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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