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Thank you for your interest in the FCA Update Blog.

We’ve relocated to McDermott’s Health & Life Sciences News blog. Visit us at healthlifesciencenews.com for future posts on for future posts on enforcement and compliance issues impacting the healthcare industry, False Claims Act litigation and more.

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More Than a Decade at the Top; McDermott Earns 11th Chambers USA Band 1 Healthcare Practice National Ranking

We are pleased to announce that our Healthcare Group received a national Band 1 ranking for the eleventh year in a row in the 2020 edition of Chambers USA. After more than a decade at the top, we are once again the only one to rank Band 1 nationally. The Health team also earned Band 1 state-level rankings for its healthcare practices in California, Florida, Illinois, Massachusetts and Washington, DC. Additionally, the team also earned the national Spotlight Table ranking for the Privacy and Data Security: Healthcare category. In addition, nearly half of the Healthcare Industry Advisory group partners were individually ranked.

Click here to view the full announcement.



New Guidance on Medicare Payment Rule Enforcement

A few days before Thanksgiving, the news media published an internal memo by the Office of General Counsel (OGC) at the US Department of Health and Human Services (Department) to officials at the Centers for Medicare and Medicaid Services (CMS). The memo expressed OGC’s views on the impact of the Supreme Court’s Azar v. Allina Health Services, et. al., No. 17-1484 decision earlier this year on the enforcement of various CMS guidance. Specifically, OGC states that Medicare payment rules that meet the Court’s standard that did not go through notice-and-comment rulemaking cannot form the basis for an enforcement action, including an overpayment finding.

The issue in this case was whether the Department’s determination that Medicare Part C patients should be included in the Medicare fraction represented a change in a “substantive legal standard” within the meaning of Section 1871(a)(2) of the Social Security Act (SSA). If the answer was yes, then notice-and-comment procedures were required under the title 18 of the SSA. In a 7-1 decision, the court held that the inclusion of Part C patients in the Medicare fraction was “substantive.” The court explained that the “substantive legal standard” under Section 1871(a)(2) of the SSA means any legal standard or determination that creates rights and obligations, such as the scope of benefits, payment for services, eligibility of individuals to receive benefits, or eligibility of individuals, entities or organizations to furnish services.

OGC concludes that, according to the Supreme Court, Congress imposed a notice-and-comment requirement for substantive Medicare rules in a broader range of circumstances than otherwise would be required under the Administrative Procedure Act. Therefore, CMS guidance documents, such as the Medicare Internet-Only Manuals, setting forth interpretive payment rules, are legally nonbinding and may not be used as the basis of an enforcement action. As an example, if a “broadly worded statute or regulation can be interpreted a variety of ways,” sub-regulatory policy statements may be viewed as creating a new substantive rule, and thus cannot be enforced as binding rules under the Court’s ruling. According to OGC’s memo, CMS guidance documents that are “closely tied to a statutory or regulatory requirement” may provide additional clarity through such guidance and enforcement actions implicating the guidance can still be brought. Further, even if the sub-regulatory guidance is not specifically enforceable as a substantive legal standard, it can be used for other purposes, such as scienter or materiality, as stated in the Department of Justice Brand Memo.

OGC indicates that it does not believe Local Coverage Decisions (LCDs) require notice-and-comment rulemaking because LCDs reflect payment determinations of the local Medicare Administrative Contractor (MAC) and are not binding on the Department. They accordingly do not create any substantive legal standards.  In its memo, OGC concludes, that LCDs cannot be solely used as the basis for a “government enforcement action,” including an overpayment demand. OGC also notes that codifying guidance in a retroactive regulation could create other legal risks for enforceability.

The primary takeaway is that providers should examine carefully the basis for any enforcement action, including an overpayment determination, for whether the decision is based on sub-regulatory guidance that offends the Court’s standard. Providers should also be on the lookout for attempts by CMS to codify sub-regulatory guidance in notice-and-comment rulemaking in order to prospectively avoid this problem.



Stark Law Proposed Change Affects Group Practice Special Rules for Productivity Bonuses, Profit Shares

On October 9, 2019, the US Department of Health and Human Services Centers for Medicare and Medicaid Services (CMS) published proposed changes to the physician self-referral law (Stark Law). Physician practices are subject to the Stark Law, and the proposed rule includes an important clarification affecting certain group practices’ compensation models.

CMS proposes to revise its regulations to clarify the special rule for group practice distributions of income from Stark designated health services (DHS). Compliance with this special rule is a requirement of the Stark Law’s definition of a “group practice,” and compliance with the “group practice” definition is generally necessary for physician groups to have the protection of the in-office ancillary services (IOAS) exception to the Stark Law. The special rule for sharing DHS profits permits a group, or a pod of five or more physicians in the group, to pool their DHS income and distribute the pool in a manner that does not directly take into account the volume or value of any physician’s referrals for DHS.

For years, there has been a debate within the health law bar regarding how these DHS income pools can be structured under the special rule. One position is that the special rule permits pools to be organized by DHS, meaning, for example, that if the group’s only DHS are imaging and physical therapy services (PT), the group can have one pool for diagnostic imaging income in which one set of five or more physicians participate, and another pool for PT income in which another (perhaps overlapping) set of five or more physicians participate (split-DHS income pooling). The other position is that the special rule requires that the DHS income pool must include all the DHS generated by the participating physicians. In such a case, the imaging and PT pools described above would have to be consolidated (all-DHS income pooling).

read more…



Agenda is Live: McDermott’s Healthcare Litigation, Compliance & Investigations Forum

Join McDermott for our 2019 Healthcare Litigation, Compliance & Investigations Forum on November 5, 2019 in Washington, DC

Featuring insights from government representatives, in-house lawyers and compliance officers from across the healthcare and life sciences landscape, attendees will learn strategies for proactively managing and effectively responding to compliance risks, investigations and litigation during this day-long program.

The event will also feature an address by Daniel R. Levinson, Former Inspector General, Office of Inspector General Department of Health and Human Services, and a lunchtime keynote by Dr. Ezekiel Emanuel,  Vice Provost for Global Initiatives & Chair of the Department of Medical Ethics and Health Policy, University of Pennsylvania; Former Special Advisor for Health Policy, White House Office of Management and Budget.

Click here to view the program agenda and register today. 



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