Health Law & Policy Matters

Health Care Attorneys | Mintz Levin Law Firm

Keep the Benefit of the Bargain – Reps and Warranties Survival in Healthcare Deals

Posted in Mergers, Acquisitions & Other Transactions

Written by: Rachel Irving Pitts

In recent healthcare mergers and acquisitions, we have seen the parties increasingly focus on the survival length of the representations and warranties in the purchase agreements.  More often than not, sellers are looking to reduce the survival time period for “reps and warranties” so they can move forward after the deal is done without those specific promises hanging over their head, while buyers are interested in a longer survival to be sure they can bring a claim for a breach of seller’s reps and warranties.  My colleague Gregory Fine has published an Alert, detailing how parties often negotiate different survival periods for reps and warranties on general business condition, governmental matters, and “special” or “fundamental” items like capitalization and good standing.

As the Alert advises, despite the parties’ intent, the longer survival periods may not be enforced due to a state’s application of varying statutes of limitations. In healthcare deals, where breaches of compliance reps and warranties can mean significant losses for a buyer—particularly where the buyer may be subject to successor liability—a buyer doesn’t want to discover a breach of a seller’s rep or warranty, only to find that it will not receive the benefit of the bargain it struck because the statute of limitations pre-empted the negotiated survival period.  Luckily, there are tools that can help mitigate these issues—some of which are described in their Alert, like careful jurisdiction selection and drafting. In addition, awareness of these issues while negotiating and drafting purchase agreements during the deal can help prevent unwelcome surprises down the road.

 

 

Charting the Future of Premium Subsidies under the Affordable Care Act: Halbig v. Burwell and King v. Burwell

Posted in Health Care Reform

Written by: Stephen M. Weiner, Alden J. Bianchi, and Roy M. Albert

On July 22, 2014, two federal appellate courts issued conflicting decisions, within hours of each other, regarding the IRS final rule published on May 23, 2012 (the “IRS Rule”), intended to implement the exchange-related tax credit provisions of the Affordable Care Act (“ACA” or the “Act”).  The decisions will likely lead to another Supreme Court decision addressing fundamental provisions of the ACA.  How these issues are reconciled and resolved will affect the further implementation of Obamacare, and even whether its core policies will survive.

Background

ACA Section 1401 provides for tax credits for eligible taxpayers purchasing insurance “through an Exchange established by the State under [ACA Section 1311]” (emphasis added). ACA Section 1311 directs the states to establish health insurance exchanges. It does not refer to federally-facilitated exchanges. Under ACA Section 1321, if a state does not elect to create an exchange that meets federal requirements, the federal government will “establish and operate” one in that state.  Currently 16 states and the District of Columbia have established their own exchanges.  Thirty-four states rely on federally-facilitated exchanges.  The IRS Rule authorized tax credits for insurance purchased on both the state and the federally-facilitated exchanges.

The Decisions

Both decisions addressed whether tax credits are available for residents in the 34 states that have federally-facilitated exchanges.  The District of Columbia Court of Appeals (the “D.C. Circuit”), in Halbig v. Burwell, said “no”; the Fourth Circuit Court of Appeals (the “Fourth Circuit”), in King v. Burwell, said “yes.”  The decisions turned on readings of the relevant statutory language and application of the principles set out in the 1984 Supreme Court case, Chevron U.S.A. v. NRDC.

The Chevron test is used to assess whether agency action, in this case the IRS, is within the scope of the agency’s authorization, in this case the authority granted by the ACA.  The Chevron test has two prongs:

  • First, has Congress “directly spoken to the precise question at issue?  If the intent of Congress is clear, that is the end of the analysis; for the court as well as the agency must give effect to the unambiguously expressed intent of Congress.”
  • Second, “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”

The D.C. Circuit relied principally on the first prong, concluding that the governing language, the specific language of Section 1401, was unambiguous: the IRS cannot provide for tax credits in conjunction with federally-facilitated exchanges.

The Fourth Circuit, weighing the conflicting arguments put forth by both parties and looking at Section 1401 in a broader context, concluded there was ambiguity in a very complex statute, and so it moved on to the second prong of the Chevron test: whether the IRS Rule was based on “a permissible construction of the statute.”  This review standard, the Fourth Circuit noted, is highly deferential, with a presumption in favor of finding the agency action valid.  Under this prong, in concluding that the IRS Rule should be upheld, the Fourth Circuit was “primarily persuaded by the IRS Rule’s advancement of the broad policy goals” of the ACA: a major overhaul of the entire health insurance market in the US, for which the individual mandate and the tax subsidies are integral.  Further, the court noted that the IRS Rule took on even greater importance in light of the number of states that chose not to establish their own exchanges.

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ML Strategies Posts Weekly Health Care Update on July 21, 2014

Posted in Health Care Reform, Payors & PBMs

ML Strategies has posted its weekly Health Care Update.  This publication provides timely information on implementation of the Affordable Care Act, Congressional initiatives affecting the health care industry, and federal and state health regulatory developments.

Last week, the Department of Labor issued the first, of what we expect to be at least a few, regulations following the Hobby Lobby case.  Also of note, the House Energy and Commerce Committee passed seven public health bills and the HHS Office of the National Coordinator released a study on the potential safety risks for Electronic Health Records.

Click here to read this week’s Health Care Update.

New Massachusetts Law Targets Self-Referrals of Clinical Laboratory Services

Posted in Clinical Laboratories, Fraud & Abuse, State & Federal Audits, Investigations & Litigation

The Fiscal Year 2015 budget for the Commonwealth of Massachusetts, which was signed into law earlier in the week, included a broad prohibition on clinical laboratory self-referrals.  This legislation (the “Bill”) originally proposed by the Attorney General’s office was intended to combat self-referral arrangements between clinical laboratories and sober houses under common ownership, but it extends beyond such relationships to prohibit referrals between clinical laboratories and any person or company with a direct or indirect ownership interest in the laboratory and vice versa (with a number of notable exceptions). Continue Reading

Changes in Breach Notification Risk Assessments Under HIPAA

Posted in Privacy & Security/HIPAA/HITECH

The American Bar Association Health Law Section’s July 2014 eSource publication includes an article by Dianne Bourque, Kimberly Gold, and me that provides examples of how risk assessments under the Breach Notification Rule have changed since the HIPAA Omnibus Rule went into effect in September 2013.   The examples analyzed in this article involve two situations that often stymie health care providers:  1) appropriate disclosures to law enforcement and 2) sending appointment reminders to patients.

Covered entities and business associates having difficulty distinguishing the old “harm standard” and the new Omnibus Rule analysis should understand that the latter clearly imposes a rebuttable presumption that a breach of protected health information will require notification to affected individuals and the government, except under narrow circumstances.  As the article concludes, “striking a balance between an inquiry that meets the risk assessment’s requirements but that minimizes the over-reporting of breaches will be a challenge that covered entities and business associates will need to address” for years to come.

Our firm consistently monitors the HHS Office of Civil Rights’ enforcement and monitoring activities and writes posts noting trends in the area of HIPAA compliance, so keep checking the blog for current health care privacy and security news.

The Growth of Telemedicine Means More Alternatives for Patients

Posted in Physicians, Telemedicine

On Monday, the Washington Post published an article about the growth of online care in the Washington, D.C. region. The slow but steady expansion of the use of telemedicine is enhanced by guidance from a number of state medical boards calling for providers to use the same standard of care in telemedicine and in-person encounters. This position is consistent with recent guidance from the Federation of State Medical Boards and the American Medical Association.

In the Washington Post article, my colleague Ellen Janos recognized that the continued expansion of the use of telemedicine technology is advanced by forward-thinking professional licensing boards:

As a general matter, states that have policies that recognize that the standard of care for telemedicine is the standard of care for an office [visit]. . . those are just the most enlightened.

Ellen advises clients on innovative care delivery models involving telemedicine, and she frequently writes and speaks on state and federal laws applicable in the telemedicine setting.

Corporate Practice of Medicine: An Old Doctrine Breathing New Life

Posted in Hospitals & Health Systems, Payors & PBMs, Physicians, State & Federal Audits, Investigations & Litigation

Written by: Bridgette A. Wiley

Many states prohibit or limit the corporate practice of medicine (CPOM), either through statute or common law.  These states generally bar a business corporation from practicing medicine or employing a physician to provide professional medical services.  As a matter of public policy, the CPOM doctrine intends to ensure that medical decisions are based on the sound and independent judgment of medical professionals.  Its purpose is to enable medical professionals to act in the best interests of the patient, without the influence of “corporate owners,” whose goals are presumed to be maximizing their own profits.

The CPOM doctrine has existed since the early 20th century, but its continuing vitality is evidenced not only by periodic litigation, but also by recent scrutiny from state regulatory agencies.  My colleagues Andrew Roth and Kim Gold recently published an article about New York’s CPOM doctrine in the New York Law Journal.  The article, Corporate Practice of Medicine: An Old Doctrine Breathing New Life, examines the history of the CPOM doctrine, and the litigation and administrative scrutiny that has taken place in New York, demonstrating that the corporate practice of medicine prohibition is alive and well.  It also provides practical advice for practitioners advising corporations and other unlicensed entities in structuring transactions which involve the provision of health care to ensure compliance with the CPOM rules.

ML Strategies Posts Weekly Health Care Update on July 14, 2014

Posted in Health Care Reform, Payors & PBMs, Pharma & Medical Devices, Reimbursement

ML Strategies has posted its weekly Health Care Update.  This publication provides timely information on implementation of the Affordable Care Act, Congressional initiatives affecting the health care industry, and federal and state health regulatory developments.

Last week, two influential Senators in health care policy continued to raise scrutiny on the Hepatitis C Drug, Sovaldi.  In other news, the Obama Administration continues to support primary care infrastructure and also Medicaid delivery/payment reform.  As we have noted for the past year, the Administration is likely to continue efforts to improve access and reduce health care costs as a key component for a successful Affordable Care Act implementation strategy.

Click here to read this week’s Health Care Update.

D.C. Circuit Affirms That Internal Investigation May Be Protected By the Attorney-Client Privilege

Posted in Fraud & Abuse, State & Federal Audits, Investigations & Litigation

A recent decision from the D.C. Circuit Court of Appeals reaffirmed that a company’s internal investigations—if structured properly—are protected from disclosure in litigation by the attorney-client privilege. As discussed in Mintz Levin’s Employment Matters blog, the court’s decision In re: Kellogg, Brown, and Root, Inc. has significant practical application, especially for health care companies, which operate in heavily regulated environments and may conduct internal investigations.  The decision also offers a roadmap for structuring an internal investigation to protect the privilege.

CMS Proposes Changes to Sunshine Act Reporting

Posted in Pharma & Medical Devices, Physicians

Written by: Kate Stewart

Drug and device manufacturers breathing a sigh of relief after completing their 2013 data submissions under the Physician Payment Sunshine Act (the “Sunshine Act’) must now contend with four proposed changes to the Sunshine Act regulations.  On July 3, 2014 the Centers for Medicare & Medicaid Services (“CMS”) released its proposed rule on the 2015 Medicare Physician Fee Schedule (the “Proposed Rule”).  The Proposed Rule includes four proposed changes to the Sunshine Act’s reporting requirements based on feedback and experience from the first annual reporting period (covering August 1, 2013 to December 31, 2013).  If finalized, these four proposed changes would become effective on January 1, 2015 and would not apply to 2014 reports.

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