In an advisory opinion posted November 10, 2021 (AO 21-15), the Office of the Inspector General of the United States Department of Health and Human Services (OIG) appeared to soften a disturbing position that it had taken in 2012 regarding the employment safe harbor.

The issue is the breadth of the employment safe harbor, which is also specifically included in the Federal Anti-Kickback Statute (AKS) as a statutory exception.  In Advisory Opinion 12-06 (AO 12-06), the OIG confronted referring physicians attempting to profit from anesthesiology services.  Without going into the details of that complicated opinion, AO 12-06 evaluated a situation where a new entity was created (owned by the referring physicians’ professional entity) that would employ or contract with anesthesiologists to provide services at the ASC.  The OIG noted that, “neither the employment safe harbor nor the personal services and management contracts safe harbor would protect the remuneration” reflected in the distribution of profit generated by the employees to the owners of the practice.  This statement effectively meant that the OIG had largely eviscerated the employment and personal services safe harbors because those safe harbors would only apply where the referring employer or contractor did not potentially profit from the employment or contract.  But this is almost never the intent, and in fact, failure to profit might itself raise FMV and commercial reasonableness issues.  It is also difficult to imagine that Congress, in adding the statutory exception to the AKS, meant it only to apply where the referring employer did not anticipate a profit.

In its recently-published AO 21-15, the OIG cleared the air a bit.  It blessed the employment of a CRNA to provide anesthesia services to a pain management practice, while aware that the practice would likely profit off its referrals to the CRNA as a result of the CRNA’s assignment of its billing rights.  The OIG first noted that it continues to maintain that the employment safe harbor does not protect the distribution of profits to referring shareholders related to the employment.  However, the OIG noted that bona fide employment in which a professional reassigns billing rights in exchange for compensation is “a commonplace practice in the health care industry, explicitly authorized by … the Medicare program.”  Since at issue was a “straightforward employment agreement” where the employer “assumes certain duties that may be typical of an employer and where … the CRNA is a bona fide employee,” the OIG deemed the employment to present a low risk of abuse and approved the relationship.

While it is disappointing that the OIG continues to argue that the employment exception does not protect a standard and accepted component of health care employment, it appears that the OIG is aware of the problems its position creates.  Its new position accepts bona fide employment despite the profit to be generated for the CRNA’s employer based on the CRNA’s referrals.

Earlier this month, the Centers for Medicare and Medicaid Services (CMS) released its final rules for the 2022 Medicare Physician Fee Schedule (PFS Final Rule) and 2022 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System (OPPS Final Rule).  Both rules take effect January 1, 2022.  This post is the first in a series covering the myriad Medicare-related changes set forth in those rules.  We turn first to an area addressed extensively in the PFS Final Rule—the amendments to the Physician Self-Referral Law (Stark Law) regulations.

Those amendments correct inadvertent omissions in a previous CMS rulemaking and clarify the reach of the prohibition related to “indirect compensation arrangements.”  As the tale unfolded, within a matter of months of publishing its Modernizing and Clarifying the Physician Self-Referral Regulations Final Rule (MCR Final Rule), which went into effect January 19, 2021, and which made significant changes to the Stark Law, CMS identified certain crucial omissions related to the regulatory calculus for analyzing indirect compensation arrangements, and sought to correct those oversights through its 2022 Medicare Physician Fee Schedule Proposed Rule (PFS Proposed Rule).  85 Fed. Reg. 77492 (Dec. 2, 2020); 86 Fed. Reg. 39104 (July 23, 2021).  After a short notice-and-comment period, on November 2, 2021, CMS announced that it had taken care of the issues through the PFS Final Rule, which is scheduled to be published in the Federal Register on November 19, 2021.

As explained in more detail below, the import of the PFS Final Rule for physicians, their immediate family members, and entities furnishing designated health services (DHS) is that, while indirect compensation arrangements still must satisfy the requirements of an applicable exception to avoid the Stark Law’s referral and billing prohibitions, the number of indirect compensation arrangements subject to those prohibitions, currently enforceable under the law set forth in the MCR Final Rule, is now reduced.  More specifically, CMS’s corrections to that rule ultimately reduce the number of arrangements that satisfy the definition of “indirect compensation arrangement” and, thus, decrease the number of arrangements that fall within the prohibitions’ purview.  To CMS’s credit, the changes appear to be consistent with its long-standing policy of ensuring program integrity against the risk of program or patient abuse.  To better understand the significance of CMS’s clarifications, we provide a chronological-based history of the amendments to the definition of “indirect compensation arrangement.”

Continue Reading CMS Corrects Inadvertent Omissions in Recent Stark Law Regulatory Amendments, Clarifies Reach of the Prohibition Related to Indirect Compensation Arrangements

This post reviews Part II of the federal No Surprises Act regulations.  In previous publications, we have commented upon the No Surprises Act, and Part I of the regulations.

The “Requirements Related to Surprise Billing; Part II” (the “Part II Rule”), published on October 7, 2021, is the second interim final rule (IFR) implementing the No Surprises Act, following a prior No Surprises Act IFR (the “Part I Rule”) published on July 13, 2021.  Both of these regulations are generally set to take effect on January 1, 2022.

In this post, we outline how the Part II Rule addresses: (A) the independent dispute resolution (IDR) and open negotiation processes for health plans and other payers (“Plans”), (B) patient-provider dispute resolution processes for uninsured individuals, and (C) the expansion of the federal external review provisions of the Affordable Care Act to cover disputes regarding the application of the No Surprises Act.

Continue Reading The Devil may be in the Details of the Part II No Surprises Act IFR

In the last few years, we have seen an uptick in behavioral health groups focused on psychedelic treatments.  There are now at least five (5) psychedelic-assisted therapy platforms traded on NASDAQ with numerous others listed on the Toronto Stock Exchange and elsewhere.[1]  Ketamine treatments, in particular, have garnered considerable attention from patients, providers and investors.   Treatment models range from more traditional psychotherapy and infusion services similar to those offered by Columbia University[2] to telemedicine-enabled psychotherapy coupled with mail-delivered tablets of ketamine under the Mindbloom model.[3]  However, despite the growth in adoption, Ketamine remains a controlled substance and ketamine behavioral health remains an industry with material regulatory risks.

We have set forth certain key considerations for various stakeholders involved with ketamine behavioral health. Continue Reading Key Legal Considerations Relating to Ketamine Behavioral Health Platforms

Although the COVID-19 pandemic is still active worldwide, health care industry leaders and regulators have already begun to think about how to implement post-pandemic changes to health care delivery based on lessons learned during the global emergency of the past year and a half. We have reported on some such post-pandemic changes to the health care industry in previous blog posts. For instance, some temporary solutions to challenges presented by COVID-19 are being made permanent due to their proven efficiency or effectiveness. The expansion of telehealth is a primary example of this. We have seen the Centers for Medicare and Medicaid Services (“CMS”), as well as state governors and legislators, expand and extend certain regulatory waivers that were initially designed as temporary solutions to allow for greater access to patient care during the pandemic, but that are becoming permanent fixtures due to their usefulness in innovative patient care delivery generally.

Other post-pandemic changes to the health care delivery landscape will be borne out of sheer necessity rather than innovation. Continue Reading Lessons from the COVID-19 Pandemic: Planning for Disaster Preparedness and Emergency Management in Hospitals

As discussed in a prior blog post, in May of this year, the Department of Justice (DOJ), through its Fraud Section and in conjunction with the Center for Program Integrity, Centers for Medicare & Medicaid Services (CPI/CMS), began prosecuting defendants who were alleged to have perpetrated a variety of COVID-19-related scams on federal healthcare programs.  On September 17, 2021, the DOJ’s Health Care Fraud Unit, in coordination with its Health Care Fraud and Appalachian Regional Prescription Opioid Strike Force, the Department of Health and Human Services Office of Inspector General (HHS-OIG), the Federal Bureau of Investigation (FBI) and the Drug Enforcement Agency (DEA), announced a new wave of enforcement actions against 138 individuals, including 42 licensed medical professionals, alleged to have participated in health care schemes that resulted in $1.4 billion in alleged losses.

Continue Reading DOJ’s National Rapid Response Task Force Strikes Again: New Wave of Enforcement Actions Target Fraudulent Schemes

Over the past few weeks, we have covered recent updates to the False Claims Act (“FCA”), first discussing the recent recension of the “Brand Memo” and the resulting restoration of the Department of Justice’s willingness to use sub-regulatory guidance to bring FCA enforcement actions. In our second post, we outlined S.B. 2428’s proposal to shift the burden of proving materiality to defendants, provide for discovery reimbursement, address deference standards in motions to dismiss brought by the government in qui tam complaints, and extend whistleblower anti-retaliation protections. In this final post of our three-part series, we close out our discussion of the FCA with a review of a recent Seventh Circuit decision endorsing the use of an “objective reasonableness” defense in litigation brought under the FCA. We also highlight other recent court activity affecting enforcement of the FCA. Continue Reading False Claims Act Spotlight (3 of 3): Changing Landscape of the FCA in the Courts

This is the second installment in our series of posts covering recent developments in False Claims Act (“FCA”) doctrine and practice, with the first post discussing the rescission of the “Brand Memo” and restoring the role of sub-regulatory guidance in FCA enforcement actions. A third post, to come later this week, will address recent federal court cases construing the FCA.

In July 2021, Senator Chuck Grassley led a bipartisan group of senators in introducing S.B. 2428, the “False Claims Amendments Act of 2021,” which aims to address legal developments in FCA doctrine that, according to the bill’s sponsors, made it “more difficult for plaintiffs and whistleblowers to succeed in lawsuits against government contractors engaged in fraud.” S.B. 2428 proposes amendments to the FCA in four key areas more fully described below:

  • to shift the burden to defendants to disprove plaintiffs’ showing of materiality of alleged FCA misconduct;
  • to provide a means by which the government can seek reimbursement for costs incurred for responding to burdensome discovery requests;
  • to resolve a Circuit Court split regarding the appropriate standard of review for evaluating government’s (c)(2)(A) motions to dismiss qui tam complaints; and
  • to extend the FCA’s anti-retaliation whistleblower protections.

Continue Reading False Claims Act Spotlight (2 of 3): Recent Proposed Amendments to the FCA Fall Short of Cohesive and Substantive Change

In a FAQ published on August 20, 2021, the Departments of Labor, Health and Human Services, and the Treasury (collectively, the “Departments”) significantly delayed implementation of statutory requirements on surprise billing and price transparency, which we had previously summarized in a series of blog posts throughout this past year:

Specifically, the FAQs focus on the implementation of certain provisions of the Affordable Care Act’s (the “ACA’s”) Transparency in Coverage Final Rules (the “TiC Final Rules”) and certain provisions of title I (the No Surprises Act) and title II (Transparency) of Division BB of the Consolidated Appropriations Act, 2021 (the “CAA”). Continue Reading The Surprises Continue: The Biden Administration Delays Implementation of Certain Provisions of the No Surprises Act and Transparency in Coverage Final Rules Applicable to Providers and Insurers

The False Claims Act (“FCA”) is a punitive civil statute that acts as the federal government’s primary tool for combatting fraud in government health care programs, such as Medicare, Medicaid, and Tricare. In fiscal year 2020 alone, the Department of Justice (“DOJ”) obtained more than $2.2 billion in FCA settlements and judgments (not including potential recoveries from pending cases or ongoing negotiations); the largest of these many recoveries came in the health care and pharmaceutical sectors, with several recoveries totaling over $100 million each.

Given the frequency of FCA application in the health care context, and despite this vast body of law and commentary spanning more than a century and a half since the FCA’s inception, novel applications and interpretations of the law still arise, especially as the health care industry evolves and new modes of payment and care delivery come to the fore. In 2021, the FCA has once again been the focal point of government attention, with a DOJ memorandum, proposed federal legislation, and recent federal court decisions adding new context and authority to guide future applications of the law.

This post is the first of three covering recent FCA updates, and in it we discuss the re-emergence of federal guidance as a tool in the belt of the DOJ in enforcing the FCA. Continue Reading False Claims Act Spotlight (1 of 3): Sub-Regulatory Guidance Subjugated No More in FCA Enforcement Actions