News & Insights


April 26, 2021

Health Headlines – April 26, 2021

King & Spalding Represents Medicaid Beneficiaries in a Suit to Challenge the Approval of the TennCare III Medicaid Demonstration Project – On April 22, 2021, thirteen Medicaid beneficiaries, represented by the National Health Law Program, the Tennessee Justice Center, and King & Spalding, filed a complaint in the U.S. District Court for the District of Columbia that challenges HHS’s approval of the TennCare III demonstration project through the end of 2030.  TennCare III, which operates as a Medicaid demonstration project under a Section 1115 waiver of the Social Security Act, caps federal funding for the State’s Medicaid program and allows the State to limit coverage of medically necessary prescription drugs, among other restrictions.

As background, on November 20, 2019, the State of Tennessee filed a proposal to amend its existing demonstration project (TennCare II) that would convert much of the federal funding for its State Medicaid program into a modified block grant.  Instead of following the current Medicaid formula––which provides unlimited federal funding depending on need––Tennessee asked that $7.9 billion of its federal Medicaid funding be delivered as a lump sum block grant that would be adjusted annually for inflation.  One year later, while the amendment request was still pending, and with TennCare II scheduled to expire at the end of June 2021, Tennessee opened a State-level comment period on a separate request to extend the TennCare II managed care program for another decade.  However, the State never submitted this request to CMS, and the agency did not hold a comment period on the continuation of the program. Then, on January 8, 2021––just before leaving office––the Trump administration approved a new project labeled as “TennCare III,” despite never having solicited comments from the public on many aspects of the program. 

TennCare III caps the federal Medicaid funding available to Tennessee and allows the State to use a portion of that funding for non-Medicaid purposes.  In effect, CMS authorized a variation on Tennessee’s request for a block grant, capping the amount of federal funding available for Medicaid services and allowing Tennessee to keep more than half of the federal share of savings achieved if it comes in under the cap.  TennCare III further authorized Tennessee to limit coverage of medically necessary prescription drugs.  CMS allowed Tennessee to continue its mandatory managed care program and its waiver of three-month retroactive coverage.  The plaintiffs contend that, in approving these components of the project, CMS authorized the State to ignore provisions of the Medicaid Act that Congress does not permit to be ignored.

More specifically, the plaintiffs argue that the approval of TennCare III exceeds agency authority for the following reasons:

  • The Medicaid Act requires that the public be given an opportunity for notice and comment, but Medicaid beneficiaries, their providers, and other stakeholders never had a chance to submit their objections to continuing the existing features of TennCare for a decade.
  • HHS’s Medicaid waiver authority is intended to test pilot programs designed to improve services for Medicaid beneficiaries, but the approval of this project for ten years shows that the project, on its face, is not a bona fide test but rather an effort to make long-term structural change.
  • The new financial model will give the State a powerful incentive to reduce access to health care.  Should Tennessee come in under the cap, it would be able to draw down federal Medicaid funding for other programs, freeing up state funding for other projects (e.g., for use on roads, bridges, etc.).
  • Because of the financial incentives that drive managed care plans, access to care and services has already been a significant problem for TennCare enrollees even without this new financing model.  TennCare III only exacerbates that problem; it does not alleviate it.

Given the restrictions on access to healthcare under TennCare III and the inability to submit comments opposing the project, as the complaint explains, the plaintiffs seek to vacate TennCare III’s approval.  The complaint is available here.  More information on the Tennessee Justice Center is available here, and the National Health Law Program is available here.

Reporters, Joel McElvain, Washington, D.C., +1 202 626 2929, and Ahsin Azim, Washington, D.C., +1 202 626 9262, 

Principal Deputy Inspector General Grimm’s Speech On OIG’s Top 10 Priorities – On April 19, 2021, HHS OIG Principal Deputy Inspector General Christi A. Grimm gave the keynote address at the Health Care Compliance Association’s 25th Annual Compliance Institute wherein she highlighted 10 key compliance priorities that will drive much of OIG’s work in the coming year and beyond. While these priorities do not represent OIG’s full work plan and there are other core areas OIG is focused on, the compliance priorities include: (1) Overseeing COVID-19 Relief and Response; (2) Realizing the Potential of Telehealth (3) Ensuring Quality of Care and Patient Safety in Nursing Homes; (4) Advancing Health Equities; (5) Modernizing Program Integrity and Compliance Information; (6) Combating the Substance Use Disorder Epidemic; (7) Prioritizing Cybersecurity; (8) Information Blocking Enforcement; (9) Implementing Value-Based Care; and (10) Strengthening Managed Care Program Integrity.

Principal Deputy Inspector General Grimm did not have time to discuss all 10 OIG priorities, but she did provide additional information regarding the following 5 compliance priorities:

  • Overseeing COVID-19 Relief and Response – Audits, evaluations, and investigations examining the COVID response will remain a priority for OIG. OIG is currently conducting 57 audits and evaluations related to COVID-19 and has issued eight reports to date.
  • Realizing the Potential of Telehealth – Telehealth can be a tool for providers to help address patient access issues, especially for underserved populations. Effectively expanding telehealth and ensuring program integrity will take effort on a number of fronts that may not be considered traditional compliance issues: cybersecurity, interoperability, and patient access to technology. Last month, OIG issued a message regarding telehealth based on its current knowledge.  
  • Ensuring Quality of Care and Patient Safety in Nursing Homes – OIG is focused on protecting residents from abuse, neglect, and failures of care, improving state oversight, and improving quality of care monitoring. To support this effort, OIG conducted an outreach campaign aimed at protecting nursing home residents at 493 nursing homes.
  • Advancing Health Equities – OIG acknowledges that the COVID-19 pandemic highlighted the preexisting stark racial and socioeconomic disparities with regards to health outcomes. OIG’s work will utilize an equity lens to better achieve equity in health and human services, including areas such as quality of care, access to care, and health outcomes.
  • Modernizing Program Integrity and Compliance Information – OIG anticipates a multiyear effort to modernize OIG guidance, compliance resources, and data sharing practices to make program integrity and compliance information easier to access. During the COVID-19 pandemic, OIG worked with organizations that needed extensions of deadlines by providing flexibilities for 42 self-disclosure actions, 81 Corporate Integrity Agreements, and 20 payment extensions in civil monetary penalty cases. OIG anticipates continuing some of these practices going forward.

The text of Principal Deputy Inspector General Grimm’s speech is available here, the presentation is available here, and the handout for the speech is available here

Reporter, Christopher C. Jew, Los Angeles, + 1 213 443 4336,

King & Spalding Discusses Regulatory Risks to Pharmaceutical and Device Manufacturers – In a new video available here, King & Spalding partner Nikki Reeves discusses state and international regulatory risks facing pharmaceutical and device manufacturers.

Also in the News

King & Spalding Webinar What to Expect from the DOJ in the Biden Administration

King & Spalding will host a webinar on April 27, 2021 from 1 p.m. to 2 p.m. ET.  This Life Sciences and Healthcare Roundtable webinar will explore President Biden’s policy priorities impacting the life sciences industry, such as: the anticipated increase in collaboration between DOJ, HHS, and the FDA; principal enforcement tools – the False Claims Act, the Food, Drug & Cosmetic Act, and the Anti-Kickback Statute; fraud and abuse related to COVID-19; clinical trial fraud; investigations and enforcement related to the opioid crisis; protection of healthcare consumers, including focus on drug pricing; and scrutiny and enforcement of digital health tools and electronic health records.  You can obtain more information and register for the webinar here.

King & Spalding Webinar Protecting Your CARES Act Provider Relief Funds During Audit and Enforcement: The Time to Act Is Now

King & Spalding will host a webinar on April 29, 2021 from 1 p.m. to 2:30 p.m. ET.  This Life Sciences and Healthcare Roundtable webinar will discuss how Provider Relief Fund recipients can prepare for the inevitable reviews, audits, and enforcement actions that will follow the submission of congressionally mandated reports on the use of Provider Relief Funds.  This webinar will focus on, among other topics, the oscillating definition of “expenses attributable to coronavirus,” the various methodologies for measuring “expenses” and their potential pitfalls, accounting for all potential “lost revenue,” strategies to account for other sources of funding such as FEMA grants and private payer reimbursement that must first be applied to pandemic-related expenses and lost revenue, tips for preparing for OIG audits, and DOJ enforcement priorities.  You can obtain more information and register for the webinar here.