News & Insights


January 23, 2017

Health Headlines – January 23, 2017


President Trump Issues First Executive Order Targeting the Affordable Care Act

On January 20, 2017, President Trump signed an Executive Order entitled “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.”  Executive Orders are legally binding statements issued by the president that direct federal agencies and officials in their execution of congressionally established laws or policies.  The Order provides broad guidance and direction to executive agencies as they implement the Affordable Care Act and other unspecified laws that regulate healthcare and health insurance.  As Congress sets out to “repeal and replace” the ACA, this Order marks the first step the new administration has taken to roll back the law.  The text of the Executive Order may be found here

The text of the Executive Order sets forth five directives to executive agencies regarding the Affordable Care Act, health insurance generally and healthcare programs. 

  • Section 1:  Announces that it is the policy of the administration to seek repeal of the ACA.  Pending repeal, the Order directs every executive branch department to ensure that the ACA is being efficiently implemented and to “take all actions . . . to minimize the unwarranted economic and regulatory burdens of the Act.” 
  • Section 2: Directs the Secretary of HHS and the heads of all departments that have “authorities and responsibilities” under the ACA to exercise their legal authority and discretion to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act” that imposes a “fiscal burden” on States or “a cost, fee, penalty or regulatory burden” on families, providers, insurers, patients, insurance consumers, and the manufacturers of medical devices, products, or medications. 
  • Section 3: Directs the Secretary of HHS and other executive agencies with “authorities and responsibilities” under the ACA to exercise all legal authority and discretion to provide States flexibility in implementing healthcare programs.
  • Section 4: Directs every department head with “responsibilities relating to healthcare or healthcare insurance,” to “encourage the development of a free and open market in interstate commerce” for the offering of health insurance.
  • Section 5: Directs the heads of all agencies to comply with the Administrative Procedure Act in carrying out the directives of the Executive Order through notice and comment rulemaking wherever required. 

The Executive Order does not itself target specific provisions of the ACA or specific regulations that are to be delayed or, if possible, repealed.  Rather, Section 2 of the Executive Order can be read as a slow-down order: it directs all relevant federal agencies to identify those provisions of the ACA that could be delayed in implementation, or that could be waived or deferred, and to grant such delays, deferrals, and exemptions that are legally permissible under current law.  The Order is unspecific as to how agencies would delay implementation, and it is possible that federal agencies could seek to delay implementation by reversing or revising current regulations.  While the Order limits federal agency power only to provisions of the ACA that create “fiscal burdens” or are a “cost, fee, penalty or regulatory burden” on individuals, providers, insurers, and manufacturers, the Order contains no standards for assessing such burdens and, therefore, grants the agencies broad discretion in deciding which provisions of the ACA to target for delay, waiver, or deferral. 

Two other provisions of the Order, Sections 3 and 4, appear to be specific references to other policies promoted by President Trump during the 2016 campaign and supported by Republican leadership.  Section 3 directs agencies to grant States flexibility in implementing healthcare programs and appears to be at least in part a reference to the Secretary’s authority under the Social Security Act and other authorities to grant waivers of federal Medicaid law in order to allow for demonstrations or experimentation in Medicaid coverage and financing.  While the Secretary has broad waiver authority to allow for such experimentation, current law constrains this authority and requires a detailed evaluation and review process for Medicaid waivers.  The CMS Administrator designee, Seema Verma, negotiated one such waiver for the State of Indiana as an alternative for accepting Medicaid expansion under the ACA. 

Section 4, which directs department heads to encourage the development of a “free and open market” for the offering of health insurance, appears to be a reference to the president’s campaign pledge to allow health insurers to sell healthcare policies across state lines.  It is unclear to what extent current federal law supports such an interstate market and many experts have stated that federal legislation may be required. 

Section 5 of the Order requires federal agencies to follow the notice and comment procedures of the Administrative Procedure Act in carrying out the Executive Order.  This provision appears to empower federal agencies to consider reversal of existing regulations, promulgated during the Obama administration, in order to carry out the commands of the Executive Order to delay, defer, or waive implementation of the ACA to the extent permitted by law.

Reporter, Mark Polston, Washington, D.C.,  +1 202 626 5540,

HHS Announces Final Rule on Medicare Benefit Claim Appeals Process – On January 17, 2017, HHS published its final rule addressing modifications to the Medicare benefit claim appeals process. The final rule seeks to reduce the significant backlog of pending Medicare appeals and streamline the actual appeals process. 

With the capacity to complete 92,000 appeals per year, HHS reports that there are currently more than 650,000 pending appeals. In light of this approximately seven-year backlog, the final rule seeks to revise the procedures HHS follows for appeals of payment and coverage determinations for Medicare enrollees. HHS notes that the number of appeals increased 1,222 percent from 2009 to 2014 and was accompanied with only a “modest” increase in HHS funding. 

HHS has put forth a three-prong approach to address this increase in appeals and current backlog of claims waiting to be adjudicated. Specifically, this three-prong approach provides that HHS will:

1) invest new resources at all levels of appeal to increase adjudication capacity and implement new strategies to alleviate the current backlog;

2) take administrative actions to reduce the number of pending appeals and encourage resolution of cases earlier in the process; and

3) propose legislative reforms that provide additional funding and new authorities to address the appeals volume.

In this final rule, HHS states that it is pursuing its three-prong approach by implementing rules that expand the pool of available Office of Medicare Hearings and Appeals (OMHA) adjudicators and “by improving the efficiency of the appeals process by streamlining the processes so less time is spent by adjudicators and parties on repetitive issues and procedural matters.”  For example, the final rule will allow attorney adjudicators the authority to decide appeals when decisions can be issued without an Administrative Law Judge hearing, to review certain dismissals, and to dismiss requests for hearings when the appellant withdraws, which HHS believes will allow Administrative Law Judges to conduct hearings and focus on more complex cases.

To further create process efficiencies, the final rule also permits designation of Medicare Appeals Council decisions (final decisions of the Secretary) as precedential. HHS believes this change will provide more consistency in decisions at all levels of appeal and reduce the appeal rates by providing clarity. Additionally, the final rule looks to simplify proceedings by limiting the number of entities, such as CMS or CMS contractors, that can be a participant or party at the hearing. Overall, HHS states that the final rule “will streamline the administrative appeal process, increase consistency in decision making across appeal levels, and improve efficiency for both appellants and adjudicators, and in particular benefit Medicare beneficiaries by clarifying processes and adding provisions for increased assistance when they are unrepresented.”

These regulatory changes in the final rule “are the latest in a series of administrative actions designed to reduce the number of pending appeals and encourage resolution of cases earlier in the Medicare appeals process.”  Although HHS acknowledges that the final rule alone will not reduce the Medicare appeals backlog, HHS hopes that the combination of the FY 2017 proposed funding increase and the final rule will allow it to eliminate the Medicare appeals backlog by fiscal year 2020.   The final rule will become effective March 20, 2017.

To view the Final Rule in its entirety, click here.

Reporter, Kiel Yager, Sacramento, +1 916 321 4811,

Substance Abuse and Mental Health Services Administration (SAMHSA) Issues Confidentiality of Alcohol and Drug Abuse Patient Records Regulations – On January 13, 2017, SAMHSA  issued a Final Rule updating the Confidentiality of Alcohol and Drug Abuse Patient Records regulations (42 C.F.R. Part 2). SAMHSA also issued a Supplemental Proposed Rule requesting comments on additional proposed changes to these regulations. The Final Rule is effective and comments on the Supplemental Proposed Rule are due on February 17, 2017.

Final Rule

The last substantive changes to 42 C.F.R. Part 2 (“Part 2”) were in 1987.  The updates in the Final Rule are intended to:  (1) address new integrated health care models; (2) facilitate information exchange within new health care models; and (3) make the regulations more straightforward and less burdensome.

Below are some of the substantive changes to the regulations:

  • Recipients of substance use disorder patient records (“Records”). Part 2 will continue to apply to any federally assisted program that provides or holds itself out as providing diagnosis, treatment, or referral for treatment for substance use disorder, including an identified unit or medical personnel or other staff within a general medical facility. The Final Rule extends Part 2 to individuals or entities who obtained Records pursuant to a Part 2-compliant patient consent.
  • Patient Consent to Disclosure. Under the Final Rule records may be disclosed to health care provider entities, third party payers, and health information exchanges and research institutions in certain instances, in addition to named individuals. 
  • General Designation Disclosures. Patients who have agreed to general designation disclosures have the right to receive a list of entities to whom their information has been disclosed, if requested. Entities disclosing Part 2 information pursuant to a general designation on a patient’s consent form (e.g., accountable care organizations, health information exchanges) must have the ability to comply with the “List of Disclosures” provision and must notify patients of this right in the consent form authorizing the disclosure.
  • Re-Disclosure Prohibition.The Final Rule clarifies the prohibition on re-disclosure of a patient’s information applies only to information that would identify, directly or indirectly, an individual as having been diagnosed, treated, or referred for treatment for a substance use disorder, such as indicated through standard medical codes, descriptive language, or both.


  • Qualified Service Organizations.The Final Rule expands the definition of a qualified service organization, which can receive information from a Part 2 provider without express patient consent, to include entities that provide population health management services, but not care coordination services, to a Part 2 program.
  • Researchers.The Final Rule allows disclosure of Records to qualified personnel for purposes of conducting scientific research, provided the researcher meets certain regulatory requirements related to other existing protections for human research (e.g., the researcher is subject to patient authorization and/or privacy protections under the HIPAA Privacy Rule or the Common Rule).
  • Electronic Records RequirementsThe Final rule modernizes Part 2 to include requirements for both paper and electronic records. For example, Part 2 programs and other lawful holders of patient identifying information must implement formal policies and procedures for the security of both paper and electronic records, and utilize encryption for electronic records transfer.

Supplemental Proposed Rule

In the Supplemental Proposed Rule, SAMHSA seeks public comment on its proposals to:

  • Explicitly list and limit specific types of activities for which any lawful holder of Records may be allowed to further disclose the minimal information necessary for specific payment and health care operations activities;
  • Allow an abbreviated re-disclosure notice in certain circumstances; and
  • Address disclosures by contractors, subcontractors, and legal representatives for purposes of audit and evaluation activities, which could include  quality improvement activities, and reimbursement and financing efforts by entities other than CMS-regulated payers.

Reporter, Lara Compton, Los Angeles, +1 213 443 4369,


Hospitals Have Until January 31, 2017 to Participate in CMS’s 2016 Hospital Appeals Settlement Program – As previously reported here, CMS is offering a new Hospital Appeals Settlement program to allow eligible providers to settle certain pending inpatient appeals for 66 percent of the net allowable amount.  Hospitals interested in participating in the 2016 Hospital Appeals Settlement program, which opened on December 1, 2016, must submit an Expression of Interest no later than January 31, 2017.  According to CMS, the purpose of the 2016 Hospital Appeals Settlement program is to reduce the backlog of pending Medicare appeals, as well as to reduce the associated litigation risk for providers and the Medicare program.  For additional information from CMS regarding the 2016 Hospital Appeals Settlement program, please click here.

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.