HRSA Announces Revised 340B Rebate Model Pilot Program

On August 3, 2026, the Health Resources and Services Administration (HRSA) published a notice in the Federal Register announcing a revised 340B Rebate Model Pilot Program (Pilot) with an effective date of January 1, 2027. The Pilot covers only a small percentage of products (“less than 5.5% of total 340B sales”), but it could have significant implications for drug manufacturers, hospitals, and other stakeholders.

Direct Pilot Implications 

The Pilot provides a rebate mechanism for qualifying drug manufacturers for certain drugs sold to covered entities. Implications of the Pilot vary by stakeholder.

Participation in the Pilot is voluntary for drug manufacturers. Drug manufacturers that would like to participate in the Pilot must submit plans (meeting specific criteria) by August 24, 2026. Eligible hospitals will participate in the Pilot based on their use (or non-use) of the specified products. Hospitals participating in the 340B program may experience an adverse cash-flow impact under the Pilot for the corresponding products. HRSA stated that it is starting the Pilot on a small scale to “enable covered entities, manufacturers, and vendors to operationalize processes and identify implementation challenges on a … manageable scale.”

Future Pilot Implications

The Pilot may indicate a new direction for the federal government’s oversight of the 340B program. This would impact drug manufacturers, hospitals, and other 340B program participants. Originally, the 340B program was “a relatively simple pricing requirement,” but it has expanded over time into “a complex, multi-billion-dollar system.” This expansion “underscores the importance of flexibility in determining how statutory pricing obligations are implemented.”

The Pilot is a result of feedback from many sources and comes on the heels of HRSA’s attempt to impose a rebate pilot last year, which was ultimately blocked by the courts. On February 17, 2026, HRSA published a request for information in the Federal Register. The request for information sought input on the use of rebates under the 340B program. A total of 2,475 comments were received, analyzed, and implemented into the Pilot. The comments reflected input from a wide range of stakeholders.

In its recent notice, HRSA flagged program integrity under the 340B program as a “growing risk” attributed to the “growing complexity” of both the statutory framework and the pharmaceutical supply chain. Accordingly, the Pilot was designed in part to discourage diversion. For example, the Pilot will use a mechanism that avoids duplicate discounts. HRSA will use data collected through the Pilot (including rebate submissions, denials, and more) to prevent duplicate discounts and “inform future policy considerations related to program integrity and compliance.” HRSA stated that the data collected through the Pilot will enable manufacturers to better identify 340B transactions to improve both nonduplication efforts and deduplication efforts under certain facts.

For more details on the Pilot, please see the HRSA notice available here.

Reporter, Colleen Pert, Houston, TX, +1 713 276 7331, [email protected]

DOJ Expands Northeast Health Care Fraud Strike Force to Philadelphia and Announces Medicaid Home Care Fraud Charges

On August 4, 2026, the Department of Justice’s (DOJ) National Fraud Enforcement Division announced the expansion of the Northeast Health Care Fraud Strike Force to Philadelphia, Pennsylvania, as part of a broader initiative to combat Medicaid fraud in the Eastern District of Pennsylvania. The expansion joins the Fraud Division’s Health Care Fraud Section with the U.S. Attorney’s Office for the Eastern District of Pennsylvania and is intended to bring additional federal resources to health care fraud enforcement in the region, including collaboration between the HHS Office of Inspector General, the Federal Bureau of Investigation, the Drug Enforcement Administration, and other federal, state, and local law enforcement partners. This is the latest expansion of the National Fraud Enforcement Division’s strategic enforcement efforts in the healthcare industry. Significantly, it underscores DOJ’s increased focus on collaborating with state authorities and the Administration’s continued focus on Medicaid fraud. It also reflects DOJ’s continued willingness to bring criminal charges, even for relatively low-dollar alleged schemes. 

DOJ framed the Philadelphia expansion as part of the Health Care Strike Force model, which has been responsible for prosecuting more than 6,200 defendants nationally who collectively billed federal health care programs and private insurers more than $45 billion since its inception in 2007. The release states that the expansion of the Northeast Strike Force to Philadelphia follows recent Strike Force expansions to the West Coast, including the Northern District of California and the Districts of Arizona and Nevada, as well as to the District of Massachusetts and the District of Minnesota. The release also notes that the expansion follows two National Health Care Fraud Takedowns in which the National Fraud Enforcement Division charged more than $15 billion in alleged loss in 2025 and more than $6 billion in alleged loss in 2026. 

According to the press release, the Fraud Division’s expansion into the Eastern District of Pennsylvania is intended to support a district with an established record of health care fraud enforcement and a history as a preferred venue for qui tam relators. The release states that the partnership between the Fraud Division and the Eastern District of Pennsylvania will support efforts to address corporate criminal actors in the health care industry and aligns with the Fraud Division’s increased focus on “full-spectrum” accountability, pursuing offenses by companies, their executives and their employees, as well as Medicaid beneficiaries and purported caregivers.

In connection with the expansion, the Fraud Division, the U.S. Attorney’s Office, and the Pennsylvania Attorney General announced criminal charges against 19 defendants for alleged participation in Medicaid and Medicare home health care fraud schemes involving more than $4 million in claims. The defendants identified in the release include owners and employees of home care companies, home health aides, Medicaid recipients, company owners, and individuals with significant criminal records. The Pennsylvania Attorney General also announced a plea agreement involving the final defendant in a previously charged 21-defendant case involving more than $1.7 million in claims. 

The DOJ press release is available here. 

Reporter, Alana Broe, Atlanta, GA, +1 404-572-2720, [email protected]

New York Implements Temporary Medicaid Enrollment Moratorium for Certain Provider Types

The New York State Department of Health (DOH) has implemented a temporary Medicaid enrollment moratorium for certain provider categories as part of the State’s broader Medicaid provider revalidation initiative. Currently enrolled providers are not affected by the moratorium and should continue to participate in the Medicaid program and complete revalidation when notified.

Enrollment Applications Suspended

The moratorium applies to the following provider types:

• Laboratories
• Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) providers
• Applied Behavior Analysis (ABA) providers
• Licensed Home Care Services Agencies (LHCSAs)
• Pharmacies
• Managed Long Term Care plans, including Managed Long Term Care Partial Capitation plans, Medicaid Advantage Plus plans, and Programs of All-Inclusive Care for the Elderly (PACE) organizations

DOH has stated that, during the moratorium period, all pending applications for affected provider types will be discontinued, regardless of their stage of review, and no applications will be processed or advanced until the moratorium is lifted. Applicants may submit a new application once the moratorium ends.

Revalidation Initiative

The moratorium coincides with New York’s effort to revalidate all Medicaid-enrolled providers following recent CMS guidance directing states to implement comprehensive provider revalidation strategies over the next 24 months. DOH has indicated that provider enrollment and revalidation activities will be conducted through the State’s Provider Services Portal, with the revalidation process rolling out in phases through June 2028.

Under the new framework, certain provider categories will be subject to enhanced screening requirements and more frequent revalidation cycles. DOH has emphasized that these requirements are routine program integrity measures and do not reflect any suspicion of fraud or wrongdoing by individual providers.

Potential Transactional Implications

The moratorium may have significant implications for healthcare transactions involving affected provider types. New York Medicaid has indicated that the moratorium will extend to affected change-of-ownership (CHOW) applications, potentially delaying acquisitions and other ownership transactions that require Medicaid enrollment-related filings or approvals. As a result, providers and investors should carefully evaluate the potential impact of the moratorium on transaction timing, regulatory approvals, and transaction structure, particularly where closing depends on completing Medicaid enrollment-related processes. Parties should also continue to monitor for additional guidance from DOH regarding implementation of the moratorium and its application to pending and future transactions.

Reporter, Francis Han, New York, NY, +1 212 556 2154, [email protected]

$14.1 Million Settlement Signals DOJ’s Continued Focus on Medicare Advantage 

On August 3, 2026, the DOJ announced that Complete Health Partners Holdings, LLC (“Complete Health”) will pay $14.1 million to resolve False Claims Act allegations that it submitted false diagnosis codes to inflate reimbursements under the Medicare Advantage program. Complete Health is a management services organization that manages, owns, and operates provider groups that offer primary care services in Florida, Alabama, and Colorado. 

The settlement resolves a qui tam suit brought by Karen Bowers, a former Associate Director of Risk Adjustment at VIVA Health, a health insurance company that contracted with Complete Health. The government alleged that from 2020 to 2023, Complete Health submitted diagnosis codes for drug and alcohol dependence (HCC 55) and major depressive, bipolar, and paranoid disorders (HCC 59) that lacked clinical support and were not considered in patient care. According to the complaint, Complete Health provided incorrect coding guidance to its coders and physicians with respect to HCC 55 and HCC 59 and then prompted doctors to add those diagnosis codes. 

The settlement reflects the DOJ’s sustained enforcement focus on Medicare Advantage. Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division underscored the point that alongside the continued growth of the Medicare Advantage program, “providers who participate in the program must be held to account when they attempt to improperly profit at the taxpayer’s expense.” 

The settlement agreement can be found here. The press release can be found here. 

Reporter, Morgan Cronin, Atlanta, +1 404-572-2795, [email protected]

DOJ Secures $36.4 Million Settlement in Genetic Testing Kickback Case

A Texas laboratory, its former CEO, and a Florida businessman have agreed to pay $36.4 million to resolve allegations that they paid kickbacks and billed Federal programs for medically unnecessary genetic testing.

DOJ alleges that, from 2018 to 2020, Access Dx Laboratory, its former CEO Michael Stewart, and Florida businessman Harold Shatz participated in a kickback scheme involving payments to marketers for genetic testing patient referrals. DOJ further alleges that they paid telemedicine physicians for false orders, used unbundled billing codes for genetic testing, and caused false claims to be submitted to Medicare and Medicaid.

The case was brought under the qui tam provisions of the FCA by the president of a marketing company hired to market genetic testing to Federal program beneficiaries. Stewart and Shatz each agreed to plead guilty to conspiracy to defraud the United States and to pay and receive healthcare kickbacks, and they separately entered into civil FCA settlements. Additionally, Access Dx Laboratory entered into a five-year Corporate Integrity Agreement, requiring it to implement auditing and accountability measures, including a robust compliance program, training and education requirements, and review of its referral-source arrangements.

The DOJ press release is available here.

Reporter, Rebecca Hsu, Atlanta, GA, +1 404 572 3339, [email protected]

Upcoming Events

Current Legal, Tax and Valuation Considerations for MSO-PC Structures Post California AG Settlements

• Tuesday, August 11, 12:00 PM ET
• Virtual

Join King & Spalding Partner Igor Gorlach and other industry professionals as they interpret the legal and regulatory framework governing MSO-PC structures, including Corporate Practice of Medicine (CPOM) restrictions, management services agreements, common compliance risks, and recent enforcement and litigation developments. Event details and registration is available here. 

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• Wednesday, October 14, 8:30 A.M. – 6:15 PM PT
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Join our distinguished faculty and industry leaders for the annual Health Law & Policy Forum West on Wednesday, October 14^th in Marina del Rey. As the healthcare industry continues to evolve in response to economic pressures, patient needs and accelerating technological advances, this full-day program will cover the trending topics that lawyers, executives, managers and investors need to know as they adapt to changes associated with the new administration and more. 

A keynote session will feature the Honorable Alex M. Azar II, the 24th U.S. Secretary of Health and Human Services (HHS) and a recognized leader in healthcare innovation. During his tenure, he led transformative efforts to modernize the U.S. healthcare system, expanding telehealth, advancing interoperability of health records, increasing healthcare transparency and accelerating the shift to value-based care. 

Attendees will also enjoy multiple networking opportunities, including a reception following the sessions. 

The registration fee for the full program is $95.

For questions or to request an invitation, contact the K&S Events Team.

Editors: Chris Kenny and Ahsin Azim

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