This week, the President’s FY 2019 budget will be released, and the Administration will spend the next couple of weeks touting its goals. How this activity is received in Congress will play out in various committee hearings, as will issues like drug pricing, which the Administration is closely examining.  On the regulatory side, is this the week that we finally see action on short-term limited duration insurance plans? We cover what that could mean and more in this week’s health care preview.

The release of the House and Senate GOP tax plan this month has left Washington on edge as it comes to grips with the realities of tax reform. However, the elimination of the medical expense tax deduction in the House Republicans’ tax reform package stands out above the rest as misguided. This elimination would not only affect filers using the deduction, but it also stands to have broader implications for our health care system.

ML Strategies has published a new blog post in Health Affairs on the consequences of the deduction’s removal to the Medicaid program. It can be found here.

Our colleagues at ML Strategies have provided their Health Care Weekly Preview for the week of October 23, 2017. The preview discusses the Alexander-Murray stabilization package introduced by Senators Lamar Alexander (R-TN) and Patty Murray (D-WA), and, in particular, where the stabilization package falls among Congress’ other priorities such as DACA and border security and what we are likely to see next.

A popular weapon used to contain health care expenditures is the creation by payors and employers of tiered provider networks, which by differentiated co-pays attempt to steer insureds to less expensive choices.  In connection with such networks, providers will often provide better pricing in order to be placed on more favorable tiers.  In a new antitrust suit, the Antitrust Division of the Department of Justice (“DOJ”) and the State of North Carolina have challenged the attempt by the dominant health care system in North Carolina to use contractual anti-steering provisions to avoid being disfavored.  This Alert analyzes the Government’s complaint and how this lawsuit fits into the DOJ’s views of contractual restraints of this type.

Late last week, the Department of Justice (DOJ) announced that in FY2015 it obtained more than $3.5 billion in settlements and judgments from civil cases involving allegations of false claims against the government. Once again, health care fraud recoveries led the pack, driven by qui tam (whistleblower) filings, including notable recoveries in qui tam cases where the government declined to intervene.  DOJ awarded qui tam relators a record $597 million, bringing the total awards to relators since the 1986 Amendments to the FCA to $5.3 billion.  Though recoveries vary from year to year, the FY2015 results demonstrate DOJ’s commitment to using the FCA to vigorously pursue allegations of health care fraud, defense department and procurement fraud, and financial and other fraud.

Last year’s recoveries in the health care industry accounted for $1.9 billion of the total FY2015 recoveries – and there is reason to believe that FY2016 will reap similar rewards.  At the September 2015 American Health Lawyers Association Fraud and Compliance Forum, Deputy Assistant Attorney General Joyce Branda underscored DOJ’s commitment to combating health care fraud, pointing to two areas that she believes will be priorities for the DOJ:  cases against skilled nursing facilities for providing medically unnecessary care, and cases against hospitals alleging the payment of physician compensation above fair market value or otherwise in violation of the Stark Law.

These priorities are reflected in DOJ’s FY2015 announcement that touted the largest “failure of care” settlement with a skilled nursing home company, Extendicare Health Services Inc., which agreed to pay $32.3 million to resolve allegations that it billed Medicare for deficient nursing services and medically unreasonable and unnecessary rehabilitation therapy services.  Likewise, there were preludes to these priorities in the late-year Stark Law recoveries from hospitals.  Of the $330 million recovered from hospitals, DOJ noted several settlements with hospitals alleging violations of the Stark Law due to physician compensation arrangements.  These settlements included Adventist Health System for $115 million, North Broward Hospital District for $69.5 million, and Columbus Regional Healthcare System and Dr. Andrew Pippas for $25 million plus contingent payments up to an additional $10 million.  DOJ announced the results of a major initiative against hospitals, and highlighted that hundreds of hospitals cumulatively paid nearly $216 million in settlements to resolve allegations of implanting cardiac devices in Medicare patients contrary to criteria established by CMS.  DOJ noted that it recovered $96 million in settlements and judgments from the pharmaceutical industry, with cases resolving alleged violation of the anti-kickback statute as well as allegations that pharmaceutical companies underpaid rebates owed under the Medicaid Drug Rebate Program.

The recovery of $3.5 billion is the fourth largest yearly recovery by DOJ, exceeded only by recoveries in FCA cases in each of the prior three years.  DOJ reported that it recovered $2.8 billion of the $3.5 billion in cases filed under the qui tam provisions.  Of the $2.8 billion, a record $1.1 billion was recovered in cases in which the U.S. declined to intervene.  DOJ also reported that there were 638 new cases filed under the FCA’s qui tam provisions in FY2015

In health care fraud matters in particular, DOJ recovered $1.4 billion in health care cases in which it intervened, and a record $468 million in health care cases in which it declined.  Additionally, 423 new qui tam matters alleging health care fraud were filed in FY2015. Intervention or no intervention, the statistics underscore that health care cases, and in particular qui tam filings, remain the driver for DOJ for obtaining FCA recoveries.

In June, an antitrust suit brought by plaintiff ambulatory surgery centers (“ASCs”) against a health system, health insurers, and a trade association survived a motion to dismiss. Last week, the ASCs’ case cleared the hump of summary judgment and will now proceed to trial.  Kissing Camels Surgery Center LLC et al. v. Centura Health Corp. et al., 1:12-cv-03012 (D.Col. August 28, 2015).  The district court found sufficient evidence of a conspiracy to reduce competition for ambulatory surgery services, making summary judgment inappropriate.  The attached antitrust alert, Kissing Camels Antitrust Suit Against Health System Moves Past Another Hump in the Road, provides some background on the case and considers the District Court’s ruling against summary judgment, based on its finding that there was sufficient evidence of a conspiracy to reduce competition.

In an April 22, 2015 letter to the New York State Department of Health, the Federal Trade Commission (FTC) cautioned that part of the state’s Medicaid reform program may sanction anticompetitive behavior. The FTC’s concern stems from the Certificate of Public Advantage (COPA) regulations, which offer federal antitrust immunity for certain collaborations among providers participating in the Delivery System Reform Incentive Payments (DSRIP) program.  Mintz Levin has prepared an advisory examining the FTC’s letter and its antitrust warnings, and what they mean for hospitals and providers looking to achieve greater efficiencies through collaborative activities.

The Federal Trade Commission continues to analyze relevant products that have not yet been introduced into the market in its merger analysis.  In Medtronic Deal Highlights FTC Focus On Future Competition, we discuss the FTC’s recent review of Medtronic’s acquisition of Covidien, where the Commission looked over the horizon to see two apparent new entrants and took steps to ensure that even after the merger, there would still be two new competitors for the incumbent monopolist.  It is clear that the agency is continuing to look at remedying forward-looking competitive concerns rather than simply remedying the present overlaps and concerns that may plague a potential acquisition.

According to Federal Trade Commission Chairwoman Edith Ramirez, the healthcare sector will “remain a top agency priority.”  Thus, the FTC will undoubtedly continue to closely analyze combinations of providers in the industry.  Extensive time, money and planning are often involved when developing and consummating transactions with competitors.  Part 3 of this series, After the Deal, is it Still Business as Usual?, provides guidance on the importance of monitoring business practices of newly integrated entities and ensuring the development and adherence to a strong antitrust compliance program to minimize the risk of antitrust investigations and lawsuits.