News & Insights


February 6, 2017

Health Headlines – February 6, 2017

HRSA Withdraws 340B Program “Mega Guidance” from OMB Review — On January 30, 2017, the Health Resources and Services Administration (HRSA) withdrew its 340B Program Omnibus Guidelines (Guidelines) from regulatory review by the Office of Management and Budget (OMB).  HRSA published the proposed version of the Guidelines in August 2015, setting forth numerous broad proposals, as summarized in our 8/31/2015 issue of Health Headlines.  Among other things, HRSA had proposed to revise the definition of eligible patient.  Neither HRSA nor HHS has commented on the withdrawal of the Guidelines.

The Guidelines (also referred to as “mega guidance” and “omnibus guidance”) are a product of years of agency deliberations.  Initially announced on HRSA’s website as a proposed rule scheduled for publication in June 2014, the Guidelines were delayed, and then re-drafted as guidance rather than rulemaking.  The reason for the “downgrade” was HRSA’s judicial setback in trying to assert plenary authority to promulgate rules implementing the 340B Program (i.e., 42 U.S.C. § 256b).  As reported in the 6/16/2014 issue of Health Headlines, in May 2014, the U.S. District Court for the District of Columbia ruled that HRSA is authorized to promulgate rulemaking pertaining to the 340B Program only with respect to the three areas for which the statute expressly authorizes HHS to promulgate rulemaking: (1) the administrative resolution process, (2) the methodology for calculating ceiling prices, and (3) the imposition of civil monetary penalties.  Yet, according to HRSA’s statements on its website, HRSA’s planned “mega rule” (which was not yet published) addressed much broader issues:  the definition of an eligible patient, compliance requirements for contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site facilities.  As reported in the 11/17/2014 issue of Health Headlines, following the D.C. District Court’s ruling, HRSA began reworking the “mega rule” into a guidance document.

HRSA published the proposed Guidelines in August 2015.  The proposed Guidelines covered, among other issues, all of the issues that were planned to be covered by the “mega rule”:  the definition of an eligible patient, contract pharmacy arrangements, hospital eligibility criteria, and eligibility of off-site facilities.  Among the proposals, the proposed revision to the definition of an eligible patient drew the most criticism from health care providers.  (See e.g., comment by the American Hospital Association to the proposed Guidelines.)   While the reason for the withdrawal of the Guidelines is not clear at this time, it may have been attributable to the change in White House Administrations.  As it stands, the proposed Guidelines remain non-finalized agency guidance. 

Reporters, Igor Gorlach, Houston, +1 713 276 7326,, Mark Polston, Washington D.C., +1 202 626 5540, and Adam Robison, Houston +1 713 276 7306.

DOJ Settles with Nursing Home for Allegations of Worthless Services -- On February 1, 2017, an Iowa nursing facility and residential care facility operator entered into a settlement agreement (the Agreement) with DOJ and the State of Iowa for alleged violations of the False Claims Act for the submission of Medicaid claims for “care provided [to] the residents [that] was so grossly substandard such that the care was worthless and effectively without value.”  The Abbey of Le Mars, Inc. (the Abbey), along with several individuals named in the Agreement who are either employees, former employees or individuals with a financial interest in the Abbey, agreed to pay $100,000 to settle the allegations with respect to allegedly “worthless” care provided to sixteen Medicaid patients over the course of approximately six years.

The government alleged that the care provided was “effectively without value” because the Abbey failed to properly address residents’ skin and other conditions that led to inadequate care and additional costs, implemented physical restraints and medications without first attempting other interventions, used anti-psychotic medications to decrease residents’ needs, failed to provide adequate nourishment and provided inadequate bathing and care that led to infections and other complications.

According to the DOJ press release, the investigation was led by the State of Iowa Medicaid Fraud Control Unit and is part of DOJ’s broader Elder Abuse Initiative.  As part of such initiative, the U.S. Attorney’s Office for the Northern District of Iowa has redirected resources to protecting seniors.

The Agreement only released government claims related to the sixteen Medicaid patients and did not release the Abbey from any criminal liability or liability related to other conduct.  A copy of the Agreement is available here, and a copy of the DOJ press release is available here

Reporter,  Kate Stern, Atlanta, +1 404 572 4661,

CMS Updates Manual Guidance to Include References to the Two Midnight Rule --  Although the Two Midnight Rule was effective October 1, 2013, until recently, CMS had not updated the Medicare Benefit Policy Manual (MBPM) to incorporate the Two Midnight Rule and its revisions to prior admission requirements.   Effective January 1, 2017, over three years after the effective date of the Two Midnight Rule, CMS updated MBPM, Chapter 1, Section 10 to include general references to the Two Midnight Rule.

For example, CMS updated the following provisions:

“An inpatient is a person who has been admitted to a hospital for bed occupancy for purposes of receiving inpatient hospital services. Generally, a patient is considered an inpatient if formally admitted as inpatient with the expectation that he or she will require hospital care that is expected to span at least two midnights and occupy a bed even though it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital bed overnight.

The physician or other practitioner responsible for a patient's care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient. Physicians should use the expectation of the patient to require hospital care that spans at least two midnights period as a benchmark, i.e., they should order admission for patients who are expected to require a hospital stay that crosses two midnights and the medical record supports that reasonable expectation…”

Importantly, however, the minor revisions do not provide any additional authority or address many of the complexities and nuances of the current Two Midnight Rule landscape.

Reporter, Lauren Gennett, Atlanta, + 1 404 572 3592 ,

HHS Issues Final Rule that Substantially Revises the Federal Policy for the Protection of Human Subjects – In a final rule, published on January 19, 2017, HHS, along with fifteen other Federal department and agencies, extensively revised and modernized the Federal Policy for the Protection of Human Subjects, also known as The Common Rule. This is the first substantive revision in over twenty years, and it is intended to facilitate broader types of clinical research and ensure the protection of human subjects.

As described more fully in King & Spalding’s Client Alert, available here, major changes to The Common Rule include: (1) new required disclosures during the informed consent process; (2) allowance for the use of broad consent for unspecified future research uses of identifiable private information or identifiable biospecimens; (3) new categories of research exempt from Institutional Review Board (IRB) review; (4) a new requirement for U.S. institutions engaged in cooperative research to use a single IRB; and (5) removal of the IRB requirement to conduct continuing review of studies that undergo initial expedited review.

Reporter, Caitlin Pardue, Atlanta, + 1 404 572 4877,


U.S. Department of Justice Issues Fraud Section “Year in Review” – The Fraud Section of the DOJ issued its “Year in Review” publication for 2016, available here.  This publication summarizes the efforts of the Health Care Fraud Unit, the Foreign Corrupt Practices Act Unit, and the Securities & Financial Fraud Unit of DOJ’s Fraud Section in prosecuting white collar crime in 2016.  

King & Spalding to Host 26th Annual Health Law & Policy Forum – Join us on Monday, March 20, 2017, 8:00 AM – 5:30 PM ET, for the 26th Annual Health & Law Policy Forum at the St. Regis Hotel, in Atlanta, Georgia. Keynote speaker Jeffrey Toobin, a senior analyst for CNN and a staff writer for The New Yorker, will discuss the Supreme Court and how it may impact health policy in the new administration. As in previous years, Forum sessions will cover a variety of health law and policy topics.  Attendance is $95 per person (lunch included). Capacity is limited. Register here.  

Save the Date: 2017 Cybersecurity & Privacy Summit – On Monday, April 24, 2017, King & Spalding will host its 2017 Cybersecurity & Privacy Summit via webinar and in person in Atlanta, Georgia. The Summit will cover the latest developments and strategies for data protection. Additional details to follow.

King & Spalding Healthcare Industry Trends Brochure – King & Spalding recently published its Healthcare Industry Trends Brochure for 2017.  The brochure is available here.