News & Insights


August 3, 2020

Health Headlines – August 3, 2020

Senate GOP Unveils HEALS Act Coronavirus Relief Plan – On July 27, 2020, Senate Republicans released their plan for the next phase of coronavirus relief.  Instead of a single bill, the Senate plan (dubbed the Health, Economic Assistance, Liability Protection, and Schools Act, or HEALS Act) consists of several individual bills.  The Senate package includes the following individual bills:  a $306 billion emergency appropriations bill; the CARES 2.0 Act; the Supporting America’s Restaurant Workers Act; the Safely Back to School and Back to Work Act; the SAFE TO WORK Act; the TRUST Act; and the Continuing Small Business Recovery and Paycheck Protection Program Act.  Negotiations between the Senate, House, and White House remain ongoing, and there is no clear resolution as to whether any or all of the provisions in the Senate’s plan will be part of the package that is ultimately agreed upon.

Appropriations and Medicare Funding

The package provides emergency funding for HHS and for various HHS programs, including:

  • $33 billion in Public Health and Social Services Emergency Funds, with $25 billion to reimburse eligible health care providers for expenses or lost revenues attributable to coronavirus and $8 billion to be transferred to the Health Resources and Services Administration for Primary Health Care for grants under the Health Centers Program, including funding hospital staffing and capital improvements as necessary to meet coronavirus needs;
  • an additional $16 billion for testing, PPE, test development, and scaling up of laboratories;
  • $3.4 billion to the CDC; and
  • $150 million to CMS to support resident and employee safety in skilled nursing and nursing facilities, including activities to support clinical care, infection control and staffing.

The HEALS Act also includes several Medicare changes designed to maintain affordability and accelerate payments to participating providers.  The HEALS Act delays the date on which providers are obligated to repay Medicare Accelerated and Advance Payment Program loans until January 1, 2021 and provides additional time until these loans must be repaid in full prior to the recipients having to pay interest.  The Senate Finance Committee’s CARES 2.0 Act also includes provisions protecting beneficiaries from anticipated spikes in Part B premiums resulting from COVID-19 by maintaining 2021 premiums at 2020 levels.

Liability Limitations

The SAFE TO WORK ACT (the Safe to Work Act) limits liability for claims of COVID-19 exposure by creating an exclusive federal cause of action, and by limiting liability in such actions to cases in which the plaintiff can prove by clear and convincing evidence that: (1) the defendant was not making reasonable efforts to comply with applicable government standards and guidance in effect at the relevant time; (2) the COVID-19 exposure was caused by the defendant’s gross negligence or willful misconduct; and (3) the actual exposure to the coronavirus cause the plaintiff’s injury.  The Safe to Work Act also establishes a rebuttable presumption that the defendant was making reasonable efforts to comply if it had in place written policies compliant with or more protective than applicable government standards and guidance, which can be rebutted if the plaintiff establishes that the defendant was not complying with its own written policies.  The Safe to Work Act also provides that a change in the written policies shall not be used as evidence of liability, and that a defendant cannot be held liable for the acts of a third-party unless it that third party was the defendant’s agent or the defendant had a common law duty to control the acts or omissions of that third party.  Finally, the Safe to Work Act imposes a 1-year statute of limitations for claims alleging injury resulting from a coronavirus exposure.

The Safe to Work Act also contains separate liability limitations provisions specifically applicable to health care providers.  These limit liability absent proof by clear and convincing evidence of gross negligence or willful misconduct and that the alleged harm was directly caused by the gross negligence or willful misconduct.  Moreover, acts, omissions, or decisions resulting from a resource or staffing shortage shall not be considered willful misconduct or gross negligence.  For health care providers, the Safe to Work Act specifies that the 1-year statute of limitations will apply absent proof of fraud, intentional concealment, or the presence of a foreign body in the injured person.

Both the general liability limitations and those applicable specifically to health care providers are applicable to currently pending actions, and the Safe to Work Act provides that actions already pending may be removed by the defendant to federal court within 30 days of enactment.  The Safe to Work Act also abrogates joint and several liability by providing that each defendant is liable solely for the portion of the judgment corresponding to its proportionate responsibility, and requiring the trier of fact to determine the percentage of total fault of all individuals or entities, including the plaintiff, that contributed to the plaintiff’s loss.  A defendant’s liability may be joint and several only where the defendant is determined to have acted with specific intent to injure the plaintiff or knowingly committed fraud.

The Safe to Work Act limits damages to compensatory damages for economic losses incurred by the plaintiff, except in cases of willful misconduct, and where punitive damages are awarded, they may not exceed the amount of compensatory damages.  The Safe Work Act also abrogates the collateral source rule by reducing an award of damages by the amount plaintiff has received in compensation for his or her injury from other sources, such as insurance or government programs.

In addition to the substantive liability limitations, the Safe to Work Act contains several procedural limitations on COVID-19 related actions.  The Safe to Work Act requires the filing of a separate statement with the complaint with “specific information” as to the nature and amount of each element of damages alleged and the factual basis for the plaintiff’s calculation.  The complaint must include a verification by the plaintiff under oath stating that the facts alleged are true to the best of his or her knowledge and specifically identifying the matters alleged on information and belief, an affidavit by a physician or other qualified medical expert that did not treat the plaintiff that the plaintiff suffered the harm alleged in the complaint, and certified medical records documenting the alleged harm.

The Safe to Work Act also prohibits discovery before the time has expired for the defendant to answer or file a motion to dismiss, and if a motion to dismiss is filed, before a ruling on that motion.  The Safe to Work Act provides appellate jurisdiction for interlocutory appeals from denials of motions to dismiss, and imposes a discovery stay while the interlocutory appeals are pending.  Discovery will be permitted only “with respect to matters directly related to material issues contested” in the case, and a court may compel responses only after a finding that the requesting party needs the information sought to prove or defend as to a material contested issue, and the likely benefits equal or exceed the burden or cost of providing the requested response.

For class actions, classes are limited to those affirmatively electing to be a member of the class and directs the court to provide notice of the action to each class member.

Under the Safe to Work Act, prospective defendants would also have a cause of action for damages and declaratory relief against any person who transmits a demand for settlement of a meritless COVID-19 related claim to that defendant.


The HEALS Act also extends the Medicare telehealth waivers so that the waivers will remain in effect for the entirety of the COVID-19 public health emergency, or December 31, 2021, whichever is later.  For federally qualified health centers and rural health clinics, the telehealth waivers extended as part of the CARES Act are extended for 5 years beyond the end of the COVID-19 emergency.

Nursing Homes

The CARES 2.0 Act creates federal “strike teams” for nursing facilities participating in Medicare and Medicaid, which may include assessment, testing, and clinical teams in order to assist facilities with infection control practices.  The CARES 2.0 Act requires HHS to provide the governors of each state with a list of all nursing facilities in which COVID-19 cases increased during the previous week, and to develop training courses for nursing facilities, survey agencies and other individuals.  The plan also authorizes HHS to work with the Elder Justice Coordinating Council to promote testing and infection control in nursing facilities.

Testing/Contact Tracing

The Safely Back to School and Back to Work Act requires HHS to establish policies for public and private entities to access infectious disease specimens in order to support the development of tests.  The Safely Back to School and Back to Work Act also clarifies that the CDC can enter into agreements with public and private entities for the development and deployment of diagnostic tests for purposes of testing and contact tracing or other public health response activities.

Click here for the appropriations bill, here for the CARES Act 2.0, here for the SAFE TO WORK Act, here for Supporting America’s Restaurant Workers’ Act, here for the Safely Back to School and Back to Work Act, here for the TRUST Act, and here for the Continuing Small Business Recovery and Paycheck Protection Program Act.

Reporter, David Tassa, Los Angeles, +1 213 443 4335,

HHS Updates Frequently Asked Questions For CARES Act Provider Relief Funds – On July 30, 2020, HHS released several new Frequently Asked Questions (FAQs) regarding payments distributed to providers under the Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Fund.  Providers must meet certain eligibility requirements to receive the funds and the FAQs provide additional detail regarding provider eligibility and reporting requirements.

Importantly, the FAQs provide any parent entity that receives a Provider Relief Fund Targeted Distribution payment, (i.e., payment to skilled nursing facility, safety net hospital, rural, tribal, or high impact area) must transfer the funds to be used by the subsidiary.  The FAQs add that the purpose of Targeted Distribution payments is to support the specific financial needs of the eligible healthcare provider, so the control and use of the funds must be delegated to the eligible subsidiary that qualified for the payments.

The new FAQs include several questions related to Medicaid, CHIP, and dental provider eligibility.  According to the new FAQs, a healthcare provider is eligible to receive a payment from the Provider Relief Fund’s Medicaid, CHIP, and Dental Providers Distribution even if the provider received funding from the Small Business Administration’s (SBA) Payroll Protection Program, or the Federal Emergency Management Agency (FEMA), or has received Medicaid’s Home and Community Based Services (HCBS) retainer payments.  The receipt of funds from the SBA, FEMA, or HCBS does not preclude a healthcare provider from being eligible for the Provider Relief Funds as long as the provider otherwise meets the criteria for eligibility.  Also, for providers not on the curated list of known Medicaid/CHIP providers, the Health Resources and Services Administration will be working directly with state/territory Medicaid or CHIP agencies for validation rather than be reaching out directly to individual providers.

Audit and reporting requirements were also an important topic of the FAQs.  HHS announced Provider Relief Fund payments must be included in calculating whether HHS requires an audit of federal awards to non-federal entities and commercial organizations pursuant to 45 CFR Part 75, Subpart F (i.e., annual total federal awards expended are $750,000 or more). 

The July 30 FAQs, along with all previous FAQs, are available on HHS’ website here

Reporter, Nicholas J. Kump, Sacramento, +1 916 321 4817,

CMS Final Rule Updates Medicare Payment Rates and Quality Programs for SNFs – On July 31, 2020, CMS issued Final Rule CMS-1737-F for fiscal year 2021, in its yearly update to Medicare payment policies for SNFs (the Final Rule).  In addition to updating Medicare payment rates under the SNF prospective payment system (PPS), the Final Rule makes changes to case-mix classification code mappings, adopts Office of Management and Budget (OMB) revisions to statistical area delineations for purposes of classifying facilities as urban or rural, and provides minor updates to the SNF Value-Based Purchasing (VBP) Program which also impacts Medicare payments to SNFs.  CMS anticipates that under this payment rule, SNFs will see a total increase of roughly $750 million in Medicare reimbursements over the next fiscal year, which begins October 1, 2020.

The $750 million increase in aggregate payments to SNFs is attributable to an anticipated 2.2% increase to the market basket index, used to establish the base Medicare rate with the intent to reflect the cost of providing covered SNF services, under the Final Rule.  The market basket adjustment was not met with any corresponding downward multifactor productivity (MFP) adjustment, equal to the 10-year moving average of changes in annual economy-wide private non-farm business multi-factor productivity, which normally acts to reduce the market basket adjustment.

The Final Rule also adopts the most recent OMB statistical area delineations for purposes of wage index adjustment.  In addition, the rule applies 1-year transition for FY 2021 which applies a 5 percent cap on wage index decreases from FY 2020 to FY 2021.  CMS’s stated goal is to more accurately determine the appropriate wage index and rate tables to apply under the SNF PPS.  The final wage index applicable to FY 2021 is available on the CMS website here.

In addition to rate-setting updates, CMS also finalizes technical updates to ICD-10 code mappings, effective October 1, 2020, updating how certain ICD-10 codes map to reimbursement categories under the Patient-Driven Payment Model (PDPM).  The PDPM replaced the previous Resource Utilization Group (RUG)-based model last year in an effort to shift focus to patient characteristics rather than volume to classify SNF patients into case-mix payment groups.  CMS cites response to stakeholder feedback and recommendations as the source for these changes. 

Lastly, CMS made minor updates to SNF VBP regulations.  Under the SNF VBP program, 2% of total Medicare reimbursement is withheld to fund the program, from which providers can be repaid, with a bonus, by meeting certain hospital readmission benchmarks scored on a single claims-based all-cause all-condition hospital readmission measure.  The VBP program results in Medicare savings, because the redistributed incentive payment accounts for 50 to 70 percent of the 2% reduction in Medicare fee-for-service payments used to fund the VBP program.

Included in these updates, CMS announced performance standards for FY 2023, confirming that the FY 2023 performance period will be FY 2021 and the baseline period will be FY 2019.  CMS also announced that the 30-day Phase One Review and Correction deadline now applies to the baseline period quality measure report in order to align the two.  This will allow SNFs 30 days following issuance of those reports to review the underlying claims and measure rate information and submit correction requests within 30 days following issuance.  No changes were made to the measures, SNF VBP scoring policies, or payment policies. 

CMS issued this rule in conjunction with Medicare payment rules for Inpatient Psychiatric Facilities (IPFs) and hospices, in an effort to better align payments for the three facility types.  See Also in the News in today’s edition of Health Headlines

The CMS fact sheet on CMS-1737F can be found here.  The Final Rule is scheduled for publication on August 5, 2020.  Once it is published, the official form will be available on at this link.  The unpublished pdf is available for download here

Reporter, Jonathan H. Shin, Los Angeles, +1 213 443 4334,

Court of Appeals Reverses Hospitals’ Victory in 340B Drug Reimbursement Case – On July 31, 2020, the U.S. Court of Appeals for the District of Columbia Circuit reversed a district court decision that had found unlawful Medicare’s nearly 30 percent rate cut for separately payable outpatient drugs purchased under the 340B program.  In a 2-1 decision, the Court of Appeals applied the deferential Chevron doctrine to hold that CMS had reasonably interpreted the Medicare statute to grant it the authority to impose this rate cut on hospitals.  Rather than the statutory rate for 340B drugs of Average Sales Price (ASP) plus six percent, the rule directs that hospitals will be paid ASP minus 22.5 percent, a rate cut that will cause hospitals to continue to lose billions of dollars each year in reimbursement.

As background, Congress set reimbursement for these “340B drugs” so as to “stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.”  H.R. Rep. No. 102-384(II), at 12 (1992); see also 82 Fed. Reg. 52362,  52493 & n. 18 (Nov. 13, 2017) (quoting House Report and noting that “[t]he statutory intent of the 340B Program is to maximize scarce Federal resources as much as possible, reaching more eligible patients”).   By statute, CMS is directed to set payment rates for all such drugs using one of two alternative processes:  (i) the Secretary may set the payment rate at the average hospital acquisition cost  using “hospital acquisition cost survey data,” 42 U.S.C. § 1395l(t)(14)(A)(iii)(I) (subclause I) ; or (ii) if “hospital acquisition cost data are not available,” the Secretary may use the average sales price for the drug established by 42 U.S.C. § 1395w-3a and “as calculated and adjusted by the Secretary as necessary for purposes of this paragraph,” 42 U.S.C. § 1395l(t)(14)(A)(iii)(II) (subclause II).  Prior to 2018, the Secretary paid for such drugs pursuant to the second option, and adjusted the rate as required by statute to ASP plus 6 percent.  42 U.S.C. § 1395w-3a(b)(1)(A)-(B); see also 77 Fed. Reg. 68210, 68387-89 (Nov. 15, 2012) (acknowledging that hospital acquisition data is not available and adding the 6 percent to account for overhead and administrative costs). 

The 340B Program has come under criticism by those who have noted that qualifying hospitals are generally reimbursed by Medicare at a rate that exceeds their costs for purchasing 340B drugs.  Hospitals contend, however, that these funds are critical in providing services to large numbers of low-income patients as Congress intended.  Nonetheless, CMS implemented its 340B rate cut policy, adopted in the Calendar Year 2018 Outpatient Prospective Payment System (OPPS) Final Rule, to cut the rates for separately payable drugs purchased under the 340B program to ASP minus 22.5 percent.  The rate cut was designed to “better align[]” to hospitals’ true acquisition costs for 340B drugs.   82 Fed. Reg. at 52501.

The lawsuit, brought by the American Hospital Association (AHA), other hospital associations and a handful of representative hospitals, was initially dismissed by the U.S. District Court for the District of Columbia because the plaintiffs had failed to present their claims to the Secretary in the context of a claim for payment, as required by the Medicare statute.  Plaintiffs, after properly presenting their claims, filed a second lawsuit challenging the rate cut to 340B drugs—and succeeded in the district court.  The district court held that CMS’s rate cut violated the formula prescribed in the Medicare statute for setting rates for certain outpatient drugs.  The agency violated the statute, according to the district court, to use its adjustment authority to develop a third payment methodology altogether, which the ASP minus 22.5 percent formula effectively was. 

In the majority opinion authored by Chief Judge Srinivasan, the court of appeals reversed the district court’s decision.  It applied the Chevron doctrine, a two-step legal framework that often proves to be highly deferential to agencies.  See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).  Under Chevron, a court first determines whether the statute is clear and, if so, decides the issue on the plain meaning of the text.  If the text is silent or ambiguous, the court then determines whether the agency’s interpretation is reasonable.  Here, the Court concluded that Congress did not unambiguously bar CMS from using subclause II to align reimbursement rates with acquisition costs.  The Court then, as a matter of course, found that CMS’s interpretation of its authority to cut reimbursement by nearly 30 percent using subclause II was reasonable.

What this means as a practical matter is that affected hospitals are poised to continue to lose billions of dollars in reimbursements under the ASP minus 22.5 percent formula.  In a dissenting opinion, Judge Pillard noted that the net effect of the 340B rate cut is to “redistribute funds from financially strapped, public and nonprofit safety-net hospitals serving vulnerable populations—including patients without any insurance at all—to facilities and individuals who are relatively better off. If that is a result that Congress intended to authorize, it remains free to say so. But . . . the statute as it is written does not permit the challenged rate reductions.”

A copy of the Court of Appeals’ decision can be found here.

Reporter, Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579,

CMS Announces Reimbursement for Patient Counseling on Self-Isolation at Time of COVID-19 Testing – On July 30, 2020, CMS and the CDC announced that health care providers can be reimbursed for counseling patients regarding the importance of self-isolation prior to the onset of symptoms at the time of COVID-19 testing.

As the transmission of COVID-19 occurs from symptomatic, pre-symptomatic, and asymptomatic individuals, the new emphasis on self-isolation education and patient counseling can help reduce the spread of the virus.  CDC models show that there is an 86 percent reduction in the transmission of COVID-19 when individuals practice self-isolation and quarantine while waiting for test results or prior to symptom onset, compared to a 40 percent reduction in viral transmission if individuals wait to isolate until after symptoms arise. 

CMS will use existing evaluation and management payment codes to reimburse providers who are eligible to bill CMS for counseling services, regardless of where the test is administrated, including doctor’s offices, urgent care clinics, hospitals and community drive-thru or pharmacy testing sites.

Counseling services shall include discussions regarding the need for patient self-isolation prior to test results or symptoms, the importance of informing household members that they should be tested, the signs and symptoms of COVID-19, and various services that can help patients isolate at home.  Moreover, patients will be counseled that if they test positive, to wear a mask at all times, to inform their immediate family and contacts in case those individuals need to be tested and self-isolate, and that they will be contacted by public health authorities to provide information for contact tracing.

A copy of the CMS press release can be found here, and further information and resource links can be found here

Reporter, Kathryn T. Han, Los Angeles, +1 213 443 4336,

CMS Announces New Procedure Codes for Tracking COVID-19 Treatments – Last week, CMS announced that hospitals can now track the use of remdesivir and convalescent plasma for treating COVID-19 patients.  In a press release issued on July 30, 2020, CMS emphasized the importance of tracking these treatments in real time.  To address this need, CMS is implementing new procedure codes that will allow Medicare and other insurers to identify the use of these treatments for hospital inpatients with COVID-19.  The codes went into effect and were implemented into the International Classification of Diseases, Tenth Revision, Procedure Coding System (ICD-10-PCS) on August 1, 2020.  ICD-10-PCS is the Health Insurance Portability and Accountability Act (HIPAA)-designated code set for reporting hospital inpatient procedures.

In May, the FDA issued an emergency use authorization for remdesivir, which allowed doctors to use the drug to treat patients hospitalized with serious cases of COVID-19.  This limited approval allowed doctors to use the antiviral, intravenously administered drug to treat COVID-19 in patients with low blood oxygen levels or patients needing oxygen therapy or a mechanical ventilator.  With the recently implemented procedure codes, Medicare and other payors will now be able to track the use of this treatment on patients with serious cases of COVID-19 for the purpose of collecting critically important data on the effectiveness of this treatment.

The press release from CMS is available here.

Reporter, Elizabeth Han, Houston, +1 713 276 7319,

Lifespan Settles with OCR For HIPAA Violations – On July 27, 2020, HHS issued a press release indicating that Lifespan Health System Affiliated Covered Entity (Lifespan), a non-profit health system in Rhode Island, reached a settlement with the Office for Civil Rights (OCR). Lifespan will pay OCR a $1.04 million monetary penalty and has entered into a Corrective Action Plan with HHS to settle potential violations of the Health Insurance Portability and Accountability Act (HIPAA). This is the second settlement that has occurred within the last week between a healthcare provider and OCR due to HIPAA violations, after Metropolitan Community Health Services settled with OCR for $25,000 on July 23, 2020.

The settlement results from the theft of a laptop from a Rhode Island Hospital employee’s car on February 25, 2017. On April 21, 2017, Lifespan Corporation, the parent company and business associate of Lifespan, filed a breach report with OCR regarding the theft. Lifespan ascertained that the employee’s work emails may have been cached in a file on the device’s hard drive, providing the thieves with access to patient names, medical record numbers and other protected health information (PHI). The theft may have allowed access to the data for over 20,000 patients across various Lifespan Corporation provider facilities.

During the course of its investigation regarding the theft, OCR found that Lifespan: (1) had failed to implement policies and procedures to encrypt all devices; (2) did not administer the requisite policies and procedures to track or inventory all devices accessing the network that contain electronic PHI; (3) did not have proper business associate agreements in place between Lifespan Corporation and the Lifespan healthcare provider affiliates that are members of Lifespan; and (4) impermissibly disclosed the PHI of 20,431 individuals.

Within 30 days of the effective date of the Corrective Action Plan, Lifespan must provide HHS with evidence of the status of the Lifespan ACE and what covered entities are members of the ACE. Lifespan has 90 days from the effective date of the Corrective Action Plan to provide proof of encryption and access controls through a report to HHS. Lifespan is also required to revise its policies and procedures regarding its business associate agreements, and it will have to create a standard, BAA template. All Lifespan workforce members with access to electronic PHI are required to receive specific training on the policies and procedures pertaining to device and media controls. The Corrective Action Plan additionally requires Lifespan to be monitored for a total of two years. The entirety of the Corrective Action Plan, which includes additional details regarding Lifespan’s obligations under the agreement can be found here.

The HHS press release is available here.

Reporter, Jennifer Siegel, Los Angeles, +1 213 443 4389,


CMS Issues Final Payment Rule for Inpatient Psychiatric Facilities - On July 31, 2020, CMS issued its Inpatient Psychiatric Facility (IPF) final rule.  The final rule updates Medicare payment policies and rates for the IPF Prospective Payment System (PPS) for FY 2021. In this final rule, CMS finalized a 2.2 percent payment rate update and adopted its revised Office of Management and Budget (OMB) statistical area delineations. CMS also finalized updates to allow advanced practice providers, including physician assistants, nurse practitioners, psychologists, and clinical nurse specialists to operate within the scope of practice allowed by state law.

The display copy for the Final Payment Rule for Inpatient Psychiatric Facilities is available here.

CMS Issues Final Payment Rule for Hospices - On July 31, 2020, CMS issued its Hospice final rule.  This final rule updates the hospice payment rates and cap amount for FY 2021.  For FY 2021, hospice payment rates are updated by the market basket percentage increase of 2.4 percent ($540 million). Hospices that fail to meet quality reporting requirements receive a 2 percentage point reduction to the annual market basket percentage increase for the year. The hospice payment system includes a statutory aggregate cap. The aggregate cap limits the overall payments made to a hospice annually. The final hospice cap amount for the FY 2021 cap year is $30,683.93, which is equal to the FY 2020 cap amount ($29,964.78) updated by the final FY 2021 hospice payment update percentage of 2.4 percent.

The display copy for the Final Payment Rule for Hospices is available here.