News & Insights

Client Alert

October 14, 2019

Health Headlines – October 14, 2019


Major Changes Proposed to Stark Rules, Anti-Kickback Statute Safe Harbors and Beneficiary Inducements CMP:  More Value than Value-Based Arrangements - CMS and OIG released highly anticipated proposed changes to the Stark Law rules, the Anti-Kickback Statute (AKS) safe harbors and the beneficiary inducements provision in the civil monetary penalties law (the Beneficiary Inducement CMP) on October 9, 2019 (the Proposed Rules).  The Proposed Rules address value-based arrangements, propose major changes to other key Stark Law concepts and definitions, address the donation of cybersecurity technology and related services and create more flexibility for providing patient incentives in the context of value-based arrangements and with respect to telehealth.  The Proposed Rules are scheduled to be published in the Federal Register on October 17, 2019, but the display copies of the Proposed Rules are available here and here.  Comments to the Proposed Rules are due by December 31, 2019.  Click here for a Client Alert issued by the King & Spalding Healthcare team that describes the key proposals.  King & Spalding will be hosting a webinar in the coming weeks to discuss these Proposed Rules in more detail.

President Trump Issues Executive Order Limiting Agency Use of Informal Guidance Documents - On October 9, 2019, President Trump issued an Executive Order aimed to curb agencies, such as CMS, from using informal guidance documents as de facto rules that have the binding effect of law.  In a press conference accompanying the Executive Order signing, President Trump called the order necessary to “stop regulators from imposing secret rules.”  The Executive Order, which adds momentum to June’s Supreme Court decision in Azar v. Allina Health Services, has clear implications for many Medicare “statements of policy” that are found in CMS manuals, but have never been subject to notice and comment rulemaking.

Executive Order 13891, entitled “Promoting the Rule of Law Through Improved Agency Guidance Documents” restates a familiar principle of administrative law.  Departments and agencies in the executive branch may adopt regulations that impose legally binding requirements even though Congress is vested with the legislative power.  The Administrative Procedure Act (APA) generally requires agencies to engage in notice-and-comment rulemaking to provide public notice of proposed “legislative,” or “substantive,” regulations, allowing regulated parties an opportunity to comment.  Agencies are then expected to consider and respond to significant comments before publishing final regulations in the Federal Register.  Agencies may also clarify existing obligations through non-binding guidance documents, which the APA exempts from notice-and-comment requirements.

The Executive Order notes, however, “agencies have sometimes used this [clarification] authority inappropriately in attempts to regulate the public without following the rulemaking procedures of the APA.”  It also notes that “[e]ven when accompanied by a disclaimer that it is non-binding, a guidance document issued by an agency may carry the implicit threat of enforcement action if the regulated public does not comply.”  The Executive Order, therefore, sets forth certain requirements that agencies (other than independent agencies) will have to following moving forward.

The Executive Order requires agencies to develop procedural regulations that govern the issuance of guidance documents; those regulations would require the agency to provide notice and an opportunity for comment, and to publish a response to comments, for “significant” guidance documents.  The Executive Order also requires each agency to establish or maintain on its website a “single, searchable, indexed database that contains or links to all guidance documents in effect from such agency or component.” The website is required to “note that guidance documents lack the force and effect of law, except as authorized by law or as incorporated into a contract.”  Additionally, each agency will be required to review its guidance documents and rescind any guidance documents that it determines are no longer in effect. 

For guidance documents issued in the future, the Executive Order requires each document to clearly state that it does not bind the public, except as authorized by law or as incorporated into a contract.  The Executive Order requires procedures for the public to petition the withdrawal or modification of a guidance document.  Significantly, the Executive Order also requires a 30-day period of public notice before the issuance of a final guidance document.  In the context of the Medicare Act, the Supreme Court’s decision in Allina already limited the circumstances in which CMS can avoid the notice-and-comment process before issuing rules affecting reimbursement.  The new Executive Order provides additional safeguards for providers on this score.  

The Executive Order is available here

Reporter Michael L. LaBattaglia, Washington, D.C., +1 202 626 5579, mlabattaglia@kslaw.com.

DOJ Settles False Claims Act Case Against Southern California Ophthalmology Group - On October 4, 2019, the DOJ announced a $6.65 million settlement with a Southern California ophthalmology group, its former CEO, and several physicians, to resolve False Claims Act (FCA) allegations related to fraudulent billing practices.  Under the settlement terms, the defendants paid sums to both the United States and the State of California to settle the case without an admission of liability.

Two former administrators at the ophthalmology group of Retina Institute of California Medical Group (RIC) brought the whistle blower action alleging RIC and the other defendants attempted to boost referrals to the group by waiving Medicare co-payments and deductibles without proper documentation of patients’ financial hardship.  According to the complaint, between January 2006 and August 2017 defendants also intentionally changed billing codes to misclassify exams to increase reimbursements and billed Medicare and Medicaid for services that were never performed, unnecessary, or in violation of applicable rules and regulations. 

The former RIC employees who prosecuted the case on behalf of the government will receive an undisclosed portion of the settlement.  The State of California, United States Attorney’s Office, and OIG all monitored the case.

The case was filed in May 2013 in the U.S. District Court for the Central District of California and is captioned United States, et al., ex rel. Smith and Rogers v. Tom S. Chang, M.D., et al., No. 2:13-cv-03772-DMG-MRW (C.D. Cal.).  The DOJ announcement can be found here.

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

Also in the News

King & Spalding Roundtable: Surprise Billing Laws - King & Spalding will host a webinar on Wednesday, October 16, 2019 from 1:00 P.M. – 2:00 P.M. ET discussing surprise billing laws and what providers should know. This webinar will address:

  • The prevalence, causes, and concerns of surprise medical bills;
  • States that have passed legislation aimed at addressing surprise medical bills;
  • A comparison of the approaches and applications of the state laws;
  • Limitations on the jurisdiction of state laws and the potential effects of federal legislation; and
  • The current status of federal surprise medical bills legislation, what it might look like, and the odds of its successful passage.

Registration for this event is available here.

King & Spalding Will Host 12th Annual Pharmaceutical University in Philadelphia – On November 12, 2019, King & Spalding will host more than 300 guests at its annual Pharmaceutical University at the Westin in Philadelphia.  For more than a decade, attendees of Pharma U have raved about the breadth and quality of the programming and have embraced the many opportunities to network with hundreds of attendees from the world’s most sophisticated pharmaceutical and biotechnology companies.

This year’s curriculum will include four concurrent tracks and more than 20 different interactive presentations from which to choose.  Lawyers from across the firm will deliver courses on cutting-edge issues critical to pharmaceutical and biotechnology lawyers, executives, and managers.  This year’s sessions will address regulatory, enforcement, litigation, commercial, corporate, intellectual property, international trade, and political issues, among many other cutting-edge issues. 

Click here to register.  Registration is $99 per person until Friday, October 18.  Space is limited.  For more information about accommodations, click here.