backFTC Wins Critical Appeal to Block Merger of Hershey Medical Center and PinnacleHealth System – On September 27, 2016, the U.S. Court of Appeals for the Third Circuit reversed a district court decision and held that the Federal Trade Commission (FTC) and the Commonwealth of Pennsylvania successfully demonstrated that a merger of two hospital systems, Penn State Hershey Medical Center and PinnacleHealth System, would violate Section 7 of the Clayton Act. In a critical victory for the FTC and one that helps maintain the FTC’s model for analysis of proposed hospital mergers, the Third Circuit unanimously reversed the lower court’s decision, which the Third Circuit stated was based on “errors … [that] render the district court’s analysis economically unsound and not reflective of the commercial reality of the healthcare market.” Following the decision, the district court is expected to issue a preliminary injunction against the merger. A King & Spalding Client Alert on the decision is available here, and the Third Circuit’s opinion is available here.
Reporter, Christina A. McNamara, Houston, +1 713 276 7340, cmcnamara@kslaw.com
DOJ Announces Settlement with Tuomey CEO Following Yates Memo Directive to Hold Individuals Accountable – The Department of Justice’s recent settlement with a healthcare system executive indicates a continued focus on pursuing individuals in enforcement actions. On September 27, 2016, the DOJ announced it reached a $1 million settlement with Ralph J. Cox, the former CEO of Tuomey Healthcare System (Tuomey) – a South Carolina-based hospital involved in illegal Medicare and Medicaid billings of services that were referred by physicians with which Tuomey had improper financial relationships.
Deputy Attorney General Sally Quillian Yates released a memo in September 2015 (the Yates Memo) noting that “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing” and indicating the DOJ intended to strengthen its pursuit of individual corporate wrongdoing. The Yates Memo stated that “criminal and civil corporate investigations should focus on individuals from the inception of the investigation” and “absent extraordinary circumstances or approved departmental policy, the Department will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation.”
The Tuomey investigation began as a whistle-blower lawsuit, United States ex rel. Drakeford v. Tuomey Healthcare System Inc., Case No. 3:05-cv-2858 (MBS) (D.S.C.), that alleged Tuomey had agreements with specialist physicians to perform all outpatient procedures at Tuomey in return for bonuses based on generated referrals. A jury determined that Tuomey violated the Stark Law and False Claims Act, and the trial court entered a $237 million judgment against the hospital. The DOJ resolved the judgment in October 2015, announcing a $72.4 million settlement with Tuomey.
The DOJ’s settlement with Cox nearly a year later follows the directives of the Yates Memo. In addition to the monetary terms, the settlement also prohibits Cox from participating in federal health care programs for four years. This includes providing management or administrative services paid for by federal health care programs.
Principal Deputy Assistant Attorney General Benjamin C. Mizer stated in the DOJ’s release, “Today’s settlement demonstrates that the Justice Department and its law enforcement partners will hold individual decision makers accountable for their involvement in causing the companies and facilities they run to engage in unlawful activities.”
Reporter, R.J. Cooper, Sacramento, +1 916 321 4809, rcooper@kslaw.com
HRSA Announces Two-Day Extension of Fall 2016 340B Registration Period – On September 27, 2016, the Health Resources and Services Administration (HRSA) sent an email announcement that it will extend its quarterly registration period for the 340B Drug Pricing Program (340B Program) by two days (from October 1-15 to October 1-17). Noting that this quarter’s registration period would both begin and end on a Saturday, HRSA announced that it was extending the registration deadline to Monday, October 17, 2016, to give potential covered entities an additional business day to register. This extension may be of particular benefit to urban hospitals that have sought Rural Referral Center (RRC) status under CMS’s new policy, discussed here, and are waiting for a response from CMS. RRCs can qualify for 340B discounts with a Medicare Disproportionate Share Hospital adjustment percentage of just 8.25% instead of the greater than 11.75% threshold that applies to urban DSHs.
The 340B Program, administered by HRSA, enables safety net hospitals and other selected provider categories to purchase outpatient drugs from manufacturers at significantly reduced prices. Providers eligible to participate in the program are defined by the 340B statute (42 U.S.C. § 256b), and are limited to nonprofit health care organizations that have certain federal designations or receive funding from specific federal programs. Examples include Medicare/Medicaid DSHs, RRCs, Children’s Hospitals, federally Qualified Health Centers, Ryan White HIV/AIDS Program grantees and other safety net providers.
To purchase discounted outpatient drugs under the 340B Program, eligible organizations, known as covered entities, must register for the 340B Program during one of the four enrollment periods throughout the year, which occur on the first 15 days of each calendar quarter (i.e., January 1-15, April 1-15, July 1-15, October 1-15). Successful applicants may participate in the program on the first day of the next quarter following approval.
HRSA’s alert extending the 340B Program registration deadline to October 17, 2016, can be found here. Learn more about the 340B Program and registration requirements here.
Reporter, C’Reda Weeden, Washington D.C., +1 202 626 5572, cweeden@kslaw.com
CMS Issues Final Rule Addressing Improvements in Care, Safety and Consumer Protections for Nursing Home Residents – On September 28, 2016, CMS issued a final rule to improve the care and safety of nursing home residents in long-term care facilities. The new rules are intended to reduce unnecessary hospital readmissions and infections, improve the quality of care, and strengthen safety measures for residents in these facilities. This is the first major overhaul of nursing home regulations in 25 years.
Perhaps most notably, the final rule prohibits long-term care facilities who participate in the Medicare or Medicaid programs from (1) requiring residents to sign binding arbitration agreements as a condition of admission or (2) entering into a pre-dispute agreement for binding arbitration with any resident or resident’s representative. Long-term care facilities may not include a pre-dispute binding arbitration clause in the admission agreement, even if the facility provides the resident an opportunity to “opt out” of the arbitration agreement at the time of admission. After a dispute between the facility and a resident arises, however, a facility may ask a resident or the resident’s representative to enter into an agreement for binding arbitration if the facility ensures the agreement is adequately explained, the resident acknowledges that he or she understands the agreement, and the agreement contains certain other protections, as codified in 42 C.F.R. § 483.70(n). A facility cannot require the resident to sign a post-dispute arbitration agreement as a condition of the resident continuing to stay at the facility. The final rule also limits when an individual other than the resident (e.g., the resident’s representative) may sign the arbitration agreement. The restrictions apply to agreements executed on or after November 28, 2016.
The prohibition is intended to strengthen the rights of long-term care facility residents. According to CMS, the prohibited pre-dispute arbitration agreements have a “deleterious impact on the quality of care of residents.” Although the final rule does not apply to agreements executed prior to November 28, 2016, CMS noted its belief that pre-dispute arbitration agreements signed as a condition of admission, relating to any type of dispute, and covering the patient’s entire stay, are “unconscionable.”
Other notable components of the final rule require long-term care facilities to:
- Update the facilities’ infection prevention and control program to include an infection prevention and control officer and an antibiotic stewardship program that includes antibiotic use protocols and a system to monitor antibiotic use.
- Develop, implement, and maintain an effective comprehensive, data-driven quality assurance and performance improvement program that focuses on systems of care, outcomes of care and quality of life.
- Investigate and report all allegations of abusive conduct and forego employing individuals who have had a disciplinary action taken against their professional license by a state licensure body as a result of a finding of abuse, neglect, mistreatment of residents or misappropriation of their property.
- Improve care planning and discharge planning for residents with involvement of the facilities’ interdisciplinary team and consideration of the caregiver’s capacity, giving residents information they need for follow-up after discharge, and ensuring that instructions are transmitted to any receiving facilities or services. Facilities must develop and implement a baseline care plan for each resident within 48 hours of their admission.
- Ensure that long-term care facilities’ staff members are properly trained on caring for residents with dementia and in preventing elder abuse.
- Ensure that long-term care facilities take into consideration the health of residents when making decisions on the kinds and levels of staffing a facility needs to properly take care of its residents.
- Ensure that staff members have the right skill sets and competencies to provide person-centered care to residents.
- Allow dietitians and therapy providers the authority to write orders in their areas of expertise when a physician delegates the responsibility and state licensing laws allow.
- Provide each resident with a nourishing, palatable, well-balanced diet that meets his or her daily nutritional and special dietary needs, taking into consideration the preferences of each resident.
- Have a pharmacist review residents’ medical charts during each monthly drug regimen review.
- Provide the necessary care and services to attain or maintain the highest practicable physical, mental, and psychosocial well-being, consistent with the resident’s comprehensive assessment and plan of care.
- Have a facility policy identifying those instances when the loss or damage of a resident’s dentures is the facility’s responsibility and forego charging a Medicare resident for the loss or damage of dentures determined in accordance with facility policy to be the facility’s responsibility.
- Accommodate no more than two residents in a bedroom for those facilities that are constructed, re-constructed, or newly certified after November 28, 2016.
CMS did not finalize other proposals set forth in the proposed rule, including CMS’s proposal to require in-person screening of patients by a physician or another highly trained practitioner before a patient could be transferred to a hospital from a nursing home, unless there was an emergency. The proposal, intended to avoid unnecessary hospitalizations, was scrutinized by commenters concerned that the requirement would interfere with patient transfer rights and delay access to care.
The final rule is available here in its unpublished form and is expected to be published in the Federal Register on October 4, 2016.
Reporter, Kristin M. Roshelli, Houston, +1 713 751 3263, kroshelli@kslaw.com