Last week, Mintz Levin’s Health Care Enforcement Defense Group published a new Qui Tam Update, which analyzes 60 health care-related False Claims Act qui tam cases unsealed in December 2017 and January 2018 and the trends they reflect:

  • The government intervened in 14% of those unsealed cases (a figure that is consistent with the longer-term trends we have seen over the prior twelve months).
  • Of the 60 unsealed cases, only 28 were being litigated (at least initially). The remaining 32 cases were docketed as closed or dismissed.
  • The 60 unsealed cases were filed in 38 different courts. Jurisdictions with the most unsealed cases included:
    • The Central District of California (which includes Los Angeles) with six cases;
    • The Middle District of Florida (which includes Jacksonville, Orlando, and Tampa) with 4 cases; and
    • The District of Connecticut and Eastern District of Louisiana (New Orleans), each with 3 cases.
  • The most frequently targeted types of defendants included:
    • Pharmaceutical companies, hospitals, and healthcare systems, with each accounting for 9 of the 60 unsealed cases.
    • Physicians and physician group practices, which were targeted in 7 cases.
    • Home health and hospice providers, which were the subject of 6 cases.
    • Outpatient clinics, which were defendants in 5 cases.
  • Former employees were again the most frequent relator type, accounting for 23 of the 60 unsealed cases. Expert witnesses brought 7 cases and current employees brought 2 cases.
  • Only one of the cases was unsealed within the 60-day period specified by statute. That case was under seal for 55 days.
  • The longest time a case was under seal was almost eight-and-a-half years. Average time under seal for this cohort was 700 days, though half of these cases were unsealed in 16 months or less, and 23 of these 60 cases were unsealed in less than a year.

Continue Reading Mintz Levin’s Health Care Enforcement Defense Group Publishes New Qui Tam Update

Late last month, Senators Grassley (R-IA), Brown (D-OH), and Blumenthal (D-CT) introduced the Fighting the Opioid Epidemic with Sunshine Act, a bill that would expand Physician Payment Sunshine Act reporting requirements to cover payments and other transfers of value made to advance practice nurses and physician assistants. As indicated in Senator Grassley’s announcement of the bill, the Senators are tying the expansion of the Sunshine Act to addressing the opioid epidemic.  Applicable manufacturers who are required to report Sunshine Act data through the Open Payments system should follow this bill.  As Congress continues to consider opioid issues, this bill could be included in a broader package of legislation. Continue Reading New Bill Would Expand the Sunshine Act to Cover Physician Assistants and Advance Practice Nurses

Earlier this week, our colleague Don Davis addressed the increasing amount of disability discrimination litigation against health care entities on the Employment Matters Blog. In the blog post, Don provides an overview of the Americans with Disabilities Act (“ADA), describes employment disability discrimination litigation and enforcement trends in the health care industry, and highlights the recent spike in accessibility-related litigation (including issues related to both facility accessibility and website accessibility).

The full post is available here.

Businesses engaged in human drug compounding, both traditional pharmacies and the more recently created outsourcing facilities, have been on quite a rollercoaster ride since congressional enactment of the Drug Quality and Security Act (DQSA) approximately four-and-a-half years ago. Federal and State inspectional mandates have changed, FDA guidance documents (and a few regulations) have been churned out, and some entities have been the target of aggressive enforcement actions and even criminal prosecutions by the FDA/Department of Justice. Suffice it to say, this blog post cannot capture everything that compounders have been grappling with or how their compliance policies have been evolving. So today, we are sharing one important and positive bit of news for health systems and other entities that may be considering whether and how to set up an outsourcing facility under Section 503B of the Food, Drug, and Cosmetic Act (as amended by the DQSA). Continue Reading FDA Alters Course on Definition of Compounding “Facility” in Final Guidance

Back in late 2015, we blogged about the interesting twist in the $125 million Warner Chilcott settlement that a Massachusetts physician had been criminally charged with violating the Health Insurance Portability and Accountability Act (HIPAA).   See HERE for that previous post.

That physician has now been convicted of the HIPAA violation, as well as an unrelated charge of obstructing a federal health care investigation.  The US Attorney’s Office in Boston made the announcement late last month.

The Warner Chilcott settlement involved illegal drug promotion.  Specifically, sales reps were accused of flagging patient medical records with product brochures and filling out the provider’s prior authorization forms in advance for specific patients.  All of this required impermissible access to patient records.  The physician’s criminal liability stems from providing these sales reps with access to her patients’ records.  In some cases, the reps were even allowed to take the records home with them!

We are often reminded through settlements with the HHS Office for Civil Rights that HIPAA violations are taken seriously and can include hefty fines and corrective action plans (see HERE, HERE and HERE for just a few examples).  This case serves as fair warning that intentional misuse of protected patient information can lead to jail time.  When this physician is sentenced, she could be looking at up to a year in prison, a $50,000 fine, and a year of supervised release.  If you picture a sales rep combing through your personal health issues in his or her living room to determine whether you might be a sales target, it shouldn’t be so surprising that this conduct can rise to the level of criminal liability.

On Tuesday, May 8th, the House held three hearings related to combating the opioid epidemic. The first hearing came out of the Energy and Commerce (E&C) Subcommittee on Oversight and Investigations, which examined opioid distribution and diversion by the pharmaceutical industry. The second hearing came out of the E&C Subcommittee on Health, which examined the current statutory restrictiveness on the medical profession’s ability to coordinate substance use disorder (SUD) treatment due to prohibitions on certain patient information disclosure. The third hearing came out of the House Judiciary Committee and examined best practices in international and domestic enforcement on drug traffickers in curbing the supply of opioids across the U.S. Continue Reading Congress Holds Hearings and Proposes Legislation to Combat Vexing Opioid Crisis

As we highlighted earlier this month, CMS released both the Contract Year 2019 Final Rules for Medicare Advantage and Part D (Final Rules) and the 2019 Call Letter. These documents are not typically released at the same time, so there is a lot of information for Medicare Advantage organizations and Part D plan sponsors to absorb. One major topic area that CMS focuses on in these documents is the prevention of opioid misuse and abuse.

As you know, we have been following this topic closely in the last few months: first, we discussed how the proposed rules set out a framework for plan sponsors to monitor and reduce the potential misuse of frequently abused prescription drugs. We then discussed the Advance Notice and Call Letter outlining utilization review controls for Part D plans to use to address opioid misuse and abuse.

The Final Rules and 2019 Call Letter work together to establish a number of new policies aimed at helping Medicare plan sponsors prevent and combat prescription opioid overuse. There is significant discussion, including CMS’s response to commenters, in the final documents linked above. Here, we provide a high-level overview of the new policies.

Continue Reading CMS Continues to Focus Medicare Plans on Preventing Opioid Abuse

On March 29, 2018, the Attorney General of California filed an antitrust action against Sutter Health and its affiliates (“Sutter”) alleging Sutter engaged in various anticompetitive conduct in violation of California’s Cartwright Act.[1]  According to the Complaint, healthcare costs in California have rapidly increased, and prices in Northern California are higher than in other areas of the State.  For example, the State asserts that “unadjusted inpatient procedure prices are 70% higher in Northern California than Southern California, corresponding to hospital market concentration being 110% higher in Northern California than Southern California . . .”

The State believes that the increased cost of healthcare in Northern California is largely “attributable to Sutter and its anticompetitive contractual practices,” which it allegedly imposed as a result of securing market power in certain local markets in Northern California.  The State asserts that Sutter has “compelled all, or nearly all, of the Network vendors operating in Northern California to enter into unduly restrictive and anticompetitive contracts” that have:

  • Established, increased and maintained Sutter’s power to control prices and exclude competition;
  • Foreclosed price competition by Sutter’s competitors; and
  • Enabled Sutter to impose prices for hospital and healthcare services and ancillary services that far exceed the prices it would have been able to charge in an unconstrained, competitive market.

Sutter Health is the largest hospital system in Northern California, with 24 state-licensed acute-care hospitals and 4,311 acute care beds, 35 outpatient centers, a 5,500 member physician organization, and other ancillary providers.

Summary of the State’s Complaint

The State argues that Sutter began to implement a strategy to acquire market power at the time of the merger between Sutter’s Alta Bates Hospital and Summit Medical Center (“Summit”), noting that the transaction enabled Sutter to “increase prices, and thus costs, for its healthcare services.”  According to the complaint, a 2008 Federal Trade Commission retrospective review of the transaction found that contracted price increases for Summit post-merger ranged from approximately 29% to 72% depending on the insurer, compared to approximately 10% to 21% at Alta Bates, and that the Summit post-merger price increases were among the highest in California.”  Sutter defended the merger by arguing, in part, that it would not be able to exercise market power to raise prices post-merger, because insurers could incentivize patients to seek care at lower-cost alternatives through various steering and tiering mechanisms.  The district court agreed.

The State alleges, among other things, that Sutter is now leveraging and maximizing its “market power in certain local healthcare markets across all markets” and preventing insurers from “using steering and tiering to counter its excessive pricing.”  Moreover, Sutter is accused of successfully demanding that all, or nearly all, of its contracts with its “Network Vendors[2]” include implicitly or explicitly:

  • An agreement that contains an “all-or-nothing” contract provision requiring that all Sutter hospitals and healthcare providers throughout Northern California be included in the payor’s provider network.  The State alleges that Sutter has exploited its substantial market power to illegally tie or bundle each of its individual hospitals to all of the other hospitals and providers in its Northern California hospital network.
  • An agreement that prohibits anyone offering access to a provider network from giving incentives to patients that encourage them to use the healthcare facilities of Sutter’s competitors.  The State alleges Sutter entered written or oral agreements that forbid or severely penalized health plans that used tiered networks by eliminating or nearly eliminating the health plan’s negotiated discounts off of Sutter’s pricing.
  • An agreement prohibiting the disclosure of Sutter’s prices for its general acute care hospital services (including inpatient and outpatient services) and ancillary and other provider services, before the service is utilized and billed.  The State alleges that this has the effect of concealing Sutter’s inflated pricing from the self-funded and other payors, and preventing them from determining the prices they will later have to pay to Sutter for the healthcare services included in their health plans at the time they select among the provider network options offered by competing Network Vendors.  As a result, payors and enrollees in health plans were allegedly “less able to exert commercial pressure on Sutter to moderate its inflated pricing.”

According to the State, Sutter also uses “punitively high Out-of-Network Hospital pricing in combination with the anticompetitive provisions in its agreements with Network Vendors to make it economically unfeasible for Network Vendors to choose higher-quality and/or lower-cost hospital competitors.”

The State alleges that such provisions have had significant anticompetitive effects in Northern California, including: (1) creating barriers to entry and expansion for existing and potential general acute care competitors in each of the geographic markets where Sutter’s hospitals are located; (2) depriving patients of the ability and the incentive to choose a better-quality and/or lower cost competing hospital or ancillary provider; and (3) depriving Sutter’s competitors of the ability to effectively compete based on price or quality, which allows Sutter to maintain system-wide prices at levels that are significantly higher than the prices currently charged by its competitors and substantially higher than prices that could be charged in a competitive market.

Relevant Market Definition

In an interesting twist, the State notes that it need not define and identify “the particular economic markets that Sutter’s conduct has harmed” given evidence of the direct negative effects Sutter’s “anticompetitive conduct has caused Network Vendors and Self-Funded Payors,” who the State alleges have paid substantial overcharges compared to what they would have paid in a competitive market for healthcare services.  The State notes that Sutter’s ability to impose anticompetitive contract terms in all of its agreements with payors and its ability to “persistently and directly charge supracompetitive prices to payors on a system-wide basis” are direct evidence of its market power  that “obviates any need for further analysis of competitive effects in particular defined markets.”[3]  Notwithstanding this assertion, the State also defines the relevant product market as “the cluster of general acute care hospital services (including inpatient and outpatient services), as well as ancillary services, that are made available for purchase, in whole or in part, through Network Vendors out of the funds of Self-Funded Payors.”

The State asserts that the relevant geographic market can alternatively be defined either (1) as a 15-mile/30-minute driving time from any Sutter hospital or on the basis of counties in which a Sutter hospital is located, or (2) based on the regions set out in Paragraph 84 of a complaint filed against Sutter by the UFCW & Employers Benefit Trust (UFCW & Employers Benefit Trust v. Sutter Health, et al., Case No. 15-53841), in which one or more Sutter facilities are located.

The State alleges that health plan enrollees who live and work in the vicinity of a Sutter facility do not view hospitals located outside of the relevant geographic market as viable substitutes for facilities located within the geographic market.  Similarly, the State alleges that not only are network vendors (who seek to assemble provider networks for health plan enrollees), unwilling to consider hospitals outside of the relevant geographic market to include in their networks, due to Sutter’s market shares in a large number of zip codes and the existence of “must have” Sutter hospitals, the Network Vendors are “unable to assemble commercially viable Providers Networks that exclude all Sutter hospitals.”

Conclusion

This case serves as an important reminder that State Attorneys General can be just as aggressive in enforcing the antitrust laws as the federal antitrust authorities.  While integrated health care systems can often provide a number of efficiencies and benefits to consumers, under certain circumstances the antitrust authorities may view specific business and contracting practices with skepticism.  Large health care providers with significant market share in one or more geographic areas need to be mindful of their contracting practices and ensure that their business strategies are closely scrutinized by antitrust counsel prior to implementation.  This matter, as well as the ongoing litigation the Department of Justice Antitrust Division and the State of North Carolina have against the Carolina’s Healthcare System, is another example that contractual provisions that reference competitors and/or anti-tiering or anti-steering clauses in payers contacts may, depending on local market conditions, raise antitrust concerns.

 

[1] The Cartwright Act is California’s principal state antitrust law.  It is intended to prevent anticompetitive activity, and it mirrors the same concepts as the federal antitrust laws (the Sherman Act and the Clayton Acts).  It prohibits agreements between competitors to restrain trade, fix prices or production, or lessen competition, and other conduct that unreasonably restrains trade.

[2] Network Vendors are defined in the complaint as a small group of specialized insurers that possess the expertise necessary to develop and assemble provider networks that will be useful to all of the people enrolled in the health plans offered by a variety of employers and Healthcare Benefits Trusts operating in a variety of locations in Northern California.  Healthcare benefits are sometimes funded through a trust that is established and maintained under the terms of a collective bargaining agreement between a labor union and one or more employers (i.e.,  Healthcare Benefits Trusts).

[3] Direct effects evidence is evidence indicating the likely competitive effects of a practice (or transaction) that is not based on traditional inferences drawn solely from market concentration.  Such evidence can include price increases or a reduction in output following a consummated merger or other indicia that helps to determine the presence or the likelihood of the exercise of market power.

In March, the Medicare Payment Advisory Commission (MedPAC) released its biannual report to Congress on matters affecting the Medicare program. MedPAC is an independent congressional agency that advises Congress on issues relating to Medicare.

Though the March report includes several policy proposals, one of the most significant is MedPAC’s recommendation that Congress eliminate the Merit-based Incentive Payment System (MIPS) passed as part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The report formalizes a vote the Commission took back in January to recommend repealing MIPS and replacing it with a voluntary value program (VVP) that MedPAC predicts would better achieve the goals put forth in MACRA. Continue Reading MedPAC Recommends Significant Changes to MACRA

The Department of Justice (“DOJ”) Antitrust Division recently announced plans to hold a series of public roundtable discussions to analyze the relationship between competition and regulation, and its implications for antitrust enforcement policy.  As the Antitrust Division continues to scrutinize the healthcare industry, these roundtables may give a window into the Division’s current thinking about mergers and acquisitions and contracting practices in the industry.  The roundtable series starts on Wednesday, March 14, 2018, with a focus on antitrust exemptions and immunities, including a focus on the appropriate role of the state action doctrine.  The roundables will include perspectives from various industry participants as well as “academics, think tanks, and other interested parties to discuss the economic and legal analyses of competition and deregulation.”  The second roundtable will be held on April 26, 2018, and will focus on consent decrees.  The third roundtable will be held on May 31, 2018, and will analyze the consumer costs of anticompetitive regulations.  The DOJ will accept public comments (not to exceed 20 pages) in advance of each of the roundtables.  The federal antitrust agencies often hold public events of this nature to further inform their antitrust enforcement agendas.  It will be interesting to see if this roundtable series results in any major enforcement policy changes for the Antitrust Division, which is now under the leadership of Assistant Attorney General, Makan Delrahim.