News & Insights


January 30, 2017

Health Headlines – January 30, 2017

Transition Update, ACA Repeal and Replace, and Look Ahead – On January 24, 2017, the Senate Finance Committee held a hearing on the nomination of Dr. Tom Price (R-GA) to be Secretary of HHS.  The Committee has scheduled a vote for today, January 30, on his nomination. 

Congressional Republicans held a retreat at the end of the week in Philadelphia, where Speaker Ryan outlined a timetable for the Affordable Care Act (ACA) repeal and replace. 

  • Although the budget resolution, S. Con. Res. 3, directs four committees with jurisdiction over health care policy (House Ways & Means; House Energy & Commerce; Senate Finance; and Senate Health, Education, Labor & Pensions) to submit legislation to the House and Senate Budget Committees by January 27, 2017, Congress is realistically looking at action taking place by mid-February/March, with the goal of getting a reconciliation bill to the President by mid-April.
  • The House is expected to take the lead on reconciliation legislation, and the goal is to get as much of the “replace” in the reconciliation package as possible.  However, new House Energy and Commerce Chairman Greg Walden cautioned:  “Don’t wait for a big bill; we’re going to take this a piece at a time.” 
  • Two new Senate proposals for replace were floated from Senators Cassidy, Collins, Capito, and Isakson, and from Senator Rand Paul, but no firm “replace” plan is in place yet.  (The Cassidy/Collins/Capito/Isakson proposal is addressed in a separate Health Headline published today and available here
  • Even Medicaid reform may not be so easily accomplished; Governors want flexibility but do not want less money, and there is no agreement on how to treat states that expanded Medicaid and those that did not.

This week, the House and Senate will hold hearings on various health issues expected to be considered in the ACA repeal and replace:

  • Senate Health, Education, Labor and Pensions Committee:  February 1 hearing, “Obamacare Emergency: Stabilizing the Individual Health Insurance Market.”
  • House Education and the Workforce Committee:  February 1 hearing, “Rescuing Americans from the Failed Health Care Law and Advancing Patient-Centered Solutions.”
  • House Energy & Commerce Subcommittee on Health:  February 1 hearing, “Strengthening Medicaid and Prioritizing the Most Vulnerable.”
  • House Energy & Commerce Subcommittee on Health:  February 2 hearing, “Patient Relief from Collapsing Health Markets.”

Reporter, Allison Kassir, Washington, D.C., +1 202 626 5600,

Seventh Republican Proposal to Replace the Affordable Care Act Is Introduced, “Patient Freedom Act of 2017” – On January 23, 2017, Senate Republicans Bill Cassidy, M.D. (LA), Susan Collins (ME), Shelley Moore Capito (WV) and Johnny Isakson (GA) introduced the legislative text for the Patient Freedom Act of 2017, a proposed replacement plan for the ACA that would allow states to either maintain key aspects of the ACA or adopt market-based alternatives.  The Patient Freedom Act of 2017 marks the seventh proposal from Republicans to replace the ACA and more are expected to be put forward over the coming weeks. 

The Senators who introduced this latest bill promise to return healthcare decisions to the states and individuals by repealing federal mandates requiring individuals and business owners to buy insurance under Title I of the ACA.  The proposal would retain, however, popular consumer protections such as prohibitions on annual and lifetime limits, prohibition of pre-existing condition exclusions, and prohibitions on discrimination.  The bill preserves the following provisions, which are also preserved in certain of the other Republican proposals: guaranteed issue and renewability; coverage of young adults on their parents’ plan until age 26; and coverage for mental health and substance use disorders.

After the bill was unveiled, Sen. Collins emphasized that the plan is “still a work in progress” but the intent is to let states decide whether they want to continue with the current system of state and federal insurance exchanges, new state-run marketplaces with health savings accounts funded with tax credits, or no federal funding at all.

More specifically, the bill repeals Title I of the ACA (covering employee and individual mandates) and offers states to select from one of the following three options in structuring their insurance markets:

  • Reimplementation of the ACA:  Under Option 1, states can choose to reinstate Title I to recreate the ACA, including its mandates and other requirements.  The state can continue to receive federal premium tax credits, cost-sharing subsidies, and Medicaid funds, provided that these subsidies do not exceed the contributions that would have been made under Option 2 below.
  • Adopt a New State Alternative:  Option 2 allows states to adopt a market-based health insurance system using federally-funded Roth Health Savings Accounts (HSA).  This option provides financial assistance to qualifying residents not receiving health insurance through their employer or public programs like Medicare or Medicaid by providing a high deductible health plan and a basic pharmacy plan to individuals with a HSA.  As for funding, a state could continue to receive the same level of funding it would have received under the ACA if 95 percent of those eligible for subsidies enroll.  If states have already expanded Medicaid, the state can choose to continue with the Medicaid expansion or convert that funding into subsidies to assist individuals with purchasing private insurance.  States will be able to auto-enroll uninsured individuals in basic health care coverage unless that individual opts out. 
  • Design an Alternative Solution without Federal Assistance:  Option 3 allows states to design and regulate insurance markets without any federal assistance.

States may change their election at any time, and states that do not select an option within one year of enactment are automatically assumed to have elected Option 2.

The full legislative text of the Patient Freedom Act of 2017 is available here, a brief summary of the proposal is available here, and a breakdown of each section is available here.

Please also refer to today’s Health Headline on “Transition Update,  ACA Repeal and Replace, and Look Ahead” for other recent legislative developments.

Reporter, Juliet M. McBride, Houston, +1 713 276 7448,

Federal Court Blocks Aetna, Humana Merger – On January 23, 2017, the United States District Court for the District of Columbia granted the Department of Justice, Antitrust Division’s (DOJ) request for an injunction to block Aetna Inc.’s (Aetna) proposed acquisition of Humana Inc. (Humana) for $37 billion.  The court held that allowing the merger to move forward would reduce competition for Medicare Advantage plans in 364 counties and in public exchanges in certain counties in Florida.  The court’s opinion is available here

Last summer, the DOJ challenged the proposed merger between Aetna and Humana, alleging that the transaction would lead to higher health insurance prices, reduce benefits for consumers, and stifle innovation.  The DOJ’s challenge was joined by the District of Columbia and eight states: Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania, and Virginia.  Arguments at trial focused on the appropriate product market definition, with Aetna claiming that Medicare Advantage should be considered in the same product market, and therefore competitive with, traditional Medicare.  The court disagreed, finding that Medicare Advantage was a separate market, because traditional Medicare was not a sufficiently close substitute for Medicare Advantage plans.  According to the court, because Aetna and Humana have a significant share of, and are close competitors in, the Medicare Advantage market, the merger would have had an anticompetitive effect. 

The court’s opinion also addressed Aetna’s decision to pull out of the Affordable Care Act health insurance marketplace exchanges in seventeen counties.  Aetna claimed to have withdrawn from the exchanges for business reasons so it could not be considered a competitor of Humana in those markets, but the court determined that Aetna withdrew from those particular market to improve its position in litigation.  The court held that Aetna would likely offer plans on the exchanges in only three complaint counties in Florida in 2018 and beyond, and the merger would lessen competition in those counties.

Aetna has sixty days from the date of the court’s decision to file an appeal.  However, the merger agreement between Aetna and Humana expires on February 15, 2017.  Pursuant to the terms of the agreement, Aetna will owe Humana a payment of $1 billion if the merger agreement expires.  For further analysis of the decision, see King & Spalding’s Client Alert available here.

The DOJ has also challenged the proposed $54 billion merger between Anthem Inc. and Cigna Corp.  The trial in United States et al. v. Anthem, Inc. et al., Case No. 1:16-cv-01493, has concluded and is awaiting judgment. 

Reporter, Paige Fillingame, Houston, +1 713 615 7632,

District Court Dismisses FCA Allegations Based Upon Difference of Medical Opinion This month, the United States District Court for the District of Utah dismissed a relator’s allegations that a cardiac surgeon and two hospitals based in Utah violated the federal False Claims Act (FCA) by billing Medicare and Medicaid for thousands of heart procedures that were medically unnecessary. The court ruled that the relator could not rely on a subjective difference of medical opinion to establish that the procedures were medically unnecessary.

The procedure in question was a patent foramen ovale (PFO) closure, whereby a surgeon closes a small opening in the wall of the heart. The opening, which is present in about 25 percent of the population, is usually asymptomatic but can sometimes lead to stroke. The American Heart Association (AHA) recommends a PFO closure for patients suffering from recurring cryptogenic stroke. Defendant Dr. Sherman Sorenson allegedly performed thousands of PFO closures, at a rate much higher than other physicians, based on his opinion that patients with an elevated risk of stroke should undergo the procedure as a preventative measure.

The relator, Dr. Gerald Polukoff, asserted that Dr. Sorenson and the two Utah-based hospitals where he performed the procedures violated the FCA by billing Medicare and Medicaid for thousands of medically unnecessary PFO closures. Dr. Polukoff relied heavily on the AHA standards to support his claims that the procedures were not medically necessary. The court, in an opinion granting defendants’ motions to dismiss, rejected the relator’s argument and explained that “opinions, medical judgments, and conclusions about which reasonable minds may differ cannot be false” for purposes of the FCA. The court reasoned that equating the AHA standard with Medicare’s standard of medical necessity is a false equivalence, since Medicare does not require compliance with industry standards. The government did not intervene in the case.

In a related development, Secretary of HHS nominee Rep. Tom Price (R-GA) recently weighed in on the issue of medical necessity audits. Testifying before the Senate Finance Committee last week, Rep. Price suggested that regulators should focus on monitoring billing in real time—likely a reference to data mining—rather than “trying to determine whether every single incident of care is necessary.”

The case is United States, ex rel. Polukoff v. St. Mark's Hosp., No. 2:16-cv-00304 (D. Utah, Jan. 19, 2017). Please click here for a copy of the court’s opinion.

Reporter, J. Gardner Armsby, Atlanta, +1 404 572 2760,

Healthcare Companies Call On Trump To Promote Value-Added Healthcare – Over 100 health care companies – including providers, insurers, biopharmaceutical companies, professional associations and consumer groups – joined to write the Trump administration to urge him to “continue focusing on value-based, patient-centered payment models that incent healthcare innovation.”  The letter, available here, stressed that “through private and public sector alignment, the move toward value-based care is succeeding, measurably improving healthcare quality and contributing to historically low costs.”  Now, they say, “is not the time for policymakers to signal a shift away from value-based care. . . .” 

According to the authors of the letter, the move towards value-based healthcare delivery system has been spurred by nearly 20 years of bipartisan leadership.  This move is important because the 50-year old fee-for-service system currently in place has grown extraordinarily complex, and this complexity blocks the efforts providers have been making “to measurably improve quality, reduce costs and take accountability for populations of patients.” 

The consortium who joined together in signing the letter “share a vision for a modernized, sustainable healthcare system based on” principles that include (1) empowering and engaging patients to make better, more informed healthcare decisions, (2) developing relevant and consistent measures of provider performance, and (3) using “payment models that promote collaborative financial and care coordination arrangements using incentives that align payers, healthcare providers, providers of long-term care services and clinicians.” 

The letter is signed by many key players in the healthcare field, including Aetna, Blue Cross Blue Shield, and Anthem; hospital providers; and numerous professional associations, including the AHA, the American Medical Association, the American Pharmacists Association, and the American Society of Anesthesiologists.  The overall goal, as stated in the letter, is to reach a point “where value-based healthcare becomes a sustainable marketplace for generations of Americans to come.” 

Reporter, Scott Cameron, Sacramento, CA, +1 916 321 4807,


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.