News & Insights


March 28, 2022

Health Headlines– March 28, 2022

$413 Million Distributed in Phase 4 Provider Relief Fund Payments—On March 22, 2022, HHS announced that it had distributed more than $413 million in Provider Relief Fund (PRF) payments to more than 3,600 health care providers impacted by the COVID-19 pandemic. HHS directed its disbursement of the fourth round of Phase 4 PRF payments towards smaller providers that had incurred higher percentages of losses during the pandemic. The Phase 4 PRF payments also included bonus payments to providers that serve Medicaid, Children’s Health Insurance Program (CHIP), and Medicare beneficiaries. Health care providers that received Phase 4 PRF payments in the first half of this calendar year will have until June 30, 2023, to use the payments.

With this most recent disbursement of PRF funds, HHS has awarded approximately $19 billion of the $25.5 billion fund that HHS allocated to assist health care providers impacted by the pandemic, which also includes payments made under the American Rescue Plan (ARP) program. Applications for distributions from the PRF opened in September 2021. HHS distributed the first round of ARP Rural payments in November 2021 and the first round of PRF payments in December 2021.

The Health Resources and Services Administration (HRSA), which processes provider applications for both ARP and PRF, estimates that it has now processed 89% of the Phase 4 PRF applications. In its press release, HRSA stated that the remaining PRF applications will require manual review and that it is working to complete this review as soon as possible. HHS has said that it anticipates distributing the remaining funds on a periodic basis through May 2022.

The HHS announcement on this recent payout is available here. Additional information about the PRF is available here.
Reporter, Amy L. O’Neill, Sacramento, CA, +1 916 321 4812,

California DMHC Takes Position that Additional California Law Constitutes “Specified State Law” Under the No Surprises Act– Last week, the California Department of Managed Health Care (DMHC) issued an All-Plan Letter (APL) stating that California case law and the Knox-Keene Health Care Service Plan Act of 1975 (the Knox-Keene Act) constitute “specified state laws” within the meaning of the No Surprises Act. DMHC’s interpretation of California law is a notable expansion of the scope of California specified state law identified in CMS’s letter published earlier this year. DMHC confirmed this interpretation with CMS and it is expected that CMS will issue an updated letter providing guidance on the interaction between the federal No Surprises Act and the expanded scope of California’s specified state laws.

The No Surprises Act limits a provider’s ability to balance bill consumers in certain nonemergency, emergency, and air ambulance situations and sets forth guidelines for enrollee cost-sharing, dispute resolution, and provider reimbursement. However, the No Surprises Act defers to states when the state has a “specified state law” that addresses the same topics. CMS has previously issued several state-specific letters detailing how certain provisions of the No Surprises Act interact with state law, including California law, where CMS indicated that California only had a state law that applied to non-emergency services provided by an out-of-network provider at an in-network facility.
In this recent APL, DMHC clarifies whether California has a specified state law in three situations: (1) a non-contracted provider providing non-emergency services at a contracted facility; (2) an out-of-network provider providing emergency services; and (3) a non-contracted provider providing air ambulance services.

Non-Contracted Provider Providing Non-Emergency Services at a Contracted Facility

DMHC confirmed that the laws enacted by AB 72 are specified state laws that apply when a non-contracted provider provides non-emergency services at a contracted facility in California. Under AB 72, the out-of-network reimbursement rate must be greater than the average contracted rate or 125% of Medicare. The specified state law also limits the enrollee’s cost-sharing amount to his or her in-network rate. Furthermore, California’s definition of in-network facilities is broader than the No Surprises Act and encompasses not only hospitals and ambulatory surgery centers, but also radiology and imaging centers, and other outpatient centers. Provider-plan disputes governing these services are to be resolved using DMHC’s Independent Dispute Resolution Process instead of the federal No Surprises Act dispute resolution mechanism.

Out-of-Network Provider Providing Emergency Services

DMHC states that California case law and Knox-Keene Act provisions governing balance billing enrollees for out-of-network emergency services including post-stabilization services are specified state laws. This means that DMHC-licensed plans must continue to comply with California laws regarding out-of-network balance billing, cost-sharing, dispute resolution, and provider reimbursement. 

Non-Contracted Provider Providing Air Ambulance Services

DMHC confirmed that California does not have a specified state law for non-contracted providers providing air ambulance services.

Other states are also broadening the scope of their current specified state laws and may be updating their submissions to CMS. With the rapidly changing movement in the state and federal landscape, providers should frequently check state and federal legislation and guidance.

The DMHC APL is available here. If you are interested in learning more about joining King & Spalding’s Price Transparency and Surprise Billing Group, please contact Amanda Hayes-Kibreab (
Reporter, Taylor Whitten, Sacramento, +1 916 321 4815,

OIG Declines to Impose Sanctions Against Device Manufacturer’s Medicare Cost-Sharing Subsidy in Clinical Trial –On March 11, 2022, OIG issued Advisory Opinion No. 22-05 in which it responded to a request for an advisory opinion regarding a proposed subsidization of certain   cost-sharing obligations in the context of a clinical trial (Proposed Arrangement) submitted by a device manufacturer (Requestor). As discussed in further detail below, OIG determined that the Proposed Arrangement could generate prohibited remuneration under the federal Anti-Kickback Statute (AKS) and the beneficiary inducement provision of the Civil Monetary Penalties Law. However, OIG ultimately concluded that it would not impose administrative sanctions upon Requestor because the Proposed Arrangement presents a low risk of fraud and abuse.

Factual Background

Requestor manufactures an investigational therapy that uses a patient’s own cells for the treatment of ischemic systolic heart failure (Therapy) and is the sponsor of a clinical trial designed to determine the safety and efficacy of the Therapy in patients with ischemic systolic heart failure (Study).

Under the Proposed Arrangement, Requestor would pay cost-sharing obligations that Medicare beneficiaries participating in the Study otherwise would owe for Medicare-reimbursable items and services provided during the Study. Requestor would pay the cost-sharing amounts directly to the institution to which the subject otherwise would owe the amount. As a result of these subsidies, Requestor asserts that Medicare beneficiaries would incur no out-of-pocket expenses relating to their participation in the Study, other than meeting any unmet Part B deductible amounts. Requestor proposes these cost-sharing subsidies to: (i) reduce financial barriers to enrollment in the Study and reduce attrition of subjects during the two-year course of the Study; (ii) facilitate socioeconomic diversity of Study subjects; and (iii) preserve blinding of subjects.

Requestor certified that it would not advertise the existence of the availability of cost-sharing subsidies to prospective subjects. Information about the subsidies would be included in the informed consent documents provided to each subject, which is where most subjects would learn of them.

Legal Analysis

OIG determined that the Proposed Arrangement could generate prohibited remuneration under the AKS and the beneficiary inducement provision of the Civil Monetary Penalties Law. However, OIG stated that it would not impose administrative sanctions on Requestor in connection with the Proposed Arrangement because it presents a minimal risk of fraud and abuse. In coming to this conclusion, OIG relied upon the following factors:

  • The Proposed Arrangement is a reasonable means of promoting enrollment, particularly where 40% of participating beneficiaries would not have the potential to receive any therapeutic benefit during the Study.

  • The Proposed Arrangement would not be advertised, which reduces risks typically associated with cost-sharing waivers, such as over-utilization and inappropriate steering.

  • CMS approved the Study as a Category B IDE study, meaning CMS evaluated the study and determined that it meets criteria to ensure appropriate patient protections and that the study design is appropriate to answer questions of importance to the Medicare program and its beneficiaries. Given this determination by CMS, it appears unlikely that the Proposed Arrangement would result in overutilization or inappropriate utilization of Federal health care program items and services.

  • The Proposed Arrangement is distinguishable from problematic seeding arrangements (e.g., an arrangement in which manufacturers initially offer subsidies to lock in future utilization of a reimbursable item or service) because the Requestor would only provide cost-sharing subsidies relating to one course of treatment using the Therapy and related services during the Study.

As is typical, OIG stated that Advisory Opinion No. 22-05 is limited in scope to the Proposed Arrangement. However, this opinion provides guidance as to how OIG might respond to similar requests. The OIG Opinion is available here.

Reporter, Michelle Huntsman, Houston, +1 713 751 3211,

District Court Enjoins Montana State Statute Which Prohibits Healthcare Providers from Denying Employment Based on a Person’s Lack of COVID-19 Vaccination – On March 18, 2022, a group of providers successfully obtained a preliminary injunction to stop enforcement of a Montana statute that prohibits employers, including healthcare providers, from compelling their employees to disclose their vaccination status or otherwise take any adverse employment action based on any refusal to provide this information.

CMS has issued a final rule that makes it a condition of participation under Medicare that healthcare providers must ensure that their covered staff have been fully vaccinated from COVID-19 or otherwise qualify for a religious or medical exemption. Montana state law prohibits employers, including healthcare providers, from denying goods, services, or employment based on a person’s lack of COVID-19 vaccination. The Montana law in question allows employers to ask employees if they have been vaccinated but does not allow them to take any adverse action against an employee that chooses not to respond or to provide the requested information.

In Montana Medical Association v. Knudsen, the healthcare providers argued that the Montana statute makes it nearly impossible for them to comply with the CMS regulation, possibly jeopardizing their compliance and participation in the Medicare and Medicaid programs. The providers also claimed they would suffer irreparable harm due to this conflict between federal and state law and the prospect of having to violate one of the applicable legal regimes.

The federal district court for the District of Montana granted plaintiffs’ request for a preliminary injunction, finding that the federal regulation likely preempts the Montana state law. The district court noted: “While these two purposes are not inherently irreconcilable, the current codification of the state's attempt to elevate individual privacy rights above all other rights is likely to be superseded by the clear purpose evinced in the Interim Final Rule.” In granting the preliminary injunction, the district court also determined that the plaintiff providers are likely to suffer irreparable harm in the absence of immediate relief because they may risk termination from the Medicaid and Medicare programs for not being in compliance with the interim final rule, and that the balance of the equities and the public interest weigh in favor of an injunction. The district court did place limits on the scope of the preliminary injunction, finding that the Montana law was enjoined as to healthcare providers only so long as the CMS vaccine mandate is in effect.

All this comes on the heels of the U.S. Supreme Court’s determination that CMS did not exceed its authority in adopting the vaccine mandate, and current CMS guidance requires that facilities show they have policies and procedures ensuring covered staff are vaccinated or have a pending request for an exemption.
The district court’s Opinion is available here.
Reporter, Dominic Nunneri, Los Angeles, +1 213 443 4329,


King & Spalding Webinar: Data Governance in Healthcare
On April 6, 2022, at 1:00 PM ET, King & Spalding will be hosting a roundtable webinar exploring the importance of implementing and maintaining a robust data governance program in the healthcare environment. Topics for discussion will include:

  • Key elements of a data governance program;

  • How data governance helps reduce organizational costs while increasing regulatory compliance and optimizing efficiencies and data integrity;

  • Potential risks related to a lack of data governance; and

  • Oversight and enforcement activities are related to data governance.

The presenters include Andi Bosshart, Tamra Moore, and Lori Burton. To register for the event, click here.   

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