The Final Countdown

In the midst of chaotic uncertainty, the Families First Coronavirus Response Act (the “Act”) provides some families with a modicum of financial safety. The Act expires on December 31, 2020.

The Act provides that certain employers are required to compensate employees for Coronavirus-related absences. The duration of the leave and amount paid to the employee is based on the Coronavirus-related reason for the absence.

For example, if a full-time employee is advised by a health care provider to self-quarantine, the employee is eligible for 80 hours of leave with either their regular rate of pay or the applicable minimum wage (whichever is higher) up to $511.00 per day and $5,100.00 in the aggregate.

Conversely, if a full-time employee is caring for a child whose school or place of care is closed due to the Coronavirus, the employee is eligible for up to 12 weeks of leave (2 weeks of which will be paid sick leave followed by 10 weeks of paid expanded family and medical leave). The employee taking leave for this reason is entitled to pay at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200.00 per day and $12,000 in the aggregate (over a 12-week period).

Employers also have a modicum of security to ensure that their interests are protected as well. In fact, the Act only applies to certain employers.

Employers who are subject to the Act are entitled to know, and should document the following:

• The name of the employee requesting leave;
• The date(s) for which leave is requested;
• The reason for leave; and
• A statement from the employee that he or she is unable to work because of that reason.
  • If an employee requests leave because he or she needs to provide care for a child whose school or place of care is closed due to the Coronavirus, the employer should document the following:
    • The name of the child being cared for;
    • The name of the school, place of care or child care provider that has closed or become unavailable; and
    • A statement from the employee that no other suitable person is available to care for the child.[3]

Coronavirus cases and deaths are on the rise throughout the country, and around the world.  This is disconcerting for a number of reasons, including the potential that employers and employees both will be without a framework to apply to the resulting problems.  Congress has to date, not succeeded in developing an alternative plan, or an extension of what is currently in place.

With Coronavirus cases on the rise employers need to know their rights and duties during the final countdown of the Act. We will continue to provide information as developments occur.

For more information, please contact: info@vwattys.com

VW Contributor: Leslie Mueller
© 2020 Vandenack Weaver LLC
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How COVID-19 and Value-Based Care Are Accelerating Hospital Mergers and Acquisitions

Two topics that dominate healthcare law right are COVID-19 and value based care. While the healthcare system has been moving towards value-based care for years, COVID-19 has accelerated this transformation. The pandemic has instilled a greater sense of urgency in the healthcare system to adopt virtual care technologies, interoperable data platforms, and remote monitoring technologies for disease management. In this article, we look at another important area driving value-based care: mergers and acquisitions. Particularly, this article illustrates how the pandemic has not only accelerated the paradigm of value-based care but has also accelerated the trend in health care mergers.

Hospital mergers and acquisitions have been on the rise well before COVID-19. Beginning in 2017, there were one-hundred and fifteen merger and acquisition transactions among healthcare organizations. However, COVID-19 has accelerated the perceived need for hospitals to engage in mergers and acquisitions to implement value-based care. This is because value-based care requires providers to control the costs and outcomes for an entire episode of patient care. Hospitals need to generate the scale to accomplish this. The merger provides more resources for hospitals to expand facilities, expand their digital and virtual access, as well as operate at lower costs.

Hospital merger and acquisition activity has not subsided despite the fact that COVID-19 has resulted in revenue losses for healthcare providers because the pandemic has caused healthcare leaders to reassess their current care delivery models. In fact, hospitals and health systems reported fourteen transactions during the second quarter of 2020. The pandemic has highlighted the advantages of scale, coordination and innovation that are likely to strengthen the strategic rationale for mergers, at least with larger hospitals. One notable announcement that occurred in June of 2020 was when Steward Health Care structured a recapitalization transaction with Cerberus Capital Management. The transaction transferred controlling interest of Steward Health Care to a management group of its physicians. This resulted in Steward Health Care becoming the largest physician-owned and operated U.S. healthcare system. The impetus for the transaction was to ensure that Steward Health Care’s transformative, accountable care model would continue to drive innovation as a physician-owned and integrated health care system, especially given the new realities in a COVID-19 world. Also in June of 2020 the largest not-for-profit hospital system in Illinois, Michigan, and Wisconsin announced they signed a non-binding letter of intent with Michigan-based Beaumont Hospital to explore a possible merger. While both entities are far from completing a deal, they also need approval from federal authorities. Early in 2020, the Federal Trade Commission (FTC) disclosed they would closely scrutinize mergers and acquisitions between two providers competing at the same level of the health care delivery chain.

In fact, the FTC and the Pennsylvania Office of Attorney General are seeking a preliminary injunction to block the union of Thomas Jefferson University hospital network and Albert Einstein Healthcare Network. The government postulates the merger would increase hospital prices by an estimated 6.9% at Einstein’s hospitals and cost consumers $23.3 million a year. On the other hand, the American Hospital Association posits that the merger of these two non-profit hospital systems will bring higher quality, greater access and more stability of health care services to some of the most vulnerable patient populations in the Philadelphia region. The FTC proceeding against the merger will take place in January 2021. Like many hospitals affected by the pandemic, Einstein Healthcare Network argues that their only viable option is to merge with Thomas Jefferson University. Whether or not the merger results in an antitrust violation, this case illustrates an important trend of closer ties between hospitals and health systems accelerated by COVID-19. And, a main justification for these mergers and acquisitions will continue to cite the need for delivering value-based care as COVID-19 has forced hospitals and healthcare providers to re-imagine how health systems can be better configured to meet the individualized needs of patients.

VW Contributor: Skylar Young
© 2020 Vandenack Weaver LLC
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South Dakota Federal District Court Allows Medical Device Kickback Suit to Proceed Against Surgeon

Back in October of 2019, the hospital entities of Sanford Health, Sanford Medical Center and the Sanford Clinic in Sioux Falls South Dakota agreed to pay $20.25 million to resolve False Claims Act (“FCA”) allegations. The settlement is one of the largest in the United States District Court for the District of South Dakota. Last week, the U.S. District Court for the District South Dakota found that the lawsuit filed against the neurosurgeon who worked for Sanford- which alleged that he violated the FCA by engaging in a kickback scheme to order medical devices used in surgeries from two companies he owned- could proceed.

This case is representative of a growing area of concern with respect to addressing possible fraudulent conduct in connection with the delivery of healthcare services vis-a-vi the Physician Owned Distributorship (POD). The Department of Health and Human Services defines a POD as any physician-owned entity that derives revenue from selling, or arranging for the sale of, implantable medical devices and includes physician-owned entities that purport to design or manufacture, typically under contractual arrangements, their own medical devices or instrumentation. This business arrangement in which physician investors form companies that purchase medical devices from third-party manufacturers and sell them to hospitals, often to the hospitals at which the POD physician-investor practices is exactly what happened with the defendants in this case.

Defendant Dr. Wilson Asfora is a neurosurgeon and the owner of Medical Designs LLC and Sicage, LLC. Dr. Asfora ordered and used devices manufactured and sold by Medical Designs and Sicage in the surgeries he performed at Sanford Medical center. As the owner of Medical Designs and Sicage, Dr. Asfora profited from the sales of these devices in violation of the False Claims Act. The claims allegedly were false because they were made in violation of the Anti-Kickback Statute and in connection with surgeries that were medically unnecessary. Thus the very essence of a POD can easily implicate the Anti-Kickback Statute, which prohibits “knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe, or rebate) directly or indirectly. . . in cash or in kind, in exchange for or inducing another to refer an individual to particular goods or services for which payment may be made in whole or in part under a federal health care program.”
Given the context of the global pandemic, it is imperative that health care professionals and medical device companies, that are critical to innovation and improving patient care, engage in transparent and ethical ways. The business relationship implicated between a hospital and a POD where a physician is the owner of the POD can corrupt the medical judgment of the physician, just as Dr. Asfora’s financial interest in the medical devices he implanted in patients corrupted his medical judgment. Moreover, because the anti-kickback statute assigns criminal liability to parties on both sides of an impermissible kickback transaction- hospitals, as well as ambulatory surgical centers (ASCs) that enter into contracts with PODs also may face liability.

Hospitals and ASCs should note that the risk of fraud and abuse is particularly high in circumstances when such physicians-owners are one of the few users of the devices sold or manufactured by their PODs. The Department of Health and Human Services issued a policy statement announcing enforcement discretion over COVID-19 anti-kickback violations for certain circumstances involving other provider types but expressly indicated that they would not extend that enforcement posture policy towards medical devices. Thus, the federal government continues to aggressively pursue medical device companies for violating the anti-kickback statute during the COVID-19 epidemic.

VW Contributor: Skylar Young
© 2020 Vandenack Weaver LLC
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Coronavirus is Deregulating Healthcare One FDA Guidance At a Time

One unintended consequence of COVID-19 has been the paradigm shift within the healthcare industry which has turned to prioritize value-based, patient centric remote monitoring solutions and non-contact technologies. COVID-19 has created a demand for digital health technologies to provide relief for public health professionals and individuals alike. This is not to say that digital technologies have not been in existence, because they have. Rather, according to a 2019 Price Waterhouse Cooper survey, 94% of participants pointed to data-protection and privacy regulations, the Health Insurance Portability and Accountability Act (HIPAA) and the expansion of HIPAA rules and penalties under the Health Information Technology for Economic and Clinical Health (HITECH) Act as factors limiting implementation of digital technologies. This blogpost will explain the significant de-regulation efforts enacted by the Federal Drug Administration (FDA) to ultimately conclude why it is such an important time for the private sector to invest in digital health technologies.

Historically, venture capitalists and businesses looking to build and invest in digital health products and services have viewed the FDA as being “closed for business when it comes to innovation.”[1] However, the COVID-19 pandemic has drastically changed the regulatory giant’s approach to healthcare related products and services. At the end of March 2020, the FDA created the Coronavirus Treatment Acceleration Program (CTAP) to provide regulatory advice, guidance and technical assistance to potential sponsors seeking to develop drugs and biologic therapies for COVID-19. The FDA’s new approach is to accelerate the investigation of safe and effective therapies that could benefit people affected by the COVID-19 pandemic.

On May 11, 2020, the FDA finally issued two guidances intended to ease the regulatory burden of developing drugs and biologics to treat or prevent COVID-19. The first guidance document is titled, “COVID-19, Public Health Emergency:  General Considerations for Pre-IND Meeting Requests for COVID-19 Related Drugs and Biological Products” (Pre-IND Guidance). The Pre-IND Guidance directs sponsors to “initiate all drug development interactions for COVID-19 related drugs through Investigational New Drug (IND) meeting requests,” instead of submitting a pre-emergency use authorization (pre-EUA) requests. The Pre-IND Guidance highlights the importance of putting together a quality submission when engaging with FDA. Now, the pre-IND meeting request and package development process has been streamlined into a single step. This is especially important because the FDA will respond to a pre-IND meeting request as “written response only meeting,” meaning that there may not be an opportunity to provide additional information. The goal of this guidance is to provide explicit direction in assisting drug manufacturers to get their products into clinical trials efficiently.

The second guidance provides recommendations for clinical trial design for Phase 2 and 3 clinical trials intended to establish safety and efficacy for therapeutic or prophylactic drugs and biologics with the goal of potentially approving safe and effective drugs to address the COVID-19 pandemic. The guidance “strongly recommends that drugs to treat or prevent COVID-19 be evaluated in randomized, placebo-controlled, double-blind clinical trials using a superiority design.” It also includes a list of what it believes to be important clinical outcome measures for treatment trials, including all-cause mortality, respiratory failure, need for invasive mechanical ventilation and sustained clinical recovery.

Additionally, the FDA has also started Emergency Use Authorization (EUA) as one tool to help make certain medical products become quickly available during COVID-19. The issuance of an EUA essentially allows access to medical products that can be used when there are no adequate, approved and available options. Under the EUA, the FDA authorizes the product’s use based on the best available evidence. For example, after initial data from a clinical trial showed that remdesivir may benefit some patients with COVID-19, the FDA authorized remdesivir to be provided under the terms of an EUA to hospitalized patients with severe COVID-19.

We are seeing the fruits of this de-regulation. On June 6, 2020, the FDA authorized the first standalone at-home sample collection kit that can be used with certain authorization tests. The FDA issued an EUA to Everlywell, Inc. for the Everlywell COVID-19 Test Home Collection Kit. Individuals at home, who have been screened using an online questionnaire that is reviewed by a health care provider, can self-collect a nasal sample at home using the kit. The FDA also authorized two COVID-19 diagnostic tests, performed at specific laboratories, for use with the samples collected by individuals using the Everlywell kit. In the future, additional tests may be authorized for use with the kit. This exemplifies how de-regulation opens the door for innovative digital services that focus on public-private partnerships to deliver personalized, at home medical access. Currently, the Everlywell home-collection kit is the only authorized COVID-19 at-home sample collection kit for use with multiple authorized COVID-19 diagnostic tests.

Sadly, as of this writing we are seeing an uptick in the rise of confirmed COVID cases across the country. Given the FDA’s loosened regulations, there is a greater potential to meet the continued need to bring digital health services, medical devices, and drugs to the market to safely and effectively prevent or treat COVID-19. Stay tuned for Vandenack Weaver’s continuing coverage on the changing landscape of health-care law during this turbulent and historic time. Next week we will evaluate the changes related to certain device software functions and the shift to prioritize personalized-healthcare through post-acute care and interoperability.

VW Contributor: Skylar Young
© 2020 Vandenack Weaver LLC
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Privacy Policies and Procedures for Small Healthcare Providers Under Scrutiny.

Although privacy incidents at the largest healthcare providers attract the most attention, The Department of Health and Human Services Office for Civil Rights enforcement (“OCR”) is actively investigating privacy and security incidents at small healthcare providers. This means that small healthcare providers, including solo practitioners, need to actively review their privacy policies and procedures to ensure full compliance with the Health Insurance Portability and Accountability Act Privacy Rule.

As an example, a small dental practice in Texas responded to a bad review by a patient on its yelp page, accidentally revealing protected health information (“PHI”) about the patient. The violation itself would have had consequences, but this dental practice failed to have sufficient privacy policies and procedures to protect the PHI, resulting in OCR settling with the dental practice in October of 2019. The corrective action settlement included a severe fine and a mandate to correct its policies and procedures. Another recent example pertains to a single physician that received a complaint from a patient through a reporter, and subsequently responded to questions from that reporter. OCR determined that the physician revealed PHI and violated the privacy rule, resulting in a six figure fine and corrective actions to its privacy policies and procedures.

For smaller healthcare providers, these examples are reminders to frequently review and update the privacy policies and procedures, then test to ensure such policies and procedures are enforced. A common issue is that many providers assume simply having the policy is enough, but OCR will review whether the policies are in place and that the policies and procedures are actually followed. Another common shortcoming by a small healthcare provider is neglecting to conduct sufficient diligence on their business associates, including a review of their healthcare technology providers. For a small healthcare provider, best practices means having policies and procedures that contemplate annual diligence on business associates, testing of the procedures, and review of the policies against the latest updates to the privacy and security rule.

VW Contributor: Alex Rainville
© 2019 Vandenack Weaver LLC
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Integrated HRAs

A new option exists for employers when it comes to paying for employee health care coverage. On June 13^th, the U.S. Departments of the Treasury, Labor, and Health and Human Services (the Departments) issued a final rule allowing employers to use pretax dollars to subsidize employee premiums in the individual health insurance market. Now, employers of all sizes that do not offer a group coverage plan can fund a new health reimbursement arrangement (HRA) known as individual coverage HRA (ICHRA).

Previously, under the Affordable Care Act, employers were prevented from offering stand-alone HRAs that would allow an employee to purchase coverage on the individual market. That has changed. Employers now have the option to provide their workers and their families with tax-preferred funds to pay all or a portion of the cost of coverage that workers purchase in the individual market. The departments posted an FAQs regarding the new regulation. ICHRAs are advantageous to employers because they maintain the tax favored status that apply to a traditional group health plan. Additionally, another employer-sponsored insurance called Excepted Benefit HRAs (EBHRA) allows employers to finance an additional pretax $1,800 per year to reimburse employees for certain qualified medical expenses (such as premiums for vision and dental insurance) even if the employee opts out of enrollment in the traditional group plan.

Qualified Small Employer HRAs (QSEHRA) are still an attractive alternative to group coverage for smaller employers- those with fewer than 50 full-time employees. Under QSEHRAs, employers can give their employees money tax-free to purchase individual health policies through the ACA exchange, similar to ICHRAs. Employees can use these funds to pay all or part of the insurance plan premium or pay for out-of-packet medical costs. While ICHRAs are void of caps on annual allowance amounts, in 2019, QSEHRAs allowance amounts were capped at $5,150 for self-only employees and $10,450 for employees with a family. While ICHRAs are free of caps, employees who choose ICHRAs will not be able to receive any premium tax credit/subsidy for exchange-based coverage. In some instances, if an employer funds an ICHRA or a QSEHRA coupled with individual-market insurance, this will bar the individual-market coverage from becoming part of the Employee Retirement Income Security Act (ERISA).

If employers choose to offer ICHRAs, then the new regulations require a written notice be issued to all employees who are eligible. In this notice, employers need to include a provision that states the ICHRA may make them ineligible for a premium tax credit or subsidy when buying an Affordable Care Act exchange-based plan. ICHRAs will be available for plan years starting on or after January 1, 2020. Employers offering an ICHRA with a plan year that begins on January 1, 2020 should help eligible employees understand that they must enroll in individual health insurance coverage during the open enrollment period, November 1, 2019 through December 15, 2019, for individual health insurance coverage that takes effect on January 1, 2020.

ICHRAs and EBHRA are two new health insurance arrangements that could provide smaller employers with innovative and more cost-effective ways to finance worker health insurance coverage. The IRS has noted that including safe harbor provisions to ensure employers still satisfy the ACA’s affordability and minimum value requirements with ICHRAs will come out later this year.

© 2019 Vandenack Weaver LLC

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U.S. Healthcare System Faces Mounting Cybersecurity Risks

The heightened use of technology in healthcare is coupled with mounting cyberattacks. Recently, the healthcare industry experienced a global cyberattack when malicious software targeted the industry. The attack hit Britain’s National Health Service the hardest, affecting sixty-five of its hospitals. Cyberattackers stole healthcare information after using phishing emails to take control of the organizations’ computers, encrypting the computers’ information, and threatening to release the patient information contained on the systems if the organizations failed to satisfy payment demands.

According to the U.S. Department of Health and Human Service’s Office for Civil Rights, over 100 million Americans’ health records were divulged in 2015. In early 2017, Experian predicted the health care industry would be the biggest target for an attack. Moreover, an Identity Theft Resource Center report revealed that more than 25% of all data breaches occurred in the healthcare industry, costing an estimated $5.6 billion each year.

Congress created the Health Care Industry Cybersecurity Task Force through the Cybersecurity Act of 2015 to examine the healthcare industry’s vulnerabilities and create solutions to the cyber threats that place millions of patients’ information at risk each year. In light of the recent attack, the task force investigated the state of health information systems security in the U.S. and found a desperate need to increase health IT security.

In its report to Congress, the task force made a series of recommendations that suggested how to fend off the increasing threats. Among others, the recommendations include creating programs to cleanse healthcare organizations of vulnerable hardware and software and inserting more people with security skills into the healthcare field. The report emphasizes that failure to intervene could lead to catastrophic losses for organizations and patients.

The task force notes that the successful implementation of its recommendations will require significant time and resources, but it hopes the government will promptly respond to its report with efforts to improve cybersecurity in healthcare organizations.

The task force notes that the successful implementation of its recommendations will require significant time and resources, but it hopes the government will promptly respond to its report with efforts to improve cybersecurity in healthcare organizations.

 

© 2017 Vandenack Weaver LLC
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U.S. Supreme Court Interpretation Permits Thousands of “Church Plans” – Including Many for Hospitals and Health Systems – to Remain Exempt from ERISA

On June 5, 2017, the United States Supreme Court unanimously adopted a “broad” interpretation of the exemption allowed under the Employee Retirement Income Security Act (“ERISA”) for “church plans.”   The decision effectively permits thousands of retirement plans adopted by church-affiliated organizations – including numerous hospitals, schools and social-service organizations – to remain exempt from most ERISA requirements.

Plaintiffs in the case of Advocate Health Care Network v. Stapleton argued that a “narrow” interpretation of the “church plan” exemption was appropriate, and that they were damaged by their employers failing to comply with ERISA’s various requirements designed to protect employee retirement savings.  Advocates of the “narrow” interpretation argued that only plans actually established by a church should be eligible for the exemption.

A split among the United States Courts of Appeal between the “broad” and “narrow” interpretations of the exemption had left plan sponsors and participants in an uncertain state where the applicable plan was maintained by a church-affiliated group and not established by the church itself.

A considerable number of plans in question related to church-affiliated hospitals and health systems.  A “narrow” interpretation would render such plans subject to ERISA.

In an 8-0 decision authored by Justice Elena Kagan, the Supreme Court concluded that principles of statutory interpretation favored the conclusion that Congress chose language indicating a “broad” exemption.  The “broad” exemption had been employed in interpretive materials, advisory opinions and private letter rulings of the Internal Revenue Service and Department of Labor, so the decision eliminates, for now, the uncertainty that had arisen with respect to plans that had relied on said interpretation.

© 2017 Vandenack Weaver LLC
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Another Delay in Implementation of the Medicare Part D Prescriber Enrollment Rule

The Centers for Medicare and Medicaid Services finalized a rule in March 2014 that required healthcare providers prescribing medication, where the prescription is paid for by a Medicare Part D plan, to enroll in Medicare as a prescriber. The enforcement date has been delayed several times and was slated to take effect on February 1, 2017, but has recently been delayed again until January 1, 2019.

 

Under the final rule, if a provider is not enrolled in Medicare as a prescriber, the patient’s prescribed drugs will not be covered by the Part D plan. Part D plans will be required to notify patients that the prescriber is not enrolled and the plan will not cover prescriptions from that provider. The most recent delay is aimed at ensuring that prescribers are aware of the rule and reduce the immediate burden placed on the estimated 250,000 prescribers not enrolled in Medicare and the 5.25 million beneficiaries that would be impacted.  

© 2016 Vandenack Weaver LLC
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Healthcare Entities Required to Post New Non-Discrimination Notice

The Patient Protection and Affordable Care Act (ACA) prohibits health care entities from discriminating on the basis of race, color, national origin, sex, age, or disability. The ACA prohibition on discrimination applies to covered entities, which means those healthcare entities that receive federal financial assistance through the Department of Health and Human Services (HHS). For example, a covered entity includes a physician or pharmacy that accepts Medicare or Medicaid, health insurers that offer a plan on the healthcare exchange, and any entity that offers a Medicare part D plan.

In an effort to enforce the non-discrimination law, HHS issued a new rule in May of 2016 that requires all covered entities to post new non-discrimination notices. Although the rule was finalized in May of 2016, health care entities had until October 16, 2016 to post a new notice of non-discrimination. The new notice must state that the health care entity does not discriminate, that language assistance for the patient is available, and delineate how an individual can file a discrimination complaint with HHS. The new notice is intended to decrease discrimination by helping consumers become more aware of their rights.

For further information or to find example HHS non-discrimination notices, visit the following link:
http://www.hhs.gov/civil-rights/for-individuals/section-1557/translated-resources/index.html

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