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January 14, 2019

Health Headlines – January 14, 2019


AdvaMed Updates Code of Ethics for Interactions with Healthcare Professionals For the first time in nearly a decade, the Advanced Medical Technology Association (AdvaMed) has updated its Code of Ethics on Interactions with Heath Care Professionals (HCPs) in the United States (the Code or the AdvaMed Code).  On January 9, 2019, AdvaMed announced that its Board of Directors has approved an updated Code, which will take effect on January 1, 2020, and replace the current version of the Code in effect since July 1, 2009.  As described by AdvaMed President and CEO Scott Whitaker, “[t]he updates reflect evolving legal standards, care delivery models and best practices over the last decade . . . and are designed to ensure the Code’s continued effectiveness as a premier foundational document for ethics and compliance across the medtech industry.”

The AdvaMed Code is a set of recommended ethical guidelines for medical device manufacturers to observe when collaborating with HCPs.  Leaders in the medical device industry drafted it to help ensure compliance with certain state and federal laws and regulations, such as the federal Anti-Kickback Statute.  Although not law, the AdvaMed Code carries some weight with federal enforcement authorities, who generally view the Code as setting the standard for ethical interactions between medical device manufacturers and HCPs.  Many states have also enacted laws that either reference or mandate compliance with industry codes. 

The updated AdvaMed Code contains several new sections to address the additional types of HCP interactions that have surfaced in recent years.  The new topics include: education and marketing programs conducted jointly by device manufacturers and HCPs, manufacturer communications about the safety and effectiveness of their products, manufacturer representatives providing support in the clinical setting, placement of consignment products at an HCP’s patient care setting, the applicability of the Code to interactions outside of the U.S., and catch-all cornerstone values to regulate activities not expressly addressed in the Code.

In addition to the new sections, the updated Code adds guidance to supplement certain topics addressed in the current version of the Code.  The updated Code clarifies, for example, when device manufacturers are deemed to have a “legitimate need” to enter into consulting arrangements with HCPs.  In addition, the update establishes several new sections to better organize and consolidate the guidelines governing when device manufacturers can cover HCPs’ meals and lodging expenses, and when they can provide grants, sponsorships, and donations to third-party programs.

For more information about the updated AdvaMed Code, please read the Client Alert prepared by King & Spalding’s FDA and Life Sciences team, available here.

Reporter, Alek Pivec, Washington, D.C., + 1 202 626 2914, apivec@kslaw.com.

CMS Releases, Then Withdraws, Additional Guidance Regarding Application of Two-Midnight Rule to Total Knee Arthroplasties – On January 8, 2019, almost exactly a year after CMS removed total knee arthroplasties from the Medicare Inpatient-Only List, CMS released additional guidance regarding the application of the Two-Midnight Rule to these cases.  However, just a few days later, CMS withdrew the guidance, likely to address certain issues in the guidance identified by the provider community. 

Prior to January 2018, total knee arthroplasties, which are also referred to as total knee replacements, had been included on the Medicare Inpatient-Only List, which identifies procedures that must be provided in an inpatient setting and therefore are not paid under the Outpatient Prospective Payment System (OPPS).  Because total knee arthroplasties represent a significant revenue source for many hospitals, the removal of total knee arthroplasties from the Medicare Inpatient-Only List garnered industry attention. 

In the wake of CMS’s change to the Medicare Inpatient-Only List, many hospitals struggled with the application of the Two-Midnight Rule to total knee arthroplasties.  Indeed, according to the Journal of Arthroplasty, following the removal from the Medicare Inpatient-Only List, some hospitals began scheduling all total knee arthroplasties as outpatient procedures. 

Last week, CMS issued Medicare Learning Network (MLN) guidance, MLN Matters Number SE19002, to provide additional clarity on the application of the Two-Midnight Rule to total knee arthroplasties and provide several case examples.  In the MLN guidance, CMS emphasized that the removal of this procedure from the Medicare Inpatient-Only List allows “[total knee] procedures to be performed on an inpatient or outpatient basis.”  CMS further stated that “CMS policy does not dictate a patient’s hospital admission status and has no default determination on whether [total knee arthroplasty] procedures should be done on an inpatient or outpatient basis.” 

Shortly following the release of the MLN guidance, the provider community noted certain issues with the guidance.  For example, the MLN guidance stated that Critical Access Hospitals are not subject to the Two-Midnight Rule, which conflicts with other CMS authority.  See 42 C.F.R. § 412.3; 78 Fed. Reg. 50496, 50949 (Aug. 19, 2013).  Likely to address these issues and to further refine the clinical examples provided, CMS removed the MLN article from CMS’s website, although a revised version of the guidance may be issued later. 

The current page for the MLN guidance is available here and the previous version is available here.

Reporter, Isabella E. Wood, Atlanta, + 1 404 572 3527, iwood@kslaw.com.

The Supreme Court Strengthens Ability of Arbitrators to Determine Their Own Jurisdiction – On January 8, 2019, the U.S. Supreme Court issued a unanimous opinion in Henry Schein, Inc. v. Archer & White Sales, Inc.—the first opinion authored by Justice Brett Kavanaugh—reaffirming that, where parties have agreed to let an arbitrator decide whether a dispute is properly submitted to arbitration, courts may not weigh in on the issue, even if courts believe there are no grounds to submit the claim to arbitration. 

“Arbitrability”—whether an arbitration agreement encompasses a particular dispute—can be decided by trial courts when one party moves to compel the other party to arbitrate their dispute.  Certain arbitration agreements, however, include a clause providing that the arbitrator—not the court—will decide whether the dispute is properly submitted to arbitration.  Other agreements, as in the case before the Supreme Court, include a provision that a certain set of rules, such as the American Arbitration Association’s rules, will apply to the dispute, and those rules can dictate whether arbitrators have the power to resolve arbitrability questions.

Lower courts were split. The Fifth and Sixth Circuit Courts of Appeals previously held that when a party’s argument that a dispute should be submitted to arbitration is “wholly groundless,” the trial court may deny a motion to compel the parties to arbitrate the dispute even where the arbitration agreement provided that arbitrability be decided by the arbitrator.  This is known as the “wholly groundless” exception.

In writing for a unanimous Court, Justice Kavanaugh rejected outright the “wholly groundless” exception, finding that it is inconsistent with the text of the Federal Arbitration Act and with prior Supreme Court precedent.  Thus, where an arbitration agreement includes a provision that the arbitrator will decide questions of arbitrability, trial courts must refer the dispute to arbitration even if they disagree that the dispute is encompassed by the arbitration agreement.

What the Court did not decide, however, is whether the particular parties in this case, Archer & White Sales, Inc. and Henry Schein, Inc., had agreed to delegate the issue of arbitrability to the arbitrator.  The arbitration agreement at issue did not expressly state that questions of arbitrability should be decided by the arbitrator.  Instead, the arbitration agreement incorporated the American Arbitration Association rules, which in turn provide that arbitrators have the power to resolve arbitrability questions.  One remaining, undecided issue is whether parties agree to arbitrate arbitrability when they incorporate a certain set of arbitration rules.  Consistent with a line of questioning at oral argument on this topic, the Court appears to have left this door open by citing a prior case in which the Court held that courts “should not assume that the parties agree to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.”  First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). 

The opinion can be found here.

Reporter, Ariana Fuller, Los Angeles, +1 213 443 4342, afuller@kslaw.com

Also in the News

CMS Selects Traylor as Director of the Center for Medicaid and CHIP Services –  This week, CMS announced that Chris Traylor was selected to serve as the director of the Center for Medicaid and CHIP Services. Traylor joined CMS last July as a deputy administrator for strategic initiatives. Traylor takes over from Mary Mayhew, who resigned from the position to run Florida’s healthcare department after three months in the post.

King & Spalding’s Healthcare and Life Sciences Teams Earn 2018 Law360 Practice Group of the Year Recognition – King & Spalding’s Healthcare and Life Sciences earned Law360’s 2018 Practice Group of the Year recognitions.  King & Spalding also earned a “Law Firm of the Year” designation and five other “Practice Group of the Year” recognitions from Law360.

King & Spalding Roundtable Regarding the Opioid Epidemic: What Hospitals Need to Know – On Tuesday, January 15, 2019, from 1:00 – 2:00 p.m. ET, King & Spalding’s John Horn, Shannon Cox, Steve Cummings, Amy Jones, and Amy Boring will host a webinar focusing on important developments and practical tips for ensuring compliance and effectiveness with regard to controlled substances in the hospital context, including:

  • Recent DEA activity demonstrating elevated concern with regard to controlled substance security, oversight and management in the hospital context;
  • Unique risks present in the hospital setting, especially with regard to healthcare workers;
  • The legal framework and key issues hospitals need to consider in evaluating their compliance programs and monitoring tools; and
  • Best practices with regard to a hospital’s controlled substance compliance program and diversion prevention. 

To register, please click here.