues, both legal and business.  The issues include the normal issues present in any joint venture between separate businesses as well as ones caused by the positions each has in health care.

  • Percentage ownership/governance – Will the parties agree to a 50/50 arrangement or will one party’s need for financial and accounting consolidation or for control require such party to own a majority of the interests and exercise control? If one party needs control for financial consolidation, how may such control be balanced through other aspects of the arrangement protecting the other party without jeopardizing control required for consolidation?
  • Investment – What will each party contribute and how will non-cash contributions be valued? Will the level of the contributions trigger the need for a Hart-Scott-Rodino filing under the rules applicable to joint ventures?
  • Decision-making – What decisions may be made by the officers, by the governing board, or by the joint venture parties? Are there certain decisions that require both parties to approve?  How should reserve powers be structured?
  • Application of Copperweld – From an Antitrust perspective, will the entity be sufficiently controlled by one of the venturers to obtain Cooperweld protection or will it be an independent entity for antitrust purposes? If the later, there will be need for strict Antitrust guidelines to ensure joint venture is separate from and does not engage in improper activities with either venturer.
  • Services – Will the joint venture provide its own services or will it acquire some services from the venture parties? What price will be paid for the services and which ones, from an insurance regulatory perspective under state’s insurance holding company act, must “fair and reasonable” to the health plan, generally considered to be at “cost?”  What role will both or one of the venturers have in services such as marketing plans, care management, underwriting/pricing, network development, etc.?
  • Leadership – Will the executive officers be representatives of one of the parties or be hired separately by the joint venture to be independent from each venturer?
  • Markets Served – In what markets will the joint venture operate? Is the market limited to the service area of the health system venturer?  Is there overlap with a market served by the health plan venturer’s existing health plan offerings?  If so, how are potential conflict issues resolved?
  • Provider Network – Who decides who is included in the provider network? Are the products limited to narrow network offerings?  Does the health system venturer have a role in network make-up?  How is provider pricing determined and how is the health system screened from pricing of any competitor providers included in the network?
  • Exit Rights – What rights does each party have to exit or terminate the joint venture? What are the triggers for such rights and does each venturer have the right to buy-out the other under certain circumstances?
  • Non-Compete/Exclusivity – Is the joint venture’s health plan the exclusive payor offering of each venturer in a certain geography? What, if any, limits are there on the health system in other health insurance participation?
  • Side-by-Side Selling – If there is no exclusivity, how does the joint venture compete for business with products offered by the health plan venturer? How are the offerings coordinated if they can be coordinated in compliance with the Antitrust laws?
  • Conflicting Goals – Will the potentially different goals of the joint venture, the health plan, and the health system be reconciled?
  • Cannibalizing Existing Business – If the health system provides favorable pricing for a narrow network offering, what protections does the health system have that the venture will not market to customers already utilizing the health system’s services albeit at a lower price point through the joint venture? Without such protections, the health system may just be seeing the same business but at a lower price point.


The increasing popularity of health system/health plan convergence in the form of a joint venture health plan, presents opportunities but also requires a careful identification and resolution of a number of issues for them to succeed and to realize each party’s goals.

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Key Takeaways From FHA’s Health Law Summit


Foley recently co-hosted the Florida Hospital Association’s (FHA) 2017 Health Law Summit, which brought together more than 40 in-house attorneys and compliance officers from FHA member hospitals to discuss the current state and future direction of the health care industry.

Amid so much economic and political uncertainty, we are diligent about keeping our fingers on the pulse of the macro trends impacting providers operating in the U.S. health system. While we know you’ve been paying close attention to these developments as well, following is a brief recap that encapsulates the key takeaways from event speakers and other health care practitioners in attendance.

Telehealth and Destination Medicine

Florida has rapidly become a hotspot for the burgeoning area of destination medicine, and hospitals must account for the movement, lest they lose valuable revenue and patients to specialty competitors. While current laws and regulations are complex, there are avenues to create compliant offerings, including telehealth and online second opinion programs.

Health Care Privacy and Cybersecurity

Managing relationships with vendors, especially those who handle protected health information, is key. Best practices include conducting due diligence and negotiating appropriate contractual protection.

Labor and Employment Law

Laws affecting the workplace are in a state of flux, but changes are on the horizon under the new administration, which is generally viewed as being pro-employer. Hospital executives are eager to see how the DOL will be steered on issues such as overtime, worker safety and collective bargaining, to name a few.

False Claims Act Investigations and Enforcement

Civil Investigative Demands (CID) served by the government must be treated differently than other kinds of subpoenas or demands, and misperceived responses can have an adverse impact. In-house counsel who receive CIDs must have an escalation plan that addresses potential high-risk or high-likelihood scenarios, including investigations, litigation, settlements, liability, damages, insurance and disclosures.

Update on Stark Law and Anti-Kickback Statute

Government enforcement of such violations is expanding at a rapid rate, particularly in Florida. There were several notable public settlements in the state last year, as well as changes made to 11th Circuit case law, so it’s important for in-house counsel to stay abreast of these developments.

Boards and Hospital Governance and Compliance

The Department of Justice is increasingly holding individual leaders responsible for the stewardship of their hospitals. Educating hospital boards is vital to effective compliance, especially related to financial arrangements and quality of care.


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House Committees Reveal Draft of Bill to Modify and Repeal Portions of the Affordable Care Act


On Monday, two House committees with oversight over health care and taxation, Energy and Commerce and Ways and Means, released draft reconciliation bills designed to repeal and alter significant portions of the Patient Protection and Affordable Care Act (PPACA).  These long-awaited draft bills, collectively entitled the American Health Care Act (AHCA), would make significant modifications to the health insurance markets and to the operation of state Medicaid programs, and would also repeal or delay several taxes imposed by PPACA.

Energy and Commerce and Ways and Means are holding mark-ups of the legislation simultaneously today, with a House Budget Committee mark-up anticipated next week.  Then the bill will go to the House floor for a vote of the full chamber.  Despite Speaker Paul Ryan’s (R-WI) confidence the bill will move swiftly through the House, significant opposition among the House Republican Conference remains.  The so called Freedom Caucus Members have expressed strong opposition to the tax credit and Medicaid expansion provisions in the current legislation and prefer the measure Congress passed previously, which was vetoed by President Obama.  Moreover, the Congressional Budget Office (CBO) has not yet released the cost of the bill or the estimated number of Americans who will be covered under the AHCA, further adding to the frustration within the Republican Conference.

In the Senate, Majority Leader Mitch McConnell (R-KY) has echoed similar sentiments as Ryan, saying he hopes to bring a bill to the Senate floor before Congress recesses for two weeks in mid-April.   Under the reconciliation process used to bring the AHCA forward, the Senate can only lose two Republican votes in order to pass the measure, and deep divisions among the GOP remain.  Some Senators are aligned with the concerns expressed by the House Freedom Caucus Members, while others oppose the proposed Medicaid changes or the prohibition of federal funds for Planned Parenthood.  President Trump has voiced support for the AHCA and will likely need to use the power of his office to get it across the finish line.  Following passage of the AHCA, Republicans plan to issue additional changes to PPACA through Executive Order and additional legislation.  Democrats in both the House and the Senate are expected to oppose the measure.

Foley attorneys are analyzing the impact of changes included in the AHCA, and over the next few weeks will be publishing more detailed analyses explaining the context and potential implications of the changes for the health care industry.  Some of the big-picture items notable for their inclusion or absence in the AHCA are identified below.

Changes to the ACA Insurance Markets and Subsidies

The AHCA would make several immediate or near term changes to the health insurance markets established by PPACA.

  • The tax penalties associated with the employer and individual mandates will be reduced to $0 effective January 1, 2016, essentially repealing the employer and individual mandates with retroactive effect.
  • In 2018 and 2019, modifications to the premium tax credits (commonly referred to as subsidies) available under PPACA would take effect. These modifications would adjust the amount of premium tax credits available for the purchase of individual health insurance based on both income and age.  Additionally, in 2018 and 2019, premium tax credits would be available for individuals who purchase catastrophic coverage and individuals who purchase off-Exchange individual health insurance. In 2020, a new premium tax credit system would take effect.  Under this new system, tax credits would vary based only on age, but would phase out above an income threshold.


Transition Period (2018 and 2019)

2020 and Beyond

Amount of Premium Tax Credit

Lesser of actual premium paid by taxpayer or premium for second-lowest silver plan, adjusted by income.

Lesser of actual premium paid by taxpayer or premium for second-lowest silver plan, adjusted by age and income.

Fixed dollar amounts, set by a schedule.  Tax credit amounts increase from $2,000 for people under 30 to $4,000 for people over 60.  The credits phase out for higher-income taxpayers (above $75,000 single/$150,000 joint)

Availability of the Premium Tax Credit

On-Exchange purchases only; no catastrophic coverage.

On and off-Exchange purchases, including catastrophic coverage.

All individual major medical insurance, including catastrophic coverage.

  • The AHCA would not rescind or modify many of the major insurance market reforms implemented by PPACA, including the ability for children to remain on their parents’ coverage until age 26, the requirement that individual health insurance be guaranteed issue and guaranteed renewable, the prohibition on pre-existing condition exclusions, and the requirement that health insurance provide coverage of ten “Essential Health Benefits” (EHBs).
  • The AHCA removes requirements that individual health plans satisfy actuarial value requirements to be identified as a particular metal level (e.g., bronze, silver or gold). The AHCA does not provide an alternative method for identifying the metal level of a particular plan.
  • Effective for special enrollments in 2018 and open enrollment for 2019 and later years, health insurance companies in the individual and small group market would assess a 30% premium surcharge if an applicant has gone longer than 63 days without continuous health insurance coverage during a 12-month lookback period.  This surcharge applies regardless of the applicant’s health status.

Additional Insurance Market Reforms

The AHCA also would promote greater use of alternative approaches by states or by individuals to manage insurance costs, including use of high-risk pools and health savings accounts (“HSAs”).

  • The AHCA will create a new Patient and State Stability Fund, which will provide $100 billion between 2018 and 2026 to mitigate the cost of individual health insurance and stabilize state markets.  States will be given the flexibility to use these funds to establish or strengthen high-risk pool mechanisms, provide additional subsidies for individual health insurance, make payments to insurers for insureds who incur more than $50,000 in claims during any single year, promote participation in the individual/small group health insurance marketplace, promote preventive care and other public health services, or to defray out-of-pocket costs incurred by covered individuals.
  • Effective January 1, 2018, the AHCA would expand the tax benefits associated with HSAs, and allow consumers to contribute substantially more pre-tax money to an HSA regardless of whether they have individual or employer-sponsored health coverage.  HSA contributions would be allowed up to the limits on out-of-pocket expenses permitted for high deductible health plans (for 2017, $6,550 for self-only coverage and $13,100 for family coverage).
  • Effective January 1, 2018, PPACA’s limit on the amount an employee may contribute to a health flexible spending account (health FSA) per year (for 2017, $2,600) would be repealed, and employees would again be able use health FSA funds to purchase over-the-counter medications without a prescription, as was the case before PPACA was adopted.
  • While many of the taxes included in PPACA would be repealed, the AHCA retains but delays the “Cadillac Tax” until 2025.  The Cadillac Tax is a 40% excise tax on high-cost health coverage provided by employers.

Modifications to the Medicaid Program

The AHCA proposes significant modifications to the financing and eligibility for Medicaid programs, including new incentives designed to reduce states expanding Medicaid coverage as envisioned by PPACA, new limits on federal matching of state Medicaid expenditures, and increased oversight and limitations on Medicaid eligibility.

  • The AHCA would allow states, at their option, to continue PPACA’s Medicaid expansion, but would reduce federal matching funds for the expansion beginning January 1, 2020. Expenditures for services for individuals enrolled before January 1, 2020 would be separately identified and continue to be matched at PPACA’s enhanced rate if the individual does not have a gap in Medicaid coverage.
  • Scheduled reductions in Medicaid disproportionate share hospital (“DSH”) payments would be reversed beginning with 2020; cuts would remain as scheduled for 2018 and 2019. These reductions in DSH payments would not be applied against providers in states that did not expand their Medicaid program.
  • New authority for states to make up to $2 billion per year in increased Medicaid payments, consisting entirely or almost entirely of federal funds, to Medicaid providers in states that did not expand the Medicaid program under PPACA.
  • New “per capita cap” formula would, beginning October 2019, penalize states whose aggregate Medicaid expenditure exceed a pre-determined per-capita target.
  • Multiple revisions to increase oversight of Medicaid eligibility requirements, including:
    • Requirement to revalidate Medicaid eligibility every 6 months.
    • Removal of the ability to cover services provided to a Medicaid beneficiaries during the three months prior to the submission of an application
    • Changes to limit the availability of federal financial participation for individuals who have attested to being citizens or nationals prior to the submission of verifying documentation
    • Termination of certain presumptive eligibility options as of January 1, 2020
    • Requirements for states to consider lottery winnings in Medicaid eligibility
  • Removes requirement for Medicaid expansion beneficiaries to receive a package including “essential health benefits,” which includes requirements for access to coverage for mental health and substance abuse disorder treatment services.

Other Notable Changes

  • The AHCA does not seek changes to the benefits or coverage under the Medicare program, although it does remove taxes imposed by PPACA that help finance the Medicare trust fund.
  • An additional $422 million in funding will be provided to Federally Qualified Health Centers through the Community Health Center Fund in 2017.
  • The AHCA would prevent any Medicaid, CHIP, and certain federal block grant payments from being made to Planned Parenthood for one year.

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Update on California’s End of Life Option Act


In June  2016, California became the fifth state to enact an aid-in-dying law.  California’s End of Life Option Act (the “Act”) authorizes an adult who is suffering from a terminal disease and meets other qualifications to request an aid-in-dying drug that may be prescribed for the purpose of ending his or her life.  Cal. Health & Safety Code § 443.2.

The California Department of Public Health (“CDPH”) and the California Medical Board have published forms for providers to use when fulfilling a patient’s request under the Act.  CDPH is expected to report the number of people who died using aid-in-dying drugs, and other information collected from health care providers participating in activities authorized by the Act.

Since the effective date of the Act (June 9, 2016), California health care providers and health care facilities have been grappling with complying with the Act’s requirements.  To fulfill a patient’s request under the Act, health care providers must follow specific protocols outlined in the Act, and ensure that proper documentation is completed.  Individual health care providers are not obligated to participate in activities authorized by the Act, and may not be subject to civil, criminal, disciplinary, or medical staff actions for refusing to participate in activities authorized by the Act.  The Act allows certain health care providers, including licensed hospitals and skilled nursing facilities, to prohibit their employees, independent contractors, or other persons or entities, from participating in activities under the Act while on premises owned or under the management or direct control of the health care provider, or while acting within the course and scope of any employment by, or contract with, the health care provider.

Many privately-owned health care facilities have developed internal policies addressed to compliance with the Act.  California recently enacted new regulations which address compliance with the Act in public facilities operated by the Department of Developmental Services (“DDS”).  According to the new regulations, DDS will not provide aid-in-dying drugs to a terminally ill resident in a developmental center or state-operated facility.  Furthermore, no DDS employees or independent contractors may provide the end-of-life option on the premises of any DDS facility or while acting within the course and scope of any employment by, or contract with DDS.  In certain circumstances, DDS may arrange for a transfer of a DDS patient who intends to exercise his or her rights under the Act.  If a transfer is not available, the patient may file an appeal to exercise his or her rights under the Act at the DDS facility.

We will continue to update you on the implementation of the Act, and its implications for health care providers.

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340B Program Omnibus Guidance Withdrawn

omnibus guidance

The Federal Office for Management and Budget has withdrawn the proposed omnibus guidance for the 340B Drug Pricing Program (previously referred to as the “Mega-Regs”), creating further uncertainty in the 340B Program. The guidance was proposed in the Fall of 2015, and would have updated all areas of 340B Program guidance. The guidance would have included significant changes to the definition of an eligible patient, and to 340B Program integrity provisions. By withdrawing the guidance, the Office of Management and Budget indicates that omnibus guidance will not be adopted as it was proposed. The new administration could issue new guidance that differs materially from the previous proposal. The withdrawal of the omnibus guidance coincides with a meeting between the President and the heads of major pharmaceutical companies.

As a result of court cases limiting the scope of the administration’s ability to issue regulations that have binding legal effect with regard to many aspects of the 340B Program, the new administration will need to evaluate the scope and intended effect of any forthcoming guidance. Until such time as guidance is finalized and adopted, 340B Program covered entities and drug manufacturers should continue to rely on the historical guidance.

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Eight Things to Know About the New Federal Substance Use Disorder Privacy Rule


A final rule published on January 18 implements the first major revisions to the federal regulations governing the confidentiality of substance-use disorder patient records (Part 2) since 1987. It finalizes a proposal from last February to modernize the regulations in light of the significant changes in the health care delivery system. On the same day, the Substance Abuse and Mental Health Services Administration (SAMHSA), also issued a supplemental notice of proposed rulemaking to request comments on the disclosure of Part 2 covered data by contractors, subcontractors, and legal representatives for purposes of carrying out payment, health care operations, and other health care related activities.

The supplemental rulemaking requests comments by February 17, 2017, which is also the date the Final Rule would ordinarily be effective. However, a January 20, 2017 presidential memorandum to the heads of executive departments and agencies directs that all regulations that have not yet taken effect, if permitted by applicable law and not subject to an exception, be temporarily postponed for 60 days from January 20 “for the purpose of reviewing questions of fact, law, and policy they raise.” This directive means that the effective date for the Final Rule is delayed until at least March 21, 2017. If SAMHSA determines that the Final Rule raises “substantial questions of law or policy,” further action may be taken, potentially including delay or withdrawal of the rule or request for additional comment.

Here are eight key takeaways from the Final Rule:

  1. Patient Consent Forms May Authorize a General Disclosure to Intermediate Entities Like Health Information Exchanges and Treating Providers (42 C.F.R. § 2.31(a)(4))

Part 2 requires that patient consent forms identify the recipients of confidential information. The Final Rule continues to permit consent forms to meet this requirement by authorizing disclosures to specific individuals or treating entities like hospitals or clinics; in addition, consent forms may now authorize disclosures pursuant to a general designation if certain requirements are met. For instance, the Final Rule allows a consent form to authorize disclosure to a health information exchange or other intermediate entity and “my current and future treating providers.” When this kind of general designation is used, the intermediate entity may further disclose the patient identifying information it receives only to those providers it can verify have a treating provider relationship with the patient. Further, the Final Rule entitles patients who have consented to disclose their information using a general designation to receive from the intermediate entity, upon written request, a list of entities to which their information has been disclosed within the last two years pursuant to the general designation.

  1. Patient Consent Forms Must Include an Explicit Description of the Substance Use Disorder Information that May be Disclosed (42 C.F.R. § 2.31(a)(3))

The Final Rule clarifies the Part 2 requirement that consent forms must include the amount and kind of information to be disclosed by stating that there should be “an explicit description of the substance use disorder information that may be disclosed.” SAMHSA suggests that the types of information that could be specified include diagnostic information, medications and dosages, lab tests, allergies, substance use history summaries, trauma history summary elements of a medical record, employment information, living situation and social supports, and claims or encounter data. The agency also states that it is permissible for a patient to make a selection like “all my substance use disorder information” as long as the consent form accommodates more specific limitations.

  1. A Qualified Services Organization May Provide Population Health Management Services (42 C.F.R. § 2.11)

In certain circumstances, Part 2 permits disclosure without patient consent to a Qualified Service Organization (QSO) that provides services to a Part 2 Program. The Final Rule clarifies that population health management is one kind of service that may be provided by a QSO. SAMHSA defines “population health management” as “increasing desired health outcomes and conditions through monitoring and identifying patients within a group.” The agency also takes the position that disclosures for population health management pursuant to a QSO agreement must be limited to the specific offices or units that are tasked with carrying out population health management for the organization. Care coordination is not considered by SAMHSA to be population health management because it includes a patient treatment component.

  1. Health Care Providers Do Not Become Part 2 Programs Simply Because They Provide Screening, Brief Intervention, or Referral to Treatment (SBIRT) (42 C.F.R. § 2.11)

SAMHSA did not finalize a proposed revision to the definition of Part 2 “program.” However, the agency states in the preamble to the Final Rule that health care providers do not become a “program” simply because they provide screening, brief intervention, or referral to treatment (SBIRT) within the context of general health care. Consistent with previous guidance, SAMHSA also reiterates that “holds itself out” means “any activity that would lead one to reasonably conclude that the individual or entity provides substance use disorder diagnosis, treatment, or referral for treatment.” This includes authorization such as licensure or certification by the state or federal government to provide such services; advertisements, notices, or statements related to such services; and consultation activities related to such services.

  1. The Prohibition on Re-Disclosure Applies Only to Identifying Information (42 C.F.R. § 2.32(a))

The Final Rule clarifies that the Part 2 prohibition on re-disclosure provision applies only to information that would identify, directly or indirectly, an individual as having been diagnosed, treated, or referred for treatment for a substance use disorder. Other health-related information that is unrelated to the substance abuse disorder, such as treatment for an unrelated health condition, may be re-disclosed, if permissible under the applicable law. In addition, if the origin of the data (such as a treatment clinic) would reveal that the individual has a substance abuse disorder, then the disclosure would be prohibited.

  1. Confidential Information May Be Disclosed Without Consent to Meet a Bona Fide Medical Emergency (42 C.F.R. § 2.51)

The Final Rule aligns the definition of “medical emergency” with the statutory definition. The revised language states that a patient’s identifying information may be disclosed to medical personnel to the extent necessary to meet a bona fide medical emergency, in which the patient’s prior informed consent cannot be obtained. SAMHSA continues to require the Part 2 program to immediately document, in writing, specific information related to the medical emergency.

  1. Part 2 Security Requirements Apply to Both Electronic and Paper Records (42 C.F.R. §§ 2.16, 2.31, 2.53)

The Final Rule incorporates electronic records in the security requirements under Part 2. Part 2 programs and other lawful holders of patient identifying information are required to have in place formal policies and procedures for the security of both paper and electronic records. Moreover, the Final Rule establishes procedures for sanitizing electronic media for handling electronic records subsequent to the discontinuation of a Part 2 program. Similarly, the electronic records are included in the exception for disclosure without consent for audit and evaluation activities.

  1. Confidential Information May Be Disclosed For Scientific Research Without Patient Consent to Recipients Who Meet Relevant HIPAA and Common Rule Requirements (42 C.F.R. § 2.52)

The Final Rule liberalizes the Part 2 exception allowing patient information to be disclosed without consent for the purpose of conducting scientific research if the program director makes a determination that specified requirements have been met. It allows any individual in lawful possession of Part 2 data to disclose the information to qualified research personnel for the purpose of conducting scientific research if applicable requirements are satisfied, including privacy regulations under HIPAA and regulations for the protection of human subjects under the Common Rule. The Final Rule also addresses data linkages to enable researchers holding Part 2 data to link to federal data sets.

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