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Health Headlines - February 18, 2013

18 Feb 2013

Final State Decisions on Insurance Exchanges – The final tally is in of State decisions on the establishment of online health insurance marketplaces, or exchanges, with eighteen States agreeing to run a State-based exchange, eight planning on partnering  with the Federal government, and twenty-five deferring to a Federally run exchange.   The final decisions were made Friday, February 15, 2013, which was the deadline for States that had declined to establish exchanges themselves to decide whether they wanted to partner with the Federal government in running an exchange.   Of the thirty-three States that refused to establish the exchanges themselves, only eight took advantage of the partnership opportunity leaving the Federal government to run the exchanges in half of the States in the country, including Texas, Florida, and Pennsylvania.  State decisions split largely, though not entirely, along partisan lines.  The Kaiser Family Foundation has an interactive map showing the disposition of each State and other useful exchange-related information.  The exchanges, which are a cornerstone of the Affordable Care Act (ACA), are meant to provide a one stop destination for individuals and small employers to buy health insurance.  They are scheduled to open for business on October 1, 2013. 

With the final decisions in, the State tally is as follows.  States that have agreed to create their own exchanges:  California, Colorado, Connecticut, District of Columbia, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington.  States that have requested a partnership with the Federal government:  Arkansas, Delaware, Illinois, Iowa, Michigan, New Hampshire and South Dakota, West Virginia.  States that have deferred to a Federally-run exchange:  Alabama, Alaska, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Wisconsin and Wyoming. 

Reporter, Daniel J. Hettich, Washington, D.C., +1 202 626 9128,

HHS and DOJ Release Annual Report on Health Care Fraud and Abuse Control Program, Which Recovered $4.2 Billion in FY 2012 – On February 13, 2013, the U.S. Department of Health and Human Services (HHS) and the Department of Justice (DOJ) released their annual report for fiscal year 2012 on the Health Care Fraud and Abuse Control Program (HCFAC).  The report summarizes the federal government’s monetary recoveries and enforcement actions with respect to federal healthcare programs during the past year.

According to the report, the government recovered approximately $4.2 billion from its healthcare fraud prevention and enforcement efforts in 2012, which constitutes the highest amount recovered since the inception of HCFAC.  This sum includes more than $3 billion in healthcare fraud judgments and settlements as well as other administrative recoveries in healthcare fraud cases and proceedings.  The report also notes that the government recovered nearly eight dollars for every dollar spent on healthcare-related fraud and abuse investigations in the last three years.

Of the $4.2 billion recovered, more than $2.4 billion was transferred to the Medicare Trust Funds, nearly $1.5 billion was deposited with other federal agencies, and close to $285 million was paid to qui tam relators in False Claims Act cases.

In terms of criminal enforcement actions, DOJ opened more than 1,130 new criminal healthcare fraud investigations, which involved nearly 2,150 potential defendants.  In addition, there were more than 2,030 healthcare fraud criminal investigations pending, and a total of 826 defendants were convicted of healthcare fraud-related crimes, in 2012.  DOJ also opened 885 new civil investigations and had more than 1,020 civil healthcare fraud matters pending.

The report also addresses other enforcement efforts that were undertaken by the federal government in 2012 to prevent and combat fraud and abuse.  In the DOJ press release, available here, Attorney General Eric Holder said, “In the past fiscal year, our relentless pursuit of health care fraud resulted in the disruption of an array of sophisticated fraud schemes and the recovery of more taxpayer dollars than ever before.  This report demonstrates our serious commitment to prosecuting health care fraud and safeguarding our world-class health care programs from abuse.”

The HCFAC report is available here.

Reporter, Jennifer S. Lewin, Atlanta, +1 404 572 3569,

FTC Staff Issues Favorable Clinical Integration Advisory Opinion That It Does Not Intend to Challenge Proposed Formation of Clinically Integrated Multi-provider Network – On February 13, 2013, the FTC issued an advisory opinion letter that it did not plan to challenge the proposed creation of the Norman Physician Hospital Organization (“Norman PHO”)—which includes approximately 280 participating physicians in various specialty practice areas, as well as Norman Regional Health System—and Norman PHO’s intent to “to engage in joint contracting with third-party payers on behalf of its participating physicians and hospitals.”  See FTC Norman PHO Advisory Opinion at 1-3.  Because “Norman PHO’s proposed activities contemplate horizontal combinations or pricing agreements only in the provision of physician services,” as well as having the potential to “generate significant efficiencies in the provision of physician services,” the FTC believes its activities “appear unlikely to unreasonably restrain trade.”  Id. at 1-2.  Further, Norman PHO’s “operations will not involve horizontal agreements among competing providers of inpatient hospital services, or outpatient hospital and ambulatory care services, because Norman Regional Health System is the only provider of such services that will participate in the network.”  Id. at 13.

In its opinion, the FTC states that the “proposed clinical integration program offers the potential to create a high degree of interdependence and cooperation among its participating physicians and to generate significant efficiencies in the provision of physician services.”  Id. at 1.  The letter also states that “Norman PHO’s proposed joint contracting appears to be subordinate to the network’s effort to improve efficiency and quality through the clinical integration of its participating physicians.”  Id.  Therefore, FTC staff decided that the proposed activities qualify for “rule-of-reason” analysis, which “determines whether the formation and operation of the joint venture may have a substantial anticompetitive effect and, if so, whether that potential effect is outweighed by any pro competitive efficiencies resulting from the venture.”  Id. at 13.

Though no market analysis was undertaken, the FTC observes that “Norman PHO appears to have the potential to exercise market power in the sale of its participating hospitals’ and physicians’ services.”  Id. at 12.  This concern, however, is alleviated by Norman PHO’s representations that it “will not attempt to force payers to contract with it,” and that it “represents that it will not limit the incentive or ability of its participating providers to participate in other network joint ventures or to contract directly with payers that do not wish to do business with Norman PHO.”  Id. at 14.

The letter concludes that Norman PHO’s proposed program “appears likely, on balance, to be pro-competitive or competitively neutral” and that “FTC staff has no present intention to recommend” any “enforcement action against Norman PHO or its providers.”  Id. at 18.  The letter does still warn that the “staff’s current enforcement view likely would change to the extent that, for whatever reason, Norman PHO’s actual operations deviate substantially from its proposal . . . or otherwise prove to have anticompetitive effects.”  Id. at 2.

For more information, click here.

Reporter, Katy Lucas, Atlanta, +1 404 572 2822,

King & Spalding LLP to Host Roundtable on February 19, 2013 – King & Spalding LLP will host a Roundtable Webinar entitled The Sun is Rising: What You Need to Know About the Final Rule to Implement the Physician Payments Sunshine Act on February 19, 2013, at 1:00 - 2:30 P.M. Eastern Time.  The Physician Payments Sunshine Act requires certain pharmaceutical, biologic, and medical device manufacturers to annually report to CMS payments or other transfers of value they furnish to physicians and teaching hospitals (deemed “covered recipients”). In addition, the law requires certain manufacturers and group purchasing organizations to report ownership or investment interests in their organizations held by physicians.  For more information and to register for the event, click here.

King & Spalding LLP to Host Employee Benefits and Executive Compensation Roundtable Series Throughout March 2013  – King & Spalding LLP will host a multi-city roundtable series on executive compensation, benefits, and employment law throughout the month of March.  For more information regarding the series including registration information and dates of the program across various cities, click here.

22nd Annual Health Law & Policy Forum on March 18, 2013 – King & Spalding LLP will host the annual Health Law & Policy Forum on March 18, 2013 in the Atlanta office from 8:15 a.m. until 5:00 p.m.  The one-day conference focuses on the latest developments in the healthcare and life sciences industry and featured speakers will include: Congressman Fred Upton (R-MI); Lew Morris, the former Chief Counsel to the Inspector General of the U.S. Department of Health & Human Services; and Brent Henry, Vice President and General Counsel of Partners Healthcare, the largest healthcare provider in Massachusetts.  For more information about the forum including registration details, please click here.

This bulletin provides a general summary of recent legal developments. It is not intended to be and should not be relied upon as legal advice.

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