Alerts

Health Law Update – April 21, 2016

Alerts / April 21, 2016

Welcome to this week's edition of the Health Law Update. In this issue:

  • Insurer Actions Cut the Heart Out of Out-of-Network Providers
  • News Flash: An Agreement Between Competitors to Limit Advertising/Marketing Violates the Antitrust Laws
  • HHS Reopens Comment Period for Proposed Rule on 340B Drug Program
  • DOJ Attempts to Encourage Corporate Self-Disclosures With the Announcement of a One-Year FCPA Pilot Program
  • Biologics and Biosimilars in the U.S. and Europe
  • Lee Rosebush Offers Insight on FDA Draft Guidelines for Drug Compounders
  • Events Calendar
Insurer Actions Cut the Heart Out of Out-of-Network Providers

By Robert M. Wolin

Aetna Life Insurance Company recently won a $37 million verdict against a group of Northern California surgical centers, Bay Area Surgical Management, LLC and its affiliates (collectively, Bay Area), for an alleged out-of-network overbilling scheme and kickbacks to referring physicians. This lawsuit is simply one more effort in a larger trend by insurers to make it more difficult for out-of-network providers to provide services to insured patients. Through audits and investigations of patient collections, third-party payors have increasingly examined the practices of providers that charge amounts substantially in excess of prevailing charges; in many cases, they have sought recoupments and reduced reimbursements, and in some cases have ceased reimbursing providers.

Allegations in the Aetna Case

Arguing that Bay Area engaged in a “massive conspiracy” to defraud the insurer, Aetna asserted causes of action for fraud, intentional interference with contractual relations, and unjust enrichment. Specific allegations in the case against Bay Area include:

  • Inducing physicians to refer Aetna insureds to Bay Area facilities through kickbacks. Physicians were sold shares in the ambulatory surgical facilities at below-market value, which resulted in disproportionally high returns of several hundred percent per year to the physician owners. At least one physician had received an 805 percent return on his investment, according to the complaint.
  • Waiving patient coinsurance, deductible, and amounts above Aetna’s recognized reasonable charge (e.g., the “balance bill” obligations).
  • Submitting false claims and inflated bills that included amounts that Bay Area never intended for their patients to pay.

Aetna also alleged that the sale of shares to the physicians was preconditioned on an understanding that the physicians would refer patients requiring high-value procedures to Bay Area facilities. A $40 million lawsuit against Bay Area affiliates has been filed by United Healthcare Services for the same types of practices. Bay Area defendants have announced that they will appeal the Aetna verdict and have also filed a lawsuit against Aetna and United Healthcare Services on antitrust grounds.

Health Net’s Out-of-Network “Self-Disclosure” Attestation and Verification Requirement

In an interesting data-mining twist, insurance provider Health Net recently began sending a “self-disclosure” Attestation and Verification form for providers to sign, attesting that they:

  • Applied all deductibles and coinsurance, and collected all applicable copayments, from the patients in connection with services provided
  • Did not reimburse any patients for deductibles, coinsurance, and copayments, nor paid or waived any such amounts on behalf of any patients
  • Submitted charges to Health Net that are the same as those billed to and collected from the patients
  • Did not make any payments to or on behalf of patients
  • Did not make any payments to, or receive any payments from, any third party with the intent to induce the referral of patients for services
  • Billed only for services that were ordered and rendered

The Attestation and Verification requirement allows Health Net to more precisely focus its investigatory resources on providers that fail to return the required form or make significant changes or exceptions to the form. False statements by providers on the Attestation and Verification form may enable Health Net to pursue suspected fraud claims more easily, in some cases.

The End of Payment for Out-of-Network Services?

Recent efforts by third-party payors to aggressively investigate and pursue suspect billing and claims submissions by out-of-network providers are a clear indicator that careful consideration by providers of specific state laws governing such practices are critical. While the Bay Area verdict does not signal the end of payment for out-of-network services, it likely will embolden insurer efforts to deter patient access to out-of-network services.

News Flash: An Agreement Between Competitors to Limit Advertising/Marketing Violates the Antitrust Laws

By Jonathan L. Lewis

For the second time in less than a year, the U.S. Department of Justice (DOJ) has filed an antitrust complaint against hospital systems that agreed to not advertise on billboards or in print in each other’s home county. Last time it was a number of hospital systems in Michigan. This time, it is two hospital systems in West Virginia, Charleston Area Medical Center, Inc. (CAMC), in Kanawha County, and St. Mary’s Medical Center, Inc. (St. Mary’s), in Cabell County.

What exactly did CAMC and St. Mary’s agree to do (or not do)?

According to the DOJ’s complaint, since at least 2012 CAMC and St. Mary’s agreed to limit their marketing for competing healthcare services. More precisely, CAMC agreed to not place print or outdoor advertisements in Cabell County where St. Mary’s is located, and St. Mary’s agreed to not place print or outdoor advertisements in Kanawha County where CAMC is located. Both hospital systems had their marketing departments monitor and enforce their agreement.

In May 2013, for example, St. Mary’s director of marketing complained to CAMC’s counterpart after CAMC ran a newspaper ad promoting a CAMC physicians’ group in The Herald-Dispatch, and succeeded in getting CAMC to agree to remove the advertisement. In an email quoted in the complaint, St. Mary’s director of marketing wrote to other St. Mary’s senior executives:

I talked with CAMC and they agreed this ad violated our agreement not to advertise in Charleston paper if they didn’t advertise in Huntington paper. Their director of marketing Says [sic] she pulled the ad but was concerned it might still run again one more time this Sunday. I can’t call the HD [Herald-Dispatch] and make sure because they could challenge this type of handshake agreement That [sic] prevents them from getting advertising dollars from a different advertiser. We’ll see and I’ll follow up from there but after Sunday I am confident we won’t see CAMC again in HD.

Consistent with its agreement with St. Mary’s, and as described by St. Mary’s director of marketing, CAMC asked The Herald-Dispatch to remove the advertisement.

Why does the DOJ care so much about agreements between competitors to limit advertising/marketing?

Advertising/marketing are important tools that companies use to compete against one another. In the healthcare field, hospitals use advertising/marketing to compete for patients. Hospitals, for example, use marketing to inform patients about their quality, the scope of their services, and the expertise of their physicians. The goal of that marketing is to increase patient volume and share.

What should you do if you have an agreement with your competitor to limit your advertising/marketing?

“Seek immediate [legal] help ...”

HHS Reopens Comment Period for Proposed Rule on 340B Drug Program

By Lee H. Rosebush and Nita Garg

The U.S. Department of Health and Human Services (HHS) is reopening the comment period for the proposed rule titled “340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation.” HHS released the proposed rule on June 17, 2015, and the original comment period ended August 17, 2015.

The 340B Drug Pricing Program requires drug manufacturers participating in Medicaid to have an agreement with HHS under which the manufacturer provides discounts on certain outpatient drugs purchased by safety-net providers. The proposed rule establishes civil monetary penalties for drug manufacturers that charge safety-net providers above a ceiling price established under the 340B Drug Pricing Program.

The notice announcing the reopening of the comment period was published in the April 19, 2016, issue of the Federal Register. The new comment period will end on May 19, 2016. Comments may be submitted via email, mail, or the Federal eRulemaking Portal. Commenters do not need to resubmit comments, as previously submitted comments are currently under review and will be considered prior to the finalization of the proposed rule.

DOJ Attempts to Encourage Corporate Self-Disclosures With the Announcement of a One-Year FCPA Pilot Program

By John J. Carney, Steven M. Dettelbach, George A. Stamboulidis, Jonathan R. Barr, Lauren J. Resnick, and Jonathan B. New

Pursuing a classic “carrot and stick” approach to incentivizing corporate self-disclosure of the Foreign Corrupt Practices Act (FCPA) violations and individual wrongdoing connected to FCPA violations, the DOJ Fraud Section announced a new FCPA pilot program aimed at providing transparency into the benefits of self-disclosing FCPA violations, and the consequences of not self-disclosing. Read More >>

Biologics and Biosimilars in the U.S. and Europe

As the pace of biosimilars development picks up, many pharmaceutical companies are looking for guidance in understanding the patent and regulatory landscapes in the United States and in Europe. This seminar will provide practical advice on the most recent legal developments, preparing for biosimilar approval and patent and litigation strategies.

Our speakers from BakerHostetler and Carpmaels & Ransford LLP have in-depth knowledge of the current state of play in the biologics and biosimilars field and will share their insights on best practices to find success in this rapidly developing area of the pharmaceutical industry.

Register Now >>

Lee Rosebush Offers Insight on FDA Draft Guidelines for Drug Compounders

Partner Lee Rosebush commented to the Regulatory Affairs Professionals Society (RAPS) and Law360 on April 15, 2016, about three draft guidance documents for drug compounders recently released by the Food & Drug Administration (FDA). In his comments to RAPS, which were shared on Pharmacist.com, Rosebush said the guidance “is going to hurt traditional compounding pharmacies, as it is clear they are not going to be able to do office use compounding.” In the Law360 article, Rosebush predicted that large health systems will protest the inability to service satellite locations that are nearby but more than one mile away. “That’s an issue here I would expect some of the hospitals to be upset about,” Rosebush said. “The FDA in this guidance has limited a hospital's ability to supply its sister or related facilities.”

Read the RAPS article

Read the Law360 article

Events Calendar

May 2, 2016

Washington, D.C., Partner Lance L. Shea will present “Regulation of Microbiota Transplantation as a Drug by FDA” for the National Institutes of Health Microbiota Transplantation Project in Baltimore, MD.

May 3, 2016

Atlanta Associate Payal P. Cramer will present “How Should Sites Compensate Investigators?” at the MAGI Clinical Research Conference in Boston, MA.

May 5, 2016

Washington, D.C., Partner Lance L. Shea will present “Clinical Trial Design, Interpretation and Regulation” for the Food and Drug Law Institute Annual Conference in Washington, D.C.

May 16, 2016

Houston Partner Susan Feigin Harris will present “In a Different Voice: Ways Women Can Create Innovative Legal Service Models and Differentiate Themselves in a Competitive Market” at the AHLA Women’s Leadership Institute in Nashville, TN.

May 18-19, 2016

Washington, D.C., Partner Lee H. Rosebush, along with other industry experts, will participate on the panel “Preparing for Reimbursement in an Evolving Landscape” at the Southeastern Medical Device Association (SEMDA) 2016 Conference at the Music City Center in Nashville, TN.

Atlanta Partner Kristen McDermott Woodrum will moderate the panel “Preparing for Reimbursement in an Evolving Landscape” at the Southeastern Medical Device Association (SEMDA) 2016 Conference at the Music City Center in Nashville, TN.

May 24-26, 2016

Washington, D.C., Partner Lance L. Shea will present on “Biologics and Biosimilars in the U.S. and Europe” along with speakers from BakerHostetler and Carpmaels & Ransford LLP in Cambridge, MA; Princeton, NJ and Rockville, MD.

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