Health Law Update – January 14, 2016

Alerts / January 14, 2016

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

  • HHS Removes Barriers to Reporting Federal Mental Health Prohibitor Status for Gun Background Checks
  • Antitrust: “Doctor, Doctor, Give Me the News”*
  • Medicare: Congress Ends 2015 With Some Last-Minute Reforms
  • Blog Exclusives
    • Incident Response Tip: Five Ways to Improve Information Security and Reduce the Impact of a Data Breach
    • Solicitation of New Safe Harbors and Special Fraud Alerts
    • FTC Brushes Aside AG, Regulators to Attack Local Hospital Merger
    • Federal Circuit denies en banc review of Ariosa v. Sequenom
  • Events Calendar
HHS Removes Barriers to Reporting Federal Mental Health Prohibitor Status for Gun Background Checks

By Lynn Sessions and Suchismita Pahi

On January 6, 2016, the U.S. Department of Health and Human Services (HHS) released a modification to the Health Insurance Portability and Accountability Act (HIPAA) removing barriers to reporting federal mental health prohibitor status for gun background check purposes. The new section, 45 C.F.R. § 164.512(k)(7), allows a covered entity to use or disclose protected health information (PHI) to report the identity of an individual to the National Instant Criminal Background Check System (NICS) if the individual is subject to 18 U.S.C. § 922(g)(4), which prohibits individuals from firearm possession by categorizing them with a federal mental health prohibitor. NICS is the Federal Bureau of Investigation’s system used to determine, within 30 seconds, whether prospective buyers are eligible to buy firearms. The federal mental health prohibitor category consists of individuals who have been involuntarily committed to a mental institution or adjudicated as a mental defective. These individuals are prohibited from shipping, transporting, receiving, or possessing any firearm or ammunition.

A Narrowly Tailored Permission

The initial January 2013 proposed changes caused concern because of potential conflicts with state laws. However, this modification is drafted with tight definitions of the types of covered entities that are allowed to disclose PHI, entities to which the disclosures may be made, types of individuals whose information may be disclosed, and the information that may be disclosed.

Not all covered entities may disclose PHI for NICS purposes. The only covered entities that are permitted to disclose the information are state agencies or other entities that are or contain entities designated by a state to report or collect information for reporting on behalf of a state to NICS or courts, boards, commissions, or other lawful authorities that make the commitment or adjudication that causes an individual to be federally prohibited under 18 U.S.C. § 922(g)(4). PHI can only be disclosed to NICS, or to an entity designated by a state to report, or to one which collects information for the purposes of reporting, on behalf of a state, to NICS. HHS expressly notes that there is no permission or exception created for uses or disclosures to law enforcement through the modification.

Though there is no list of permitted data elements, HHS specifies that the disclosure is restricted to limited demographic and certain other information needed for NICS purposes. Information that is considered within the modification includes only name, date of birth, sex, a code or notation indicating the individual is subject to the federal mental health prohibitor, a code or notation representing the reporting agency, and a code identifying the agency record supporting the prohibition. Some additional fields, such as height, weight, Social Security number, age, place of birth, state of residence, eye color, hair color, and race may be provided to help eliminate incorrect matches. HHS prohibits any disclosure of diagnostic or clinical information, from medical records or other sources, and any mental health information beyond the indication that the individual is subject to the federal mental health prohibitor.

Consequences for Covered Entities

The modification to HIPAA is not a significant disruption for the majority of covered entities, as noted by HHS, as most covered entities do not act as NICS data repositories or adjudicate or commit individuals. If a covered entity is not the type of covered entity specifically listed in the HIPAA modification, there is no permissible disclosure of mental health information for the purposes of reporting to NICS.

For those covered entities that fall within the definition provided in the modification, it is important to follow the exact data element suggestions provided by HHS. Further, even though the modification is narrowly tailored, HIPAA does not pre-empt more stringent state laws. It is still vital that covered entities check state law provisions pertinent to mental health information uses and disclosures prior to disclosing information to NICS under HIPAA.

For further information regarding this modification, please see our prior postings below.

Antitrust: “Doctor, Doctor, Give Me the News”*

Court gives Teladoc some good news in its antitrust challenge to Texas Medical Board Rule

By Jonathan L. Lewis

Back in April 2015, Teladoc, Inc., which provides U.S. board-certified doctors for consults via phone or online video, filed an antitrust challenge to stop a new Texas Medical Board (TMB) rule from taking effect that requires physicians to conduct an in-person patient exam prior to telephonic diagnosis and treatment, regardless of whether the exam is medically necessary. A month or so later, a Texas federal district court judge granted a motion by Teladoc for a preliminary injunction enjoining the TMB “from taking any action to implement, enact, and enforce” the challenged rule. (Background on this and other disputes involving Teladoc and TMB is available here and here.)

At that time, the court did not review the TMB rule under the Supreme Court’s decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission, which provides that professional boards, when composed primarily of active market participants, are exempt from antitrust claims only if they are actively supervised by the state government, because “TMB declined to assert any immunity defenses” to the challenged rule. TMB has now changed its tune asserting that Teladoc’s challenge to its rule is barred by the doctrine of state action immunity. The only problem for TMB is that the court disagreed, finding that “TMB has failed to show the active supervision required to merit dismissal on the basis of state action immunity.”

Here’s why the court reached that result: The court first dispatched TMB’s claim that it is subject to active state supervision “because its decisions are subject to judicial review by the courts of Texas and the State Office of Administrative Hearings ("SOAH"), as well as review by the Texas Legislature.” As for judicial and administrative review, the court found that review is “limited to inquiring whether the decision exceeded the statutory authority granted to the agency,” a determination that a rule is invalid and not an “evaluation of the policy underlying the rule.” As such, the court found that the claimed review failed to meet the Supreme Court’s mandate that the supervisor “must review the substance of the anticompetitive decision, not merely the procedures followed to produce it [and that] the supervisor must have the power to veto or modify particular decisions to ensure they accord with state policy.”

As for TMB’s argument that “the Texas Legislature exercises sufficient oversight to constitute active supervision” based on a “sunset review” process and a provision requiring the legislature to be notified of proposed rule changes, the court found that (1) the sunset review did not include “the power to veto or modify any rule adopted by the TMB” and (2) the notification requirement lacked “any authority to veto or modify the rule.” After noting that the “mere presence of some state involvement or monitoring does not suffice,” the court had little difficulty finding that the claimed legislative review fell “well short of the active supervision required.” After finding that TMB failed to show its adoption of the challenged rule was subject to active state supervision, the court saw no reason to address the second requirement of state action immunity, a showing that the challenged rules were enacted pursuant to a clearly articulated state policy.

With TMB’s immunity defense behind it, Teladoc’s antitrust challenge can move forward. However, given that the court already concluded that Teladoc showed it would likely succeed on the merits of its antitrust claim when it granted Teladoc’s motion for a preliminary injunction, one has to wonder what’s really left to fight about, but that hasn’t stopped TMB from pressing the immunity fight in another courtroom. This time, TMB is asking the U.S. Circuit Court of Appeals Fifth Circuit to review and overturn the district court’s recent ruling. Whether TMB has better luck in that courtroom is yet to be seen.

* “Bad Case of Loving You (Doctor, Doctor)” by Robert Palmer

Medicare: Congress Ends 2015 With Some Last-Minute Reforms

By Robert M. Wolin

Congress chose to end 2015 with some last-minute Medicare reforms impacting healthcare providers. Significantly, the Patient Access and Medicare Protection Act, signed into law by President Obama on December 28, 2015, includes provisions aimed at identity theft protections, exception from meaningful use requirements, radiation therapy rates, fee awards for Medicare Administrative Contractors (MACs), and payment for complex rehabilitative wheelchair accessories.

Identity Theft Protections

The Act strengthens the penalties for the knowing and willful purchase, sale, or distribution of a Medicare, Medicaid, or CHIP beneficiary identification number or a unique health identifier for a healthcare provider. The penalty is now imprisonment for up to 10 years or a fine of not more than $500,000 ($1 million in the case of a corporation) or both. Providers should make their employees aware of the enhanced penalties and also consider the safeguards they have in place to prevent the distribution of beneficiary identification numbers or unique health identifiers inasmuch as the Act does not define the term “distribution.”

Exceptions From Meaningful Use Requirements

Hospitals, physicians, and other eligible professionals seeking relief from financial penalties for failing to meet Stage 2 Meaningful Use requirements in 2015 will find it easier to apply for hardship exceptions. The Act permits the Centers for Medicare and Medicaid Services (CMS) to grant certain exceptions to the meaningful use penalties on a blanket basis rather than case-by-case to eligible professionals and hospitals for hardships described on the CMS website prior to December 15, 2015. For hospitals, the exceptions include (1) areas with significant Internet infrastructure limitations, (2) new eligible hospitals, (3) extreme and uncontrollable circumstances (e.g., natural disaster areas), and (4) electronic health records (EHR) vendor difficulties. Eligible hospitals must apply for these new exceptions by April 1, 2016, and eligible professionals must apply by March 15, 2016. Certain case-by-case exception deadlines are later.

However, the impact of the Act is uncertain, given that Acting CMS Administrator Andy Slavitt recently announced that “the meaningful use program as it has existed, will now be effectively replaced with something better.” Slavitt laid out the themes of the new program, which are consistent with the agency’s value-based purchasing approach:

  • Moving away from rewarding providers for the use of technology and rewarding providers for the outcomes they achieve with the technology
  • Adopting provider-specific technology goals to meet the provider’s rather than government’s needs
  • Requiring open application programming interfaces so providers are not locked in by their EHR decisions (e.g., they can easily move data in and out of their programs securely)
  • Requiring technology interoperability

Radiation Therapy Rates

The Act also freezes Medicare payment rates for certain radiation therapy services (HCPCS G-codes G6001 through G6015) provided in freestanding radiation oncology centers in 2017 and 2018, as CMS transitions those services to a new, episodic alternative payment model in 2019. The new law also requires HHS to submit a report to Congress on the development of the episodic payment model within 18 months.

MAC Fee Awards

Providers can expect to see additional efforts focused on reducing improper payments from the MACs. The new law provides incentives to MACs to reduce the improper payment error rates, which may include a sliding scale of award fee payments and additional incentives as well as “substantial reductions” in award fee payments under cost-plus-award MAC contracts. The incentives apply to contracts entered into or renewed by CMS on or after December 2018.

Payment for Complex Rehabilitative Wheelchair Accessories

Finally, the Act limits CMS’s ability to consider competitive pricing information when establishing payment rates for complex rehabilitative wheelchair accessories prior to January 1, 2017.

Blog Exclusives

Incident Response Tip: Five Ways to Improve Information Security and Reduce the Impact of a Data Breach

Solicitation of New Safe Harbors and Special Fraud Alerts

FTC Brushes Aside AG, Regulators to Attack Local Hospital Merger

Federal Circuit denies en banc review of Ariosa v. Sequenom

Events Calendar

January 26, 2016

Washington, D.C., Partner Lee H. Rosebush will moderate a panel on “Recent FDA Guidance and Enforcement Discretion” at the FDLI Drug Quality and Security in 2016 Conference in Washington, D.C.

April 4, 2016

Houston, Partner, Gregory S. Saikin will participate in a webcast on “FCPA Investigation Cooperation: Avoiding Common Mistakes” for The Knowledge Group.

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

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