Health Headlines – December 13, 2021

Bill Averting Medicare Sequester Cuts Enacted—The House and Senate voted last week, and President Biden signed into law on December 10, 2021, a bill to delay looming reduction in Medicare rates set to take effect in 2022.  The bill, the Protecting Medicare and American Farmers from Sequester Cuts Act (the Act) provides for delays in Medicare sequestration cuts for 2022 and an increase to rates under the Medicare Physician Fee Schedule (PFS), among other changes.  Set forth below is a summary of the Act’s provisions relating to Medicare.

• The 2% sequestration cut that would apply to all Medicare rates beginning January 1, 2022 is postponed until April 1, 2022.  Sequestration cuts for the period from April 1, 2022 through June 30, 2022 are reduced from 2% to 1%.  Congress originally implemented the scheduled sequestration cuts in 2011 pursuant to the Budget Control Act.

• Pay-As-You-Go (PAYGO) sequestration cuts, which would reduce Medicare spending by approximately 4% in 2022, are delayed until 2023.

• Rates under the Medicare Physician Fee Schedule (PFS) are increased by 3% for 2022. This increase is intended to mitigate the expiration of the temporary 3.75% increase to PFS rates for 2021 that was implemented under the Consolidated Appropriations Act of 2021.

• Rate reductions to the Medicare Clinical Laboratory Fee Schedule (CLFS) are delayed until 2023.  Requirements for certain hospital laboratories to report private payor data are also delayed until 2023.

• Implementation of the new Medicare Radiation Oncology Model, which provides for episode-based payments for radiotherapy services, is delayed until 2023.

A copy of the Act is available here.

Reporters, J. Gardner Armsby, Atlanta, +1 404 572 2760, garmsby@kslaw.com, and Allison Kassir, Washington, D.C., +1 202 626 5600, akassir@kslaw.com.

Nevada Jury Awards Millions of Dollars to TeamHealth Affiliates in Out-of-Network Payment Dispute—A jury last week awarded TeamHealth $60 million in punitive damages and late last month awarded TeamHealth $2.65 million in compensatory damages against UnitedHealthcare for underpaying TeamHealth affiliates for out-of-network emergency services.  The jury found that UnitedHealthcare was guilty of fraud, malice, and oppression in its conduct.
TeamHealth filed a lawsuit in Clark County, Nevada on behalf of its subsidiary, Fremont Emergency Services, alleging that UnitedHealthcare systematically underpaid its physicians for emergency services provided in 2019.  UnitedHealthcare allegedly terminated all of its contracts with TeamHealth after learning that TeamHealth would not balance bill out-of-network patients. 

The lawsuit exposed that UnitedHealthcare in some instances paid emergency providers less than 25% of billed charges, and that UnitedHealthcare’s systemic contract terminations of network providers led to increased profits for the payor.

One focal point during the case was a Yale study analyzing millions of UnitedHealthcare’s claims.  The study found that out-of-network billings increased when TeamHealth took control of certain providers.  However, the study had not taken into account UnitedHealthcare’s own financial incentives to terminate in-network contracts with providers like TeamHealth nor disclosed the communications between the Yale researchers and UnitedHealthcare from 2016 to 2017.  The Nevada court compelled UnitedHealthcare to turn over its emails with the Yale researchers revealing UnitedHealthcare’s involvement with the Yale study. 

Tellingly, the same Yale study UnitedHealthcare had sought to use here has been attributed with helping persuade Congress to pass the No Surprises Act, which comes into effect on January 1, 2022.  The No Surprises Act (the Act) bars certain providers and facilities from balance billing individuals for emergency services.  The Act requires providers and payors to try to agree upon an out-of-network price.  The Act also sets up a new government run dispute resolution process outside the court system for payment disagreements that remain after attempts at negotiations.  Companies like UnitedHealthcare may be hoping that arbitrators selected by the government will be more sympathetic to payors than courts and juries. 

TeamHealth has similar, pending court cases against UnitedHealthcare in Florida, Oklahoma, New Jersey, New York, Pennsylvania, and Texas. UnitedHealthcare has also filed a separate lawsuit in Tennessee federal court alleging that TeamHealth upcoded its claims.

Reporters, Taylor Whitten, Sacramento, +1 916 321 4815, twhitte@kslaw.com, and Glenn Solomon, Los Angeles, + 1 213 443 4330, gsolomon@kslaw.com.

OIG Determines That a Program to Provide Free Eye Drops to Eligible Patients Undergoing a Particular Treatment is Not Subject to Sanctions—On December 6, 2021, OIG issued an advisory opinion (Advisory Opinion No. 21-19) to a pharmaceutical manufacturer regarding its arrangement to provide free eye drops to patients who are prescribed one of the manufacturer’s drugs (the Product) which is known to cause keratopathy (changes to the corneal surface) as a side effect of treatment.  OIG found the arrangement poses a low risk of fraud and abuse under the federal Anti-Kickback Statute and does not trigger sanctions under the Beneficiary Inducements CMP.
The Product, which has been approved by the FDA, causes roughly 70% of its users to develop keratopathy.  The FDA-approved literature for the Product recommends use of preservative-free lubricant eye drops at least four times per day to reduce the risk of developing this potential side effect.  The eye drops are non-prescription, cost up to $17 per month, and are not typically reimbursed by federal health care programs.

The pharmaceutical manufacturer offers the eye drops for free to certain eligible patients. The physician or the eligible patient may submit an application to a third-party vendor which is not a health care provider, practitioner, or supplier.  The eligible patient interacts exclusively with the vendor regarding the eye drop shipments and receives a supply of the eye drops.

The federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) prohibits knowingly and willfully offering, paying, soliciting, or receiving any remuneration to induce, or in return for, the referral of an individual to a person for the furnishing of, or arranging for the furnishing of, any item or service reimbursable under a federal health care program. The Civil Money Penalties Law (42 U.S.C. § 1320a-7a) provides for the imposition of penalties against a person offering or transferring remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary to receive any item or service reimbursed under those programs from a particular provider, practitioner, or supplier (the Beneficiary Inducements CMP).

The concluded that providing the free eye drops poses a low risk of fraud and abuse even though it constitutes “remuneration” under the federal Anti-Kickback Statute. In reaching its conclusion, OIG noted that the Product label, medical guide, and Risk Evaluation and Mitigation Strategy guide recommend the use of the eye drops to mitigate the risk of keratopathy, which is a very common negative side effect of the Product. OIG further observed that the eye drops do not cost a lot of money, are non-prescription, and receiving them for free will likely not lead to overutilization or inappropriate utilization of the Product.  Additionally, OIG explained the eye drops will not increase federal program costs because the eye drops are not reimbursed by federal health care programs. Finally, the free eye drops present a low risk of other forms of fraud and abuse typically considered under the federal Anti-Kickback Statute, such as corrupt medical decision-making, since prescribers do not financially benefit from the Product.

OIG also determined that neither the pharmaceutical manufacturer nor the vendor supplying the eye drops is a provider, practitioner, or supplier of health care items or services within the meaning of the Beneficiary Inducements CMP. Enrollment documents for the program make clear to the patient that the free eye drops program is sponsored by the pharmaceutical manufacturer, and not the prescriber. Under the program, all patients (including federal health care beneficiaries) are eligible to receive the free eye drops regardless of which physician prescribed the manufacturer’s Product. Based on these facts, OIG concluded that the free eye drops offered by the pharmaceutical manufacturer will likely not influence a beneficiary to select a particular provider, practitioner, or supplier.
OIG Advisory Opinion No. 21-19 is available here.

Reporter, Dominic Nunneri, Los Angeles, +1 213 443 4329, dnunneri@kslaw.com.