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Newsletter

March 22, 2021

Health Headlines – March 22, 2021


King & Spalding Insights Into What the Healthcare Industry Can Expect Under the Biden Administration – As the Biden administration has taken the reins during the COVID-19 public health emergency, the healthcare industry remains front and center. Whether the issue is new legislation regarding vaccine administration or regulatory developments pertaining to digital health and price transparency, healthcare providers must remain well-informed of fast-moving developments.  As a service to our clients, King & Spalding offers insight into what to expect under the Biden administration regarding legislative and regulatory developments in the healthcare arena.  King & Spalding’s insights may be found here.

Federal Judge Blocks Implementation of 340B ADR Final Rule – On March 16, 2021, a federal judge issued a preliminary injunction blocking HHS from implementing the 340B administrative dispute resolution final rule (the Final Rule) released in December 2020.  The blocked Final Rule would have created a panel to settle disputes between hospitals and drug manufacturers on issues related to the 340B drug discount program. Judge Sarah Evans Barker of the U.S. District Court for the Southern District of Indiana held that because HHS issued the Final Rule without an additional notice and comment period, HHS failed to follow proper protocols and violated drug manufacturers’ rights.

As previously reported, HRSA issued the Final Rule in December 2020, completing a ten-year rulemaking process and setting forth the administrative dispute resolution (ADR) process for certain disputes regarding the 340B Drug Pricing Program.  In 2010, as part of the Affordable Care Act (ACA), Congress directed HHS to issue regulations establishing an ADR process within 180 days of the ACA’s enactment. After an extended delay, in 2016, HHS issued a Notice of Proposed Rulemaking (the Proposed Rule) and invited comment.  In January 2017, HHS removed the Proposed Rule from its regulatory agenda and, no action took place until HHS issued the Final Rule (published at 85 Fed. Reg. 80,632 and codified at 42 CFR §§ 10.20-24) in December 2020 with no opportunity for additional public comment. The Final Rule is in many respects identical to the proposed rule that was published by HHS in 2016 and withdrawn in 2017.

In January 2021, a drug manufacturer challenged the Final Rule, arguing that HHS violated the manufacturer’s rights and interests by publishing the rule without providing an opportunity for public comment.  HHS argued that no more comment was needed because the agency had never withdrawn the rule.  Judge Barker granted plaintiff’s motion for a preliminary injunction, concluding HHS did not follow the proper protocol in finalizing the Final Rule, and that HHS’s messaging around the ongoing rulemaking was “ambiguous, confusing, duplicitous, and misleading—the antithesis of fair notice under the APA.”

The injunction prevents HHS from implementing or enforcing the Final Rule.  Of note, in January, the Biden administration withdrew appointments to the ADR panel made by the previous HHS Secretary, Alex Azar. The preliminary injunction prevents President Biden’s HHS from filling the panel with its own picks.

The opinion is available here.

Reporter, Alana Broe, Atlanta, +1 404 572 2720, abroe@kslaw.com.

DOJ Files Proposed Settlement to Resolve Challenge to Geisinger Health’s Partial Acquisition of Evangelical Community Hospital – On March 3, 2021, DOJ filed a proposed settlement to resolve its lawsuit challenging Geisinger Health’s (Geisinger) partial acquisition of Evangelical Community Hospital (Evangelical).  DOJ filed a complaint against the two hospital systems (collectively, the Defendants), both located in central Pennsylvania, in August 2020, alleging the partial acquisition agreement (the Agreement) created substantial financial entanglements and reduced the hospitals’ incentives to compete aggressively.

The proposed settlement, which is subject to court approval and public comments under the Tunney Act, mitigates DOJ’s antitrust concerns by imposing several conditions, such as: 

  • Defendants cannot appoint members to one another’s Boards of Directors; 
  • Geisinger’s ownership interest in Evangelical must not exceed 7.5% (down from a 30% interest in Evangelical under the original Agreement terms); 
  • Geisinger must not make any additional financial contribution to Evangelical (Geisinger would have given Evangelical $100 million in exchange for the 30% interest under the original terms of the Agreement);
  • Geisinger must not influence Evangelical’s expenditure of funds; 
  • Geisinger must not influence Evangelical’s decision-making or provide a financial guaranty to Evangelical; and 
  • Defendants must implement firewalls to prevent sharing of competitively sensitive information. 

The proposed settlement allows Evangelical to use funds it already received from Geisinger for certain projects that improve the quality of care in central Pennsylvania.  In addition, Evangelical is permitted to use Geisinger’s electronic medical record systems and related technology.   

This lawsuit signals that DOJ may continue to focus on partial acquisitions or minority interests in the healthcare space. The DOJ press release is available here

Reporters, Norman Armstrong Jr., Washington, D.C., +1 202 626 8979, narmstrong@kslaw.com; and Meaghan Griffith, Washington, D.C., +1 202 626 5412, mgriffith@kslaw.com

HHS Revokes Arkansas and New Hampshire Medicaid Work Requirements – On March 17, 2021, HHS notified Arkansas and New Hampshire officials that it was withdrawing its approval of demonstration projects which had permitted those states to impose work requirements as a condition for eligibility for Medicaid benefits.  These letters appear to be the first time HHS has rescinded an already-approved state demonstration project under Section 1115 of the Social Security Act, which allows the Secretary of HHS to waive certain provisions of the Medicaid Act for states testing new approaches to Medicaid coverage and payment.

Arkansas was one of the first states to implement Medicaid work requirements in 2018.  Under the terms of its demonstration project, some enrollees in the ACA Medicaid expansion population were required to document that they worked or engaged in work-related activities for at least 80 hours per month, unless they reported that they qualified for limited exemptions.  New Hampshire gained approval of a similar project in 2019, requiring all expansion enrollees to work or engage in work-related activities for 100 hours each month or obtain an exemption. 

The Biden administration had previously notified several states (including Arkansas and New Hampshire) on February 12, 2021, that it had begun a process to consider whether to revoke its approval of these demonstration projects.  Additionally, CMS sent letters to states that rescinded a January 4, 2021 letter from then-Administrator Seema Verma, which had purported to impose certain procedural requirements for HHS to follow before revoking an approval of Section 1115 project.  

Litigation over the approval of the Arkansas and New Hampshire projects is pending in the Supreme Court, on review of the D.C. Circuit’s rulings vacating the approvals.  On March 11, 2021, the Supreme Court removed the arguments in these cases from its March calendar.  As previously reported in the March 15, 2021 Health Headlines, the Acting Solicitor General (with the consent of the plaintiffs, but over the opposition of state officials) had requested that the arguments be removed from the calendar and that the D.C. Circuit’s decision be vacated.  The Supreme Court has not yet acted upon the request for vacatur, but the most recent decision by HHS may strengthen the argument that the pending litigation has become moot. 

Arkansas and New Hampshire will have 30 days to appeal the determination before HHS’s Departmental Appeals Board.  HHS’s letter to Arkansas is available here, and HHS’s letter to New Hampshire is available here.

Reporter, Ahsin Azim, Washington, D.C., +1 202 626 9262, aazim@kslaw.com. 

MedPAC Issues Medicare Payment Policy Report to Congress – On March 15, 2021, the Medicare Payment Advisory Commission (MedPAC) released its Medicare Payment Policy report to Congress updating payment recommendations for providers paid under Medicare’s traditional fee-for-service payment systems in nine sectors.  MedPAC unanimously recommended a two-percent increase in the 2021 Medicare base payment rates for acute care hospitals and long-term hospitals and a five-percent decrease for inpatient rehabilitation facility services and home health care services.  MedPAC recommended no change for physician services, ambulatory surgical center services, outpatient dialysis services, skilled nursing facility services, and hospice services.

MedPAC also recommended a policy option for expanded telehealth services after the COVID-19 public health emergency is over.  Under the policy option, policymakers would temporarily continue some aspects of the expanded telehealth services for one to two years while gathering more evidence about the impact of telehealth on access, quality, and cost.  During the temporary continuation period, Medicare would pay for specified telehealth services for all Medicare members regardless of location and, if there is a potential clinical benefit, Medicare would also pay for new services covered since the public health emergency began and audio-only services.  The findings would then inform any permanent changes.

The report explains that in developing its recommendations, MedPAC first assessed the adequacy of Medicare payments for providers in 2021 by considering Medicare members’ access to care, the quality of care, providers’ access to capital, and how Medicare payments compare with providers’ costs.  MedPAC next assessed how those providers’ costs are likely to change in 2022 and made a judgment about what, if any, update is needed.  The report notes that many of the effects of the COVID-19 public health emergency were temporary and best addressed through targeted temporary-funding policies rather than a permanent change to payment rates.

This report fulfills MedPAC’s legislative mandate to evaluate Medicare payment issues and make recommendations to Congress in accordance with the Balanced Budget Act of 1997.  The full report is available here

Reporter, Nicholas Kump, Sacramento, +1 916 321 4817, nkump@kslaw.com.

ALSO IN THE NEWS

HHS Postpones Requirement for Retrospective Reviews of Rules – Last week, the Biden administration delayed the effective date of an HHS rule published on January 19, 2021, the last day of the Trump administration, which would cause most HHS regulations to expire unless they are reviewed at least once every 10 years. The rule, known as the “SUNSET” rule, would give HHS an initial period of five years to review covered regulations over 10 years old, a period which HHS could extend for up to one year. In the original press release announcing the rule, now-former HHS Secretary Alex Azar said that requiring retrospective reviews would deliver “smarter, less burdensome regulations.” The American Hospital Association opposed the SUNSET rule on the grounds that it “does not provide an adequate mechanism for obtaining public input on the substance of the regulations being reviewed.” The HHS notice published last week postpones the effective date from March 22, 2021 to March 22, 2022 and indicates the delay is intended to allow a suit filed earlier this month challenging the rule to proceed.  Plaintiffs in the suit allege, among other things, that the SUNSET rule violates the Administrative Procedure Act. The case is County of Santa Clara v. HHS, Case No. 5:21-cv-01655-BLF (N.D. Cal.).

King & Spalding Webinar Series – The Growing Liability Issues Facing Florida Healthcare Facilities in 2021 –More than 10,000 residents and staff of Florida nursing homes have died from COVID-19. The Florida Legislature is considering limited immunity provisions, but Florida plaintiff lawyers are already working to leverage the weaknesses in any potential legislation. King & Spalding is hosting a series of webinars to discuss what Florida healthcare facilities need to know about the current legal environment at both the state and national levels so they can take appropriate precautions and plan for the coming year. The first installment was Wednesday, March 17 from 12:00 pm ET to 1:00 pm ET and focused on Florida law on COVID-related tort liability. The second installment is Wednesday, March 24 from 12:30 pm ET to 1:30 pm ET and addresses potential COVID-related False Claims Act liability. The third installment is Wednesday, March 31 from 12:00 pm ET to 1:00 pm ET and focuses on post-COVID-19 jury trials. RSVP by emailing Angie Yeary at ayeary@kslaw.com.