backCMS Seeks Feedback on FY 2023 SNF Prospective Payment System Proposed Rule – On April 11, 2022, CMS issued its FY 2023 Skilled Nursing Facility (SNF) Prospective Payment System (PPS) proposed rule updating Medicare payment policies and rates for SNFs. The proposed rule also includes proposals for the SNF Quality Reporting Program (QRP) and the SNF Value-Based Program (VBP) for FY 2023 and future years, and it seeks feedback on addressing staffing constraints and turnover in nursing homes and health equity disparities. Comments are due to CMS by June 10, 2022. The key highlights of the proposed rule are summarized below.
SNF Payment Rate Updates
The proposed rule includes an overall SNF payment rate decrease of approximately $320 million in FY 2023 as compared to FY 2022, which includes an annual payment update of 3.9% and the implementation of a 4.6% cut to maintain budget neutrality from the implementation of the Payment-Driven Payment Model (PDPM). Further, the proposed rule would include a permanent 5% cap on annual wage index decreases to limit year-to-year changes in SNF payments associated with index changes. The proposed rule also contains several changes to the PDPM ICD-10 code mappings and coding guidelines for improved consistency.
SNF QRP Updates
The proposed rule would adopt the Influenza Vaccination Coverage among Healthcare Personnel measure to evaluate the percentage of health care personnel who are physically present at the facility who received an influenza vaccine. The proposed rule would also postpone the collection of two new quality measures—the Transfer of Health Information to the Patient and Transfer of Health Information to the Provider, as well as certain standardized patient assessment data elements — to October 1, 2023.
SNF VBP Program Measure Additions
Additional measures have been added to the SNF VBP Program, including: (1) the SNF Healthcare Associated Infections Requiring Hospitalization (HAI) measure, which is an outcome measure assessing SNF performance on infection prevention and management in FY 2026; (2) the Total Nursing Hours Per Resident Day measure in FY 2026; and (3) the adoption of the Discharge to Community measure, which is an outcome measure assessing the rate of successful discharges to the community from SNFs in FY 2027.
Requests for Comment
The proposed rule also solicits input on several topics, including establishing minimum staffing requirements needed to ensure the provision of safe and high-quality care, developing strategies to improve measurement of disparities in health care outcomes, and stakeholder input on a measure to examine staff turnover levels in nursing homes for possible inclusion in the SNF VBP Program in the future.
A CMS fact sheet on the proposed rule can be found here, and the full proposed rule can be found here.
Reporter, Jasmine Becerra, Atlanta, +1 404 572 3537, jbecerra@kslaw.com.
King & Spalding Analysis: Enforcement of Labor Agreements
Recent actions by the Biden administration, including the Treasury Department’s report on the State of Labor Market Competition in the U.S. Economy, the Memorandum of Understanding between the Department of Labor (DOL) and Department of Justice Antitrust Division (DOJ) to combat labor collusion, and statements by various officials indicate there will be continued, aggressive antitrust enforcement by this administration in labor markets. The focus of these efforts is anticompetitive labor agreements, including no-poach, wage fixing and non-competes. These actions follow on the heels of President Biden’s July 2021 Executive Order on antitrust that requested that the federal antitrust agencies, in cooperation with multiple other agencies, vigorously enforce the antitrust laws and specifically called out enforcement in the labor markets. These actions also follow on the heels of several criminal no-poach and wage-fixing indictments brought by the DOJ against healthcare companies and executives. Notably, juries recently ruled against the DOJ in two of these criminal indictments.
Background
Anticompetitive labor agreements such as no-poach and wage fixing are a significant enforcement priority of the current administration. A no-poach arrangement is an agreement between two or more employers that restrains any of them from cold-calling, soliciting, recruiting, hiring or otherwise competing for each other’s employees. A wage fixing agreement is an agreement among two or more employers to fix wages for similarly situated employees.
In 2016, the DOJ and U.S. Federal Trade Commission (FTC) issued joint guidance regarding anticompetitive conduct regarding these types of agreements (2016 Guidance). Among other things, the 2016 Guidance classified naked no-poach agreements, meaning those agreements unrelated or unnecessary to a larger legitimate collaboration between employers, as a per se violation of the Sherman Act. A per se violation is a practice so inherently anticompetitive that it is deemed illegal without inquiry into its competitive effects.
Importantly, the 2016 Guidance also stated DOJ’s intention to pursue criminal charges against both individuals and companies that entered into naked no-poach agreements. This was a departure from the agency’s historical practice of enforcing no-poach agreements in the civil context only and marked a significant enforcement escalation as criminal violations of the Sherman Act carry hefty fines and potential jail time. In particular, criminal violations of the Sherman Act carry maximum penalties for companies of $100 million and for individual executives $1 million and 10 years in jail.
Recent Developments
Following President Biden’s executive order on antitrust in July 2021, the agencies responded with a number of initiatives to address labor market competition, including:
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In December 2021, the FTC and DOJ held a “Workshop on Competition” to discuss efforts to promote competitive labor markets and worker mobility, including whether there should be an outright ban on non-competition agreements.
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On March 7, 2022, the U.S. Treasury Department issued the State of Labor Market Competition in the U.S. Economy report. The report noted that the labor market is characterized by high levels of employer power and that noncompete agreements are contributing to low wages and poor working conditions. The report made a number of recommendations, including raising the minimum wage, making it easier for workers to organize and increasing antitrust enforcement in labor markets.
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On the same day, Attorney General Merrick Garland delivered remarks at the White House Roundtable in response to the Treasury Department report. Attorney General Garland stated that lack of competition harms the American economy, and “employer concentration and anticompetitive labor practices undermine the free and fair labor markets upon which the integrity of our economy depends.”
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The Chairman of the FTC, Lina Khan, also delivered remarks at the White House Roundtable in response to the Treasury Department report. She stated that “[t]he report highlights several ways in which a lack of fair competition is hurting workers. A priority of mine at the Federal Trade Commission has been to ensure that we are using our tools and authorities to tackle unfair methods of competition that affect workers ….”
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On March 10, 2022, the DOJ Antitrust Division and the Labor Department signed a memorandum of understanding to protect workers from employer collusion, to ensure improved compliance with labor laws, and to promote competitive labor markets and worker mobility. This memorandum memorializes an agreement between the two agencies to share information with each other in certain circumstances, creating new risks for parties subject to DOJ antitrust investigations.
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On April 8, 2022, the FTC’s Bureau Director, delivered remarks at the ABA Antitrust Spring Meeting Conference. As part of her remarks, she stated that the FTC plans to use its broad authority under Section 5 of the FTC Act to pursue anticompetitive labor practices. Section 5 of the FTC Act prohibits unfair or deceptive acts or practices in or affective commerce and except in limited circumstances, historically has not been used on a standalone bases to combat anticompetitive conduct.
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At the same conference, the chair of the National Association of Attorneys General multistate antitrust task force stated that several U.S. states are considering looking at labor issues in evaluating mergers. She stated that “(j)ob losses are an aspect of the market that the states are concerned about.”
Recent Litigation
In keeping with this recent aggressive enforcement stance, the DOJ has filed several recent criminal no-poach or wage-fixing indictments against several companies including:
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U.S. v. Neeraj Jindal (obstructing justice and fixing wages paid to physical therapists and assistants in north Texas; was the first criminal action for wage-fixing and included a superseding indictment adding John RodgersI;
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U.S. v. Surgical Care Affiliates (agreement with a company based in Texas not to solicit each other’s senior level employees; agreement with a company in Colorado not to solicit each other’s senior level employees);
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U.S. v. DaVita Inc. and Kent Thiry (agreement with Surgical Care Affiliates and an unnamed Colorado company in SCA indictment); and
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U.S. v. VDA OC and Ryan Hee (agreement with co-conspirator not to recruit or hire each other’s nurses working at Clark County School District facilities in Las Vegas and to fix the nurses’ wages).
Notably, juries recently found against the DOJ in two of these litigations. First, a federal jury found dialysis provider DaVita and former CEO Kent Thiry not guilty of engaging in no-poach agreements with two competitors and of horizontal market allocation. Second, a jury found Neeraj Jindal and another individual, John Rodgers, not guilty of criminal wage fixing in the criminal prosecution. It appears that these two losses will not deter DOJ from continuing to aggressively pursue these types of agreements criminally. In response to the jury verdict, the DOJ stated that “[t]he jury’s verdict in any particular case says nothing about the legal principles underlying the charge,” and “it’s clear to everyone that collusion in labor markets is a crime and it’s something that we can prosecute and will prosecute.”
Takeaways
The recent developments should put companies on notice that the DOJ (and FTC) intends to follow through with, and expend significant resources on, the administration’s request to aggressively enforce the antitrust laws against anticompetitive labor agreements. That means more costly and lengthy investigations for companies and possibly more criminal indictments. As a result, companies should ensure that they have reviewed existing employment practices and agreements, implemented robust and up-to-date compliance training, programs and policies and are closely monitoring DOJ and FTC enforcement actions.
Norm Armstrong, Reporter, Washington, D.C. +1 202 626 8979, narmstrong@kslaw.com.
OIG Issues Favorable Advisory Opinion Regarding Biopharmaceutical Company Arrangement to Provide Free Genetic Testing and Counseling to Potentially Eligible Patients – Last week, OIG posted Advisory Opinion No. 22-06 regarding a biopharmaceutical company’s (BioPharm Co.) arrangement to provide free genetic testing and genetic counseling services to patients potentially eligible for treatment with the biopharmaceutical company’s drug (the Arrangement). OIG concluded that it would not impose administrative sanctions under the federal Anti-Kickback Statue (AKS), or under the civil money penalties law relating to beneficiary inducements (the Beneficiary Inducements CMP) because, according to OIG, the Arrangement posed a sufficiently low risk of fraud and abuse.
BioPharm Co. sought OIG approval to provide free genetic testing and genetic counseling services to potentially eligible patients pertaining to two drugs (the Medications) prescribed to treat a rare disease (the Disease). The Disease, which affects the heart and can lead to heart failure and death, can be hereditary or occur spontaneously. The Medications are the only items or services that BioPharm Co. manufactures, promotes, markets, or has any financial interest in related to the Disease.
Patients with the Disease often do not receive a correct diagnosis until many years after Disease onset because the Disease is rare and its symptoms are nonspecific. Diagnosis of the Disease requires an objective clinical assessment consisting of diagnostic and other testing. BioPharm Co. proposed to provide free genetic testing (the Genetic Test) and genetic counseling services (the Counseling Services) to adults in the United States who fit the following criteria: (i) the individual has been diagnosed with the Disease; (ii) the individual’s physician suspects the individual has the Disease based on clinical evidence but has not yet made a diagnosis; or (iii) the individual has not been diagnosed with the Disease, but a family member has a confirmed diagnosis of the hereditary form of the Disease (each an Eligible Patient).
To provide the Genetic Test and the Counseling Services, Biopharm Co. entered into contracts with third party vendors (the Testing Vendor and the Counseling Vendor). BioPharm Co.’s contracts with the Vendors require them to bill only BioPharm Co. for the respective services rendered and not to promote their other services to any physician who ordered the services. Further, while the Testing Vendor provides monthly reports about the Arrangement to BioPharm Co. to track participation, the information provided does not include individually identifiable health information and the data will not be used for sales and marketing activities.
OIG concluded that the arrangement implicates the federal AKS because the free Genetic Test and Counseling Services may induce Eligible Patients to purchase, or their physicians to provide, the Medications or other products manufactured by BioPharm Co. However, OIG concluded that it would not impose sanctions under the AKS because: (1) the Genetic Test indicates only whether a patient had a genetic mutation associated with the Disease, not whether a patient presently has the Disease, and therefore is unlikely to lead to overutilization or inappropriate utilization; (2) the Arrangement is unlikely to skew clinical decision making or raise concerns regarding patient safety or quality of care because BioPharm Co. does not require or otherwise incentivize providers who prescribe the Genetic Tests to recommend, prescribe, or administer any other products or services manufactured by BioPharm Co.; and (3) there are various safeguards to prevent the Arrangement from being used as a sales and marketing tool, including limitations on use of the data arising from the Arrangement for sales or marketing purposes and prohibitions on Vendor promotion of other services or the Arrangement generally.
OIG also concluded that it would not impose sanctions under the Beneficiary Inducements CMP, even though implicated by the Arrangement’s potential to induce an Eligible Patient to seek further care from the provider who ordered the Genetic Test, for the same reasons stated above as to the AKS.
OIG Advisory Opinion No. 22-06 is available here.
Reporter, Christopher C. Jew, Los Angeles, + 1 213 443 4336, cjew@kslaw.com.
D.C. Circuit Rejects Critical Access Hospital’s Appeal for Medicare Payments to On-Call Specialty Physicians – On April 15, 2022, the D.C. Circuit affirmed the denial of a California hospital’s request to obtain critical access hospital cost reimbursement from Medicare for the costs incurred to keep non-emergency specialty physicians on-call. St. Helena Clear Lake Hospital (St. Helena), a California critical access hospital, argued that its on-call costs for inpatient care, just like those for emergency room care, are “necessary and proper” and therefore should be reimbursed under state and federal regulations. However, the D.C. Circuit, affirming the district court and Provider Reimbursement Review Board (Board), disagreed and concluded that the relevant statutes and regulations only address on-call costs for emergency room physicians.
St. Helena sought Medicare cost reimbursement under Medicare’s critical access hospital 101% of reasonable cost reimbursement framework for the costs it incurred for payments made to non-emergency room specialists for providing on-call coverage. St. Helena’s Medicare contractor denied the request for reimbursement on the basis that non-emergency room on-call costs were not reimbursable. St. Helena appealed the Contractor’s denial to the Board.
Before the Board, St. Helena argued that it was required by the federal Emergency Medical Treatment and Active Labor Act (EMTALA) and California law to incur the specialty on-call costs given its obligation to, among other things, treat patients after emergency room treatment. EMTALA requires hospitals providing emergency room service to, among other things, stabilize patients before releasing them or transferring them to a large hospital. Accordingly, St. Helena argued that its on-call costs for inpatient care are necessary to stabilize its patients and should therefore be reimbursed. The Board rejected this argument and explained that reimbursement is only allowed pursuant to 42 U.S.C. § 1395m(g)(5) and 42 C.F.R. § 413.70(b)(4) for on-call costs for the emergency room physicians.
After the CMS Administrator declined to review the Board’s decision, St. Helena appealed to the district court, which affirmed the Board’s decision. The D.C. Circuit agreed with the district court and Board’s decisions, concluding that “it is at least reasonable to read the key regulation as precluding a policy change extending [critical access hospital cost reimbursement] beyond on-call emergency room physicians.”
The D.C. Circuit’s opinion is available here.
Reporter, Dennis Mkrtchian, Austin, +1 512 457 2068, dmkrtchian@kslaw.com.
ALSO IN THE NEWS
HHS Extends COVID-19 Public Health Emergency– On April 12, 2022, the Secretary of HHS again renewed the Public Health Emergency in connection with the continued impacts of the COVID-19 pandemic, effective April 16, 2022. The Secretary’s declaration is available here.
Editors: Chris Kenny and Kate Stern
Issue Editors: Lauren Gennett and David Tassa