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.

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Pending Increases for False Claims Act Civil Penalties

The False Claims Act (“FCA”) creates a civil penalty for any person that knowingly submits for payment a false or fraudulent claim to the federal government. This usually includes any government contractor, but will often arise in the healthcare industry. In 2015, for example, the federal government collected over $3.5 billion resulting from these civil penalties, with approximately $1.9 billion from the healthcare industry.

In December of 2015, the Bipartisan Budget Act was enacted and it included a section titled the Federal Civil Penalties Inflation Adjustment Act Improvements Act (“Act”). This Act amends a prior 1990 act, requiring inflation adjustments to the civil penalties in the False Claims Act. Due to the length of time between the last adjustment, the Act requires a catch-up adjustment and annual adjustments thereafter. The Act is slated to be implemented at all federal agencies by July 1st, with the new rates to take effect by August 1st of 2016.

The first federal agency to issue an interim final rule to implement the catch up adjustment was the Railroad Retirement Board, doing so on May 2, 2016. The interim rule changed the minimum FCA civil penalty from $5,500 per violation to $10,781 per violation, nearly doubling the per violation penalty. As the other agencies look to implement this rule, such as the Centers for Medicare and Medicaid, similar increase are expected. For those working on a government contract, especially those submitting claims to the government in the healthcare industry, taking due care in compliance efforts will be magnified because of the pending increases in FCA civil penalties.

© 2016 Vandenack Williams LLC
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Public Policy in Physician Non‐Competition Agreements

Non‐competition agreements take many forms and arise in virtually every industry, but many will encounter these agreements in employment contracts. Generally, in Nebraska, should the employer draft the non‐competition agreement properly, a court is likely to enforce it. For a physician, however, a non‐competition agreement with a practice group or similar entity can raise public policy concerns.

The purpose of a non‐competition agreement in an employment context is to protect trade secrets and customers. In the physician context, the effect of a non‐compete agreement is that a patient cannot see the physician of their choice. In most industries, a similar public policy issue will not arise, but for healthcare providers, this creates a unique problem.

For employers of physicians in Nebraska, the state has not addressed the public policy concern arising with physicians. Other states, for example, have enacted laws that address the policy concern in the physician context and how a non‐compete must be drafted, including specific provisions protecting the patients. In Nebraska, the limited law on the issue upholds the non‐competition agreement against physicians, if the agreement is reasonable. However, as with any law, it is subject to change and potential evolution to keep up with the modern practice of medicine. For a physician or a practice group, prior to drafting or signing a non‐competition agreement, it may be wise to discuss the implications with an attorney.

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Final rule on Medicaid Prescription Drug Programs

In January of 2016, the Centers for Medicare and Medicaid Services (CMS) issued a final rule on covered outpatient drugs. The rule changes the Medicaid Drug Rebate Program by the Patient Protection and Affordable Care Act (PPACA) and the overall Medicaid drug reimbursement program.  These changes have several goals, including reducing the cost to the federal and state governments and improving beneficiary access to covered outpatient drugs.

CMS claims the changes implemented will help the government save money in the Medicaid Drug Rebate Program, which had been subject to sustainability issues. One key change in the final rule is a definition of the Average Manufacture Price, which in turn gets used to determine rebates and pharmacy reimbursements subject to the federal upper limit. Similarly, the changes to the federal upper limit formula will incentivize pharmacies to use certain generic drugs. The final rules clarify many of the ambiguous sections of the Medicaid Drug Rebate Program by the PPACA, including the manufacturer reporting requirements. The rule also aligns the pharmacy reimbursement system with the actual acquisition cost of the drug.

Overall, the new incentives and changes should improve the reimbursement system and help manage drug costs. This rule becomes effective April 1, 2016, although CMS is allowing comment for 60 days after publication on certain elements of the rule. The new rule can be found at the following link:

https://www.gpo.gov/fdsys/pkg/CFR-2014-title42-vol4/pdf/CFR-2014-title42-vol4-part447.pdf

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Who Owns Medical Records in the Digital Age?

Determining who owns medical records in the age of electronic health records remains somewhat ambiguous. In fact, recent issues at the University of Rochester Medical Center highlight the confusion as the health provider recently reached settlement over a violation of protected health information because a nurse practitioner took patient information to a new practice. Thus, the relevant question is whether the provider, the physician, the electronic health record provider, or the patient own the information?

Many patients assume the Health Insurance Portability and Accountability Act (HIPAA) provides ownership of health information to the patient, but the law, in fact, fails to specify. Largely, this issue is left to state legislatures to determine, but the majority of states have failed to address the issue. According to a recent survey by the George Washington University’s Hirsh Health Law and Policy Program and the Robert Wood Johnson Foundation, only New Hampshire provides ownership of medical records to the patient, while in 20 other states, the healthcare provider owns them.

In the age of electronic health records, patient data is quickly shareable between physicians, patients, and other individuals. This poses new legal challenges for healthcare providers and physicians, especially as the laws and regulations on protected health information continue to evolve and state attorneys general start to enforce the privacy laws under the Health Information Technology for Economic and Clinical Health Act. This means that physicians and healthcare providers of all types should ensure that their internal policies on health records fully comply with the evolving legal landscape.

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FDA Issues Draft Guidance on Injectable Medical Products Packaging

The Food and Drug Administration (FDA) issued draft guidance regarding the packaging of certain injectable medical products. The FDA is charged with approving packaging for medical products, including the package type terms and discard terms. This draft guidance specifically updates the packaging requirements and definitions for multiple-dose and single-dose medical products, while introducing a new term, single patient use container.

In issuing the draft guidance on October 22, 2015, the FDA noted the increased practice of unsafe injections. Specifically, the FDA has stated that problem is the improper use of needles, syringes, and medication vials, causing contamination of the medication vials. Moreover, when these single use containers are subsequently used on more than one patient, cross-contamination occurs. The failure to follow safe injection procedure for single patient and single dose containers, the FDA notes, has led to bacterial and viral infection outbreaks.

The FDA hopes that the clear product packaging will help alleviate some of the mistaken injection procedures and reduce the transmission of blood-borne pathogens. Although the guidance is not a legal requirement, it is the current FDA position based upon current trends. The draft guidance can be found at the following link:

http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM468228.pdf 

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Final Rules Issued by CMS on Stage 3 Electronic Health Record Incentive Program

On October 6th, 2015, the Centers for Medicare and Medicaid Services (CMS) issued two final rules regarding the incentive program for eligible professionals adopting electronic health records. One rule pertained to the requirements necessary to receive a stage 3 incentive payment and the second rule pertained to the electronic health record use requirements for stage 3 participants.

Of the many specifics in the final rules, eligible professionals should note a change to the meaningful use incentive payment reporting period. Previously, eligible professionals had to report meeting the requirements for a full year, but the new rule only requires reporting that the eligible professional met the specifications for 90 days, significantly shortening the reporting period. Another important change, CMS shifted hospitals to a calendar year from a fiscal year, meaning that the attestation period has been moved as well. For hospitals looking to attest to meeting the meaningful use requirements in 2015, the hospital will have to wait until the online attestation portal opens on January 4, 2016. For non-hospital eligible professionals, this will not change the attestation timing because CMS already required the use of a calendar year for these individuals.

The attestation requirements are important for Medicare providers because these 2016 incentive payments turn into Medicare penalties, a negative payment adjustment, in 2017. The final rules for stage 3 electronic health record incentive payments will be published on October 16, with comments open until December 15, 2015. The final rules can be found at the following links:

https://s3.amazonaws.com/public-inspection.federalregister.gov/2015-25597.pdf

https://s3.amazonaws.com/public-inspection.federalregister.gov/2015-25595.pdf

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CMS announces equitable plan to improve care for under-served Medicare populations.

In an effort to reduce health-care disparities among specific Medicare populations, the Centers for Medicare & Medicaid Services (CMS) has developed the Medicare Equity Plan. Announced on September 8, 2015, the plan is designed to improve upon healthcare disparities, especially for minority populations, in four years. The equity plan, to be implemented in conjunction with other CMS priorities, focuses on improving health-care quality to under-served Medicare groups, especially those with traditionally higher percentages of disease, low quality of care, and high barriers to care.

 

The six priorities of the Medicare Equity Plan, as outlined by CMS, are as follows:

  •  Priority 1: Expand the Collection, Reporting, and Analysis of Standardized Data
  • Priority 2: Evaluate Disparities Impacts and Integrate Equity Solutions Across CMS Programs
  • Priority 3: Develop and Disseminate Promising Approaches to Reduce Health Disparities
  • Priority 4: Increase the Ability of the Health Care Workforce to Meet the Needs of Vulnerable  Populations
  • Priority 5: Improve Communication and Language Access for Individuals with Limited English Proficiency and Persons with Disabilities
  • Priority 6: Increase Physical Accessibility of Health Care Facilities”

 

For those that participate in Medicare as recipients or providers, more information may be obtained from CMS at the following location:

https://www.cms.gov/About-CMS/Agency-Information/OMH/OMH_Dwnld-CMS_EquityPlanforMedicare_090615.pdf

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CMS Reveals Star Ratings for Home Health Care Agencies

By Matthew J. Effken.

The Centers for Medicare and Medicaid Services (CMS) has added star ratings to its Home Health Compare website that provides information about Medicare-certified home health care agencies. The new feature is intended to help consumers identify differences in quality among home health care providers and also help agencies identify areas where they can improve. Ratings range from 1 star for the worst performers to 5 stars for the best performers. Agencies are awarded more stars when they follow recommended care practices for more patients and when more of their patients show improvement.

Nationally, nearly half of all agencies fall in the 3 to 3½ star range. Less than 3% of home health agencies achieve the highest 5 star rating. Quality measurements used in determining the star ratings include: managing daily activities, managing pain and treating symptoms, treating wounds and preventing pressure sores, preventing harm, and preventing unplanned hospital care.

The star ratings are determined based on patient surveys and Medicare claims data, and will be updated by CMS each quarter. Further information and the website can be found at the following link: http://medicare.gov/homehealthcompare/

© 2015 Houghton Vandenack Williams
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CMS Reveals Star Ratings for Home Health Care Agencies

By Matthew J. Effken.

The Centers for Medicare and Medicaid Services (CMS) has added star ratings to its Home Health Compare website that provides information about Medicare-certified home health care agencies. The new feature is intended to help consumers identify differences in quality among home health care providers and also help agencies identify areas where they can improve. Ratings range from 1 star for the worst performers to 5 stars for the best performers. Agencies are awarded more stars when they follow recommended care practices for more patients and when more of their patients show improvement.

Nationally, nearly half of all agencies fall in the 3 to 3½ star range. Less than 3% of home health agencies achieve the highest 5 star rating. Quality measurements used in determining the star ratings include: managing daily activities, managing pain and treating symptoms, treating wounds and preventing pressure sores, preventing harm, and preventing unplanned hospital care.

The star ratings are determined based on patient surveys and Medicare claims data, and will be updated by CMS each quarter. Further information and the website can be found at the following link: http://medicare.gov/homehealthcompare/

© 2015 Houghton Vandenack Williams
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