Top Ten Issues in Health Law 2023

1. Reproductive Health Rights in a post-Roe Era

Devon Minnick and Alaap Shah, Epstein Becker & Green PC

+Listen to Episode 1

The U.S. Supreme Court’s opinion in Dobbs v. Jackson Women’s Health Organization (Dobbs) uprooted a half-century of Roe v. Wade precedent regarding abortion rights under constitutional law. The Dobbs ruling relegated the issue of abortion to the states and left individuals, families, states, regulators, and agencies, as well as the health care industry writ large, in a state of uncertainty that is unlikely to be resolved in 2023.

State Law Polarization. State laws will continue to take various approaches to mitigate or capitalize on the shifting legal landscape emanating from the overturn of Roe v. Wade. Conservative-leaning states will likely continue seeking avenues to implement near-full bans on abortion, which often may impede access to other reproductive health services, such as in-vitro fertilization. Progressive states have and will likely continue to implement new laws seeking to protect or expand access to abortion services, such as privacy protections for reproductive health information and immunities for individuals facing criminal prosecution or civil litigation arising from conduct in other states. This push for protection of reproductive health is evidenced by several states increasing their budgets to provide funding to organizations that support abortion access and to local health departments that support abortion-related services, which will likely continue into 2023, as more individuals in restrictive states travel across state lines to access legal, safe reproductive health care services. Additionally, some states’ abortion bans, such as Arizona’s, are likely to be implemented in 2023. Arizona’s Attorney General said that he would not enforce the abortion ban until “at least 45 days after a final ruling” in the litigation against the ban; currently, abortions are still being performed in Arizona.¹

Conflicts of Law Abound. It is likely that in 2023, we will see complex conflict of laws questions emerge due to states’ fundamentally opposed positions on abortion access. First, interstate enforcement efforts will likely face challenges. While certain states have so-called “bounty hunter” laws to support enforcement of abortion-bans against citizens who seek such services outside of their home state, some states have prohibited in-state actors, such as judicial officers, from assisting other states with abortion-related arrests, investigations, and litigation. Litigation around these issues is likely in 2023.

Second, the Dobbs decision has resulted in complicated preemption issues between state and federal law. For example, with respect to medication abortion it is likely that litigation will continue to answer whether the Federal Food, Drug, and Cosmetic Act preempts state laws from barring, limiting access to, or making it more difficult to access Food and Drug Administration (FDA)-approved abortion drugs, such as mifepristone and misoprostol. GenBioPro recently withdrew its lawsuit against Mississippi for impeding access to its generic mifepristone, but it has indicated that it is “committed to using the law to remove unnecessary barriers for patients and providers” and may refile after adjusting its legal strategy. Similarly, another contentious issue for 2023 is the Department of Health and Human Services’ (HHS’) July 2022 guidance letter to providers, clarifying its position that abortion is a treatment necessary to stabilize a pregnant patient in a medical emergency such as an ectopic pregnancy.² Currently, two district courts have opposite holdings on the Emergency Medical Treatment and Labor Act (EMTALA) issue, and if the Supreme Court finds that states’ abortion restrictions are not preempted by EMTALA in the context of an emergency at an emergency department, this could challenge the ability of the federal government to standardize access to emergency treatment, with implications extending past abortion.

Winter Is Coming: The Chilling Effect of Dobbs. Variability in state laws, complexity in conflicts of law and interstate enforcement of such laws, and the general fear of criminal prosecution will likely continue to have a chilling effect on providing reproductive health services in many states. By way of illustration, while some states have banned nearly all abortion-related services, others have provided narrow exemptions from near-total bans to save the health of the pregnant person or in certain cases, to allow abortion if the pregnancy is caused by rape or incest. Nevertheless, providers may continue to question the legality of providing abortion services, which may cause delays in providing such services, even when such services are medically necessary, for fear of violating their state’s abortion laws. Additionally, many states’ laws are unclear as to what qualifies as an emergency medical condition or what the process is to qualify for the rape and incest exceptions. In 2023, we will see continued confusion and resulting chilling effects on providing timely abortion-related services in certain states.

Threats to the Private Sector. In the private sector, companies will continue to evaluate offering travel benefits for employees in states restricting abortion so that their employees may access abortions in states that protect abortion access. Some companies, such as Google, are going even further, allowing employees to relocate to office locations in states where abortion is accessible.³ Employers may face pushback to such travel benefits from legislators or regulators in 2023. We already saw in 2022, the Texas Freedom Caucus threatened law firm Sidley Austin for offering such travel benefits, stating that it would disbar any lawyer who violated the state’s abortion law.⁴ Similarly, letters were sent to several publicly traded companies in late 2022 by an ex-Equal Employment Opportunity Commission (EEOC) official under the Trump administration, raising discrimination-based challenges to travel benefits provided solely for abortion-related services (and not for general health care needs that are not available locally), which the EEOC has been asked to investigate.⁵ The EEOC’s Office of Legal Counsel responded, stating that the ex-EEOC official “lack[ed] authority to speak on behalf of the agency.”⁶ Large companies have also spoken out about state laws restricting abortion; for example, prior to the Dobbs decision, more than 50 companies signed a letter opposing the Texas abortion bill before it became law, stating that it would harm their businesses including their ability to recruit and retain talent.⁷ It remains to be seen whether in 2023, companies will speak with their feet and migrate operations out of states restricting abortion.

In 2023 and beyond, abortion rights will likely remain a strong issue for voters as states grapple with whether to implement abortion restrictions and the results of ongoing litigation. The health care industry will continue to face difficulties navigating the shifting legal landscape.

2. Health Care Antitrust Enforcement Trends and Outlook

Dionne Lomax, Affiliated Monitors, Inc.

+Listen to Episode 2

The first year after President Biden’s sweeping Executive Order on Promoting Competition in the American Economy has delivered robust antitrust enforcement in the health care industry. Despite setbacks, the Department of Justice (DOJ) continues to criminally prosecute labor market collusion in the health care sector, the Federal Trade Commission (FTC) is exploring labor market effects in provider mergers, and both agencies are focused on challenging vertical transactions. Moreover, the FTC is conducting retrospective studies that could influence their enforcement agenda in 2023 and beyond. Meanwhile, state attorneys general, several of whom are using recent state pre-merger notification statutes and other legislative authority to regulate transactions, are closely scrutinizing provider conduct.

Criminal Prosecution of Health Care Firms. The DOJ recently began prosecuting health care firms criminally but suffered back-to-back losses in April 2022 after juries voted to acquit in both the DOJ’s wage-fixing and no-poach cases.⁸ Notably, both courts’ rejection of defendants’ motion to dismiss the indictments (i.e., finding the alleged conduct to be within the scope of the antitrust laws) reflects some plausibility of the DOJ’s theory of harm. Undeterred, the DOJ continued to pursue similar cases, and recently won its first no-poach criminal prosecution in United States v. Hee.⁹ The DOJ’s recent win will likely encourage it to pursue similar indictments, underscoring the importance of developing effective antitrust compliance programs.

Scrutiny of Conduct Impacting Health Care Labor Markets. Post-employment non-compete agreements are also being scrutinized. Some states have passed laws severely limiting the ability of employers to impose post-termination non-compete restrictions. Meanwhile, labor market effects on wages are presently a key focus at the FTC during health care transaction reviews.¹⁰ Accordingly, merging parties should be prepared to provide information pertaining to the labor-market impact of their proposed transactions to regulators as part of their substantive antitrust advocacy.

Robust Horizontal and Vertical Merger Challenges. In 2022, the FTC challenged four horizontal hospital mergers, all of which were subsequently abandoned by the parties.¹¹ Both agencies have also been pursuing vertical merger challenges and each have suffered recent defeats. In September 2022, a judge denied the DOJ’s request for an injunction seeking to block UnitedHealth Group’s proposed acquisition of Change Healthcare, and an administrative law judge denied the FTC’s bid to block Illumina’s acquisition of Grail, Inc. (now on appeal to the full Commission). While the agencies’ recent vertical merger theories have yet to gain traction in court, merging parties pursuing vertical integration should thoroughly prepare for in-depth agency scrutiny. Such scrutiny could also come from state antitrust authorities, some of whom are examining small transactions based on state-level pre-merger notification statutes that, unlike their federal equivalent, do not have minimum transaction-size thresholds (e.g., Connecticut, Washington). As such, merging parties should be prepared for the possibility that smaller transactions (e.g., physician mergers) that could fly under the radar of federal authorities will nevertheless be reviewed in certain states.

FTC COPA Study Results and New Inquiry into PBM Industry. In August 2022, the FTC issued a policy paper warning about the anticompetitive effects of state Certificate of Public Advantage (COPA) legislation.¹² Designed to shield hospital mergers from antitrust laws in favor of state oversight, COPAs are touted by providers as reducing costs and improving population health outcomes. The FTC’s paper concludes otherwise, citing studies showing that past hospital mergers subject to COPAs have experienced significant increases in commercial inpatient prices, as well as declines in quality of care, despite state oversight. In June 2022, the Commission also launched an inquiry into the pharmacy benefit management (PBM) industry, scrutinizing the impact of vertically integrated PBMs on the access and affordability of prescription drugs.¹³ This probe is just one of several FTC retrospective studies into the impact of mergers and other activity in health care markets, the outcome of which could impact the FTC’s future enforcement agenda.

3. Telehealth Trends: What to Watch

Amy Joseph, Jeremy Sherer, and Melania Jankowski, Hooper Lundy & Bookman PC

+Listen to Episode 3

The COVID-19 pandemic instigated a paradigm shift for telehealth in the United States, with services delivered via telehealth becoming more widely accessible and more readily covered by commercial and governmental payers. However, some of the key flexibilities that fueled this expansion are temporary, creating an uncertain landscape for providers in 2023. Adding to this uncertainty, telehealth appears to have caught the attention of enforcement agencies in recent months and is expected to remain a focus of future enforcement action.

A few of the telehealth issues most likely to impact health care providers in 2023 follows.

Increased Government Scrutiny. While DOJ has been focused on “telefraud” for several years, the Office of Inspector General (OIG) firmly pivoted its attention towards virtual care this year. In July, OIG issued a Special Fraud Alert outlining seven “suspect” characteristics that it observed in some telehealth companies, including advertising waivers of copayment responsibilities, marketing only to Medicare beneficiaries, furnishing only a single class of products or treatment, and offering limited clinical interaction between practitioners and their patients. OIG also issued multiple reports in September that highlighted telehealth companies as a potential source of program integrity risk (though only a tiny fraction of claims reviewed for the report were identified as potentially problematic). OIG ultimately recommended that the Centers for Medicare & Medicaid Services (CMS) monitor the behavior of telehealth companies billing Medicare moving forward, meaning this will be an important area in 2023.

Post-PHE Off Ramps—Medicare Coverage of Telehealth Services. Over the course of the COVID-19 pandemic, CMS quickly waived hundreds of regulatory requirements, including waivers to promote access to virtual care. Telehealth waivers broadened the types of practitioners that could bill for telehealth services, authorized the use of audio-only technology, and expanded coverage to include services furnished to patients outside of rural areas and in their homes. These telehealth waivers and flexibilities are currently scheduled to expire 151 days after the federal public health emergency (PHE) ends. Similarly, the types of telehealth services that are covered under Medicare are in flux. Medicare covers about 270 telehealth services on a permanent basis with another 160 services approved temporarily through the end of the PHE. CMS has ensured that certain temporary telehealth services will remain in place through at least December 31, 2023, but it is unclear what will be covered in the future.

Stakeholders across the health care industry are lobbying to extend these waivers or make them permanent, but whether such efforts will be successful remains unknown. As such, 2023 will be pivotal in determining Medicare’s future telehealth landscape.

In-Person Examination Requirements for Prescribing Controlled Substances. As amended by the Ryan Haight Act, the Controlled Substances Act has long prohibited prescribing controlled substances via telehealth without a prior in-person examination unless one of the limited exceptions, including the existence of a PHE as declared by HHS, is satisfied. In reliance on that exception, the U.S. Drug Enforcement Administration (DEA) has not enforced the prohibition on prescribing controlled substances via telehealth without a prior in-person examination during the PHE. New telehealth models emerged during the PHE that expanded access to treatment requiring controlled substances medication, but their future is murky.

To date, the DEA has been silent as to whether the in-person examination requirement will return post-PHE, leaving providers and their patients in limbo. The agency could, of course, explore establishing the telemedicine registration process outlined by Congress in the Ryan Haight provisions in 2008, and again in the SUPPORT Act of 2018. That process would enable providers to obtain a telemedicine registration permitting them to prescribe controlled substances via telehealth without a prior in-person examination. As of October 2022, the DEA has not provided guidance regarding its intentions moving forward.

State Law Developments. Many states are also revisiting their medical practice laws to incorporate telehealth standards to allow for the continued evolution and growth of virtual care, resulting in prolific changes to state telehealth legal frameworks. For example, some states are building licensure frameworks for out-of-state practitioners providing services via telehealth, some states are addressing physicians’ ability to prescribe controlled substances through the use of telehealth, and some states are assessing various modalities for delivery of services via telehealth. In addition, some states are enacting laws addressing coverage and payment parity for services delivered via telehealth. State law can be expected to continue evolving rapidly in 2023 as lawmakers look to facilitate virtual care moving forward.

4. Implications of the CMS Framework for Health Equity

Dawn Hunter, Network for Public Health Law

+Listen to Episode 4

In 2021, I wrote about the movement toward racial equity in health outcomes, noting the opportunity for hospitals, health care systems, and insurers to work with partners to address the ways that racism has been institutionalized in the health care system.¹⁴ Some of the trends identified, such as building workforce capacity and diversity and improving data collection and use, are reflected in the CMS Framework for Health Equity 2022-2032.¹⁵ The Framework is responsive to Executive Order 13985, Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.¹⁶ The Executive Order established a comprehensive, whole-of-government approach to racial equity, requiring executive departments and agencies to conduct an equity assessment of their policies and programs and to develop Equity Action Plans, among other things, and it defined equity broadly to include multiple intersectional identities, including race and ethnicity.

Current Vision. The Framework is an update to the CMS Equity Plan for Improving Quality in Medicare (2015),¹⁷ providing a more expansive, ten-year approach to embedding equity in all CMS programs including Medicare, Medicaid, the Children’s Health Insurance Program, and the Health Insurance Marketplaces. The Framework’s five priority areas define how CMS will assess, design, and operationalize policies and programs to ensure that they are a vehicle for people and communities to attain their highest level of health. These priority areas also are where current attention should be directed. While the Framework provides reasoning for each and gives examples of what CMS is doing to advance them, guidance is needed for providers and institutions on implementation.

These priorities are:

1. Expand the collection, reporting, and analysis of standardized data.
2. Assess the causes of disparities within CMS programs and address inequities in policies and operations to close gaps.
3. Build the capacity of health care organizations and the workforce to reduce health and health care disparities.
4. Advance language access, health literacy, and the provision of culturally tailored services.
5. Increase all forms of accessibility to health care services and coverage.

Some changes from 2015 include the collection, analysis, and use of data on social risk factors, experience of care, and more comprehensive demographic data; improving engagement in CMS Innovation Center models and demonstrations; expanding language access to include health literacy and culturally tailored communication; and identifying physical, communication, cognitive, and functional elements of disability when addressing accessibility of programs and services.

To support the five priorities, CMS highlights resources and support available such as the Mapping Medicaid Disparities Tool, Disparities Impact Statements, its Technical Assistance Program, Language Access Resources, and the Rural Health Strategy Guide.¹⁸

On the Horizon. Much of the Framework is not new but it now applies to all CMS programs, so the challenge will be in adapting lessons learned after the 2015 equity plan was implemented to these additional programs.¹⁹ There is also an opportunity to enhance or improve existing efforts to address health equity issues. A critical first step is organizational self-assessment—identifying and assessing what policies and programs are in place using the Framework as a lens, determining the impact of any changes to providers and institutions, and assessing capacity for implementation. As an example, the collection, analysis, and use of more comprehensive patient data may require changes to systems and create additional privacy risks and will require understanding the intersection with any related state statutory requirements.

Additionally, CMS issued the Medicare Hospital Inpatient Prospective Payment System and Long-Term Care Hospital Prospective Payment System final rule in August 2022.²⁰ Among other things, this rule establishes a “birthing-friendly” hospital designation for hospitals that report participation in a statewide or national quality collaborative and implement all recommended interventions, which is anticipated to support efforts to reduce persistent disparities in maternal morbidity and mortality. This rule also establishes new health equity measures for the Hospital Inpatient Quality Reporting Program, including the Hospital Commitment to Health Equity measure, the Screening for Social Drivers of Health measure, and the Screen Positive Rate for Social Drivers of Health measure. It will be critical to monitor implementation and evaluate the impact on improving equity in health outcomes.

The Bigger Picture. The Framework reflects a continued shift to a focus on health care quality and experience of care. While CMS programs are driven by measurement and reporting, the Framework recognizes and promotes that equity is a process and not just an outcome. Creating a ten-year plan recognizes that advancing equity requires a long-term commitment and vision and that success will not be realized overnight. Building that plan on past efforts creates continuity and sustainability of those efforts. Expect the work to embed equity in operations and improved health outcomes for all to continue even in a shifting political environment.

5. Fraud & Abuse Issues to Watch

Chris Sabis, Sherrard Roe Voigt & Harbison PLC

+Listen to Episode 5

If there was any pandemic-related slowing of DOJ’s fraud enforcement machine, then it has quickly regained steam. DOJ brought in $5.6 billion in total False Claims Act (FCA) settlements and judgments in 2021,²¹ and several of the Department’s stated priorities from February 2022 remain unchanged. We can expect continued enforcement activity in areas like opioids, managed care (Medicare Part C), and medically unnecessary services. Indeed, over $3 billion of the 2021 total came from two opioid-related resolutions,²² and a number of managed care providers paid significant amounts to settle allegations that they manipulated their risk adjustment scores to make their patients appear sicker than they were and increase their capitated payments.²³ Some FCA issues merit specific attention going into 2023, including health IT, subregulatory guidance, and kickbacks.

DOJ has characterized health IT, including cybersecurity and Electronic Health Records (EHR), as a focus area.²⁴ Cybersecurity has been at the core of many enforcement actions in recent years. For example, in September 2019, three individuals were indicted for conspiracy to breach a health care provider’s EHR system and steal protected health information.²⁵ More broadly, EHR systems have been a source of significant FCA settlements, and the area continues to evolve. EHR-related fraud enforcement historically has centered on EHR donation fraud cases, allegations of false meaningful use (MU) attestations, and kickbacks relating to the adoption of particular EHR systems.²⁶ The most recent EHR settlement is along similar lines.²⁷ Some EHR-related FCA cases involve a different theory, alleging what I refer to as Substantive EHR Fraud. In these cases, a whistleblower or the government claim that the functions of the EHR system itself are causing or contributing to alleged fraudulent conduct, such as upcoding. It will be interesting to see what fraud enforcement actions arise in the health IT space in 2023.

Subregulatory guidance will continue to be debated in 2023.²⁸ In the summer of 2021, Attorney General Merrick Garland issued a memorandum rescinding limitations on the uses of subregulatory guidance that DOJ had announced in the Sessions and Brand Memos. The Department subsequently deleted a section on subregulatory guidance from the Justice Manual that it had adopted to expand on and clarify the Brand Memo in particular.²⁹ A revised version of Justice Manual Section 1-20.000 has not been released.³⁰ It will be interesting to see if the Department provides additional details on the appropriate uses of subregulatory guidance in FCA cases or simply relies on the broader policies stated in the Garland Memo.

While these will be important topics in 2023, kickbacks remain the most prevalent area of DOJ civil and criminal enforcement.³¹ The telemedicine sector is a particular target of Anti-Kickback Statute³² (AKS) investigations. Alleged kickbacks in telemedicine have resulted in several enforcement actions, including a $64 million settlement related to a nationwide kickback conspiracy³³ and a guilty plea in Kentucky relating to a conspiracy to pay and receive kickbacks in exchange for physician orders for cancer genomic testing.³⁴

An interesting case addressing the scope of the AKS is pending in the Middle District of Tennessee.³⁵ There, the court denied a motion to dismiss kickback claims asserted by the plaintiff states.³⁶ In doing so, the court ruled that the states could enforce the federal AKS through their respective state FCAs in relation to Medicaid beneficiaries’ incurred medical expenses (IME) payments for services not covered by the applicable state Medicaid programs. The ruling appears unprecedented and inconsistent with other federal law regarding the nature of IME payments. The outcome of this case could have significant implications for the breadth of AKS applicability.³⁷ Stay tuned.

6. New Year, New (and Old) Data Privacy Requirements

Valerie Breslin Montague, Nixon Peabody LLP

+Listen to Episode 6

Health care providers, health plans, and health care vendors should plan for 2023 to include new data privacy laws and regulations, as well as laws and regulations already in effect that will once again be enforced should the COVID-19 PHE end during the coming year.

Since it was signed into law in June 2018, the California Consumer Privacy Act (CCPA) has proven to be the most robust state privacy law in the country.³⁸ A second California ballot initiative, the California Privacy Rights Act (CPRA), amends the CCPA and adds new consumer privacy protections.³⁹ The majority of the CPRA provisions take effect on January 1, 2023, but apply to data collected starting on January 1, 2022. The CPRA establishes the California Privacy Protection Agency (CPPA), which has enforcement and rulemaking jurisdiction over the CCPA. The CPPA issued proposed regulations in July 2022 with the intent to sync the existing CCPA regulations with the CPRA, as well as to update the existing regulations to clarify the new consumer rights added by the CPRA.⁴⁰ While nonprofit health care entities continue to fall outside of regulation under the CPRA, for-profit health care organizations that share the personal information of 100,000 or more California residents or households (the previous requirement regulated only those who buy, sell, or share such information for commercial purposes) or derive 50% or more of their annual revenue from either selling or sharing California residents’ personal information (modified from just selling) are now subject to regulation.⁴¹ Health data now falls within a category of “Sensitive Personal Information,” and California consumers have the right to prevent a CCPA-regulated entity from disclosing this information and to opt-in or opt-out of its use.⁴² Noting that the CCPA’s carve-out for protected health information collected by a Health Insurance Portability and Accountability Act (HIPAA) covered entity or business associate remains, health care organizations should continue to analyze whether other personal information held by the entity triggers regulation.

Beyond the changes promulgated under the CPRA and its forthcoming final regulations, Virginia’s Consumer Data Protection Act also takes effect on January 1, 2023⁴³ and Connecticut’s law follows on July 1, 2023.⁴⁴ Utah’s Consumer Privacy Act takes effect at the end of the year, on December 31, 2023.⁴⁵ Notably, all three laws exempt nonprofit organizations, as well as HIPAA covered entities and business associates, from compliance. A number of other states have pending consumer privacy legislation.⁴⁶

In addition to continuing to monitor the status and applicability of state privacy laws, health care organizations should closely monitor guidance on the expiration of the PHE. HHS has committed to providing notice 60 days prior to the expiration of the PHE.⁴⁷ The PHE has been extended until January 11, 2023,⁴⁸ but it is likely that, even if it does not end in January, that it will end at some point during 2023. The end of the PHE will cause the roll back of the Office for Civil Rights’ (OCR’s) enforcement discretion, which currently permits HIPAA covered entities to provide telehealth services through any remote communication product that is not public facing.⁴⁹ Prior to the end of the PHE, covered entities should take the opportunity to analyze changes needed with respect to their telehealth programs. OCR’s June 13, 2022 guidance to health care providers and health plans on how to use audio-only telehealth services in a HIPAA-compliant manner can serve as a good starting point for analyzing these types of service arrangements.⁵⁰

Health care providers, health plans, and health care vendors also should assess how their operations have changed over the course of the PHE and ensure that their data privacy and security compliance plan addresses the state of their operations in 2023. For example, elements of their workforce that are now remote or “hybrid” may have an impact on the organization’s HIPAA security risk assessment and corresponding risk management plan. A robust vendor management plan may be particularly helpful if an organization relies on a startup entity vendor or a telehealth platform that is new to the health care regulatory environment to deliver key services.

Will 2023 bring the enactment of a comprehensive federal data privacy law, such as the American Data Privacy Protection Act?⁵¹ Even if federal legislation does not pass, health care organizations have a myriad of state laws, as well as the likely removal of OCR’s enforcement discretion, to keep them focused on data privacy and security in the new year.

7. Long Term Care Reforms

William Hopkins, Spencer Fane LLP

+Listen to Episode 7

For those paying attention to the Post-Acute (Long Term Care) industry in 2022, it has been a very busy year for the Biden administration and CMS. Over the course of 2022, there have been several proclamations by the administration regarding the need for reform and improvement in the areas of safety, staffing, quality of care, and reimbursement, and CMS has responded with multiple announcements and regulations attempting to implement some of those initiatives.

On February 28, 2022, the administration announced a comprehensive set of reforms to improve the safety and quality of nursing home care. President Biden declared that he is “committed to ensuring that all Americans, including older Americans and people with disabilities, live in a society that is accessible, inclusive, and equitable. To accomplish that goal, the administration continues to be committed to home and community-based services and ensuring that in no case should a health care facility be causing a patient harm.”

To that end, the administration’s reforms are focused on ensuring that:

1. Every nursing home provides a sufficient number of staff who are adequately trained to provide high-quality care;

2. Poorly performing nursing homes are held accountable for improper and unsafe care and immediately improve their services or are cut off from taxpayer dollars; and

3. The public has better information about nursing home conditions so that they can find the best available options.

Based on this presidential directive, CMS has spent 2022 preparing and launching four new initiatives to ensure that residents receive high-quality of care. These initiatives are focused on:

• Establishing Minimum Nursing Home Staff Requirements. Citing research that the quality of resident care is closely linked to nursing home staffing levels, CMS is actively in the process of proposing minimum standards for staffing adequacy. This effort includes a research study to determine the minimum level and type of staffing needed to ensure safe and quality care for nursing home residents and proposed rules expected to be issued in 2023. CMS has launched a multi-faceted approach to inform the rulemaking process, including seeking written comments and participating in information and listening sessions. The nursing home industry has pushed back on the call for minimum staffing requirements, citing the ongoing workforce shortage that long term care facilities are facing and the substantial costs to implement them.
• Reducing Resident Room Crowding. While most nursing homes operate under a multiple resident per room model, the majority of residents would prefer to have a private room to protect their privacy and dignity. The COVID-19 pandemic also underscored that multi-occupancy rooms increase the spread of infectious diseases. CMS is exploring ways to accelerate phasing out multiple resident rooms and transitioning to a single, private room model.
• Strengthening the Skilled Nursing Facility Value-Based Purchasing Program. This program is designed to provide significant financial incentives to facilities based on quality performance. CMS is actively studying staff turnover and weekend staffing levels with the belief that these metrics closely align with a facility’s ability to provide quality care. CMS has already started to implement new payment changes based on staffing adequacy, the resident experience, and how well facilities retain staff.
• Reinforcing Safeguards Against Unnecessary Medications and Treatments. With CMS’ National Partnership to Improve Dementia Care in Nursing Homes, the industry has seen a dramatic decrease in the use of antipsychotic drugs in nursing homes. CMS plans to launch new efforts to identify problematic diagnoses and refocus efforts to continue to reduce the inappropriate use of antipsychotic medications.

CMS also is increasing scrutiny and oversight of the country’s poorest performing facilities by revamping the Special Focus Facility (SFF) program. Under revisions unveiled in October 2022, CMS is strengthening the criteria for SFFs to graduate out of the program, including requiring them to demonstrate systemic improvements in quality. CMS also will consider discretionary termination for facilities cited with Immediate Jeopardy deficiencies in two surveys while in the program. The agency also will impose more severe, escalating enforcement remedies for SFFs that do not show sufficient improvement and compliance while in the program, and extend the monitoring period and increase the severity of punishment for facilities that graduate from the program but continue to struggle with compliance.

The administration also has asserted that the introduction of private equity into nursing home ownership has tended to lead to significantly worse health outcomes for residents. Private equity investment in nursing homes has grown from $5 billion in 2000 to more than $100 billion in 2018, with about 5% of all nursing homes now owned by private equity firms. The administration expects to shift significant resources, time, and scrutiny to this growing trend and its ongoing effects on the long term care industry.

The long term care industry should anticipate ongoing scrutiny in 2023 and beyond as the administration continues to pursue these comprehensive reforms.

8. It Costs How Much? Drug Pricing and the Inexorable Shift to Non-Institutional Care Settings

Todd Nova and James Junger, Hall Render Killian Heath & Lyman PC

+Listen to Episode 8

2022 was a landmark year for drug pricing and regulation of the pharmaceutical delivery system. Key developments include a blockbuster Supreme Court decision affecting 340B drug reimbursement, manufacturers refusing to offer 340B pricing for contract pharmacies, a continued push by payers to deemphasize institutional services, and drug pricing reforms included in the Inflation Reduction Act. Given continued efforts to steer patients toward non-institutional sites of service, drug pricing issues will continue to drive a shift toward provider-owned pharmacies in 2023.

American Hospital Association v. Becerra: How Will CMS Repay 340B Hospitals? Beginning in 2018, CMS paid some hospitals less for drugs purchased using a 340B Program⁵² discount (Average Sales Price (ASP) -22.5%) than for non-340B drugs (ASP + 6%). In 2022, the Supreme Court ruled that these payment reductions were unlawful because CMS did not comply with statutory requirements that a survey be conducted to establish a basis for pricing that varies by hospital class.⁵³ Currently on remand, the district court has ordered CMS to reverse its payment reductions for the remainder of 2022, but it has not decided on the American Hospital Association’s (AHA’s) motion requesting that CMS repay all affected hospitals for the 2018-2021 calendar years.

CMS believes a remedy must be crafted through notice-and-comment rulemaking to consider how a statutory budget neutrality provision should affect repayment. Meanwhile, AHA argues that rulemaking is unnecessary because the Supreme Court’s decision leaves only one possible remedy: repayment in full without regard to budget neutrality.

In the interim, 340B hospitals should promptly identify their specific Medicare Administrative Contractor (MAC) guidance addressing claim amendments for fiscal year (FY) 2022 within the one-year rebilling window since there has been variability in their guidance. CMS continues to require affected hospitals to append 340B claims with a “JG” modifier and unaffected hospitals with a “TB” in spite of what some in the industry may have suggested. A failure to accurately identify these purchases could cause CMS to incorrectly request rebates or result in application of a repayment formula using inaccurate data that could have legal consequences for a 340B covered entity.

Given that these 340B payment reductions were not, and are unlikely to be, directly applied pharmacy benefit claims, many health systems have continued to focus on the development of pharmacy service lines that facilitate access to self-administered drugs.

340B Manufacturer Restrictions. Since 2020, numerous drug manufacturers have restricted shipments of 340B drugs to covered entities’ 340B contract pharmacies. On average, these restrictions have caused more than $500,000 in annualized losses for critical access hospitals and nearly $3,000,000 in annualized losses for disproportionate share hospitals.⁵⁴ In response to notices from the Health Resources and Services Administration’s Office of Pharmacy Affairs (OPA) that their actions are unlawful, a number of manufacturers initiated litigation in federal district courts. Their arguments focused not only on whether their actions are permissible under the 340B statute, but also on OPA’s authority to regulate the 340B program, calling into question the fundamental mechanisms used for 340B program oversight. So far, district courts have issued split decisions, often finding that neither party’s position is compelled by the language of the 340B statute.

As many as three courts of appeals could issue opinions on this issue in 2023. Regardless of the outcome before the circuit courts, an appeal to the Supreme Court is likely, and a circuit split could lead the Justices to take the case.

In the interim, since many of these manufacturers have continued to allow 340B drug access for system-owned pharmacies, we continue to see interest from health systems in growing their pharmacy operations footprint to emphasize mail order, home infusion, specialty, and retail pharmacies facilitated by consolidated pharmacy shared service centers.

Inflation Reduction Act. In 2022, Congress enacted a number of drug pricing reforms as part of the Inflation Reduction Act⁵⁵ (IRA). Although the IRA’s high-profile provisions allowing Medicare to negotiate drug prices will not go into effect until 2026, numerous other changes are effective in 2023. Among these are provisions that cap Medicare beneficiaries’ cost for insulin at $35, eliminate cost sharing for vaccines for Medicare Part D and Children’s Health Insurance Program beneficiaries, and require manufacturers to pay a rebate to Medicare if the prices for their Part B and Part D-covered drugs rise faster than inflation. All of this will likely increase the importance of self-administered drugs, further hastening the development of provider-owned specialty, mail order, and retail pharmacies.

9. ESG-Related Matters

Michael W. Peregrine, McDermott Will & Emery LLP, and Anne M. Murphy, ArentFox Schiff LLP

+Listen to Episode 9

2023 should be a consequential year for the application of environmental, social, and governance (ESG)-related matters across the health care industry. This is especially the case given the significant manner in which ESG issues presented themselves to the industry in 2022, and the perceived impact of both a recessionary economy and divided federal government on continued ESG focus.

ESG Definition and Clarity as a Threshold Issue. The ESG movement may continue to suffer from lack of certainty concerning the definition and scope of ESG and the impact of ESG on corporate performance, investment, and disclosure. Environmental factors remain better defined and understood than Social or Governance factors, both across the board and in the health care sector. As scrutiny on ESG ratings agencies continues, as discussed below, one outcome may be development of separate “E,” “S,” and “G” ratings, with better-defined measures for each.

ESG Ratings Agencies Face Increased Scrutiny. Continued controversy and government attention can be expected regarding the objectives, methodologies, and incentives of the ESG ratings providers. Increasingly, deficiencies and inconsistencies among ratings agency ESG methodologies are being brought forward as a fundamental concern about the integrity of the ESG ratings system. These perceived ratings agency ecosystem issues include varying sources of data, inconsistent scoring approaches, lack of transparency as to ratings methods, insufficient updating of data, and unexplained variation in ratings results within a single ratings agency. One consequence of this concern could be domestic and international government efforts at making the ESG ratings process more transparent and consistent.

HHS Involvement. The health industry impact of two prominent ESG-related bureaus within HHS should be monitored. The Office of Climate Change and Health Equity serves as a “department-wide hub for climate change and health policy, programming and analysis, in pursuit of environmental justice and equitable health outcomes.” The Office of Environmental Justice develops and implements HHS-wide strategy on environmental justice and health.

CMS Policy on Health Equity. Health care organizations will want to monitor the extent to which CMS implements its new Framework for Health Equity policy in its relationship with stakeholders. CMS has already announced the five specific priority areas it will be emphasizing as it works to address health disparities across all its programs.

Accreditation of Health Care Providers. Certain health care providers will need to be prepared to respond to new and revised Joint Commission requirements designed to reduce health care disparities as they will be applied effective January 1, 2023 to ambulatory health care, behavioral health care and human services, critical access hospitals, and hospital accreditation programs.

Credit Analysis of Health Industry Organizations. Many health care organizations will prepare to participate in efforts by credit rating agencies, such as Moody’s Investor Services, to formally quantify ESG factors into the credit analysis process for health care institutions. Scoring systems, such as those developed by Moody’s, are designed to convey ESG factors that may already be incorporated into credit ratings. As indicated above, however, these ratings agencies may experience pressure to modify their ratings methods.

Tax-Exempt Health Care Organizations. ESG-related tax planning will continue to be an important consideration, as tax-exempt health care organizations evaluate whether (1) their ESG activities are in furtherance of tax-exempt purposes, and (2) ESG investments and health equity initiatives may/should be addressed by those organizations in the Form 990 (e.g., Schedule H) in support of their continued Section 501(c)(3) status.

Executive Compensation. ESG goals are likely to be increasingly considered as related incentive targets in health care executive compensation arrangements (e.g., long term incentive pay plans). Achievements in addressing health care equity, and in making improvements to the social determinants of health, may be particularly well suited for such use.

Recession Impact on ESG Implementation. An increasing number of indicators suggest that organizational ESG commitments may be delayed or reduced as CEOs seek to respond to the financial pressures anticipated from a looming recession. These efforts are not necessarily intended to demonstrate disinterest in ESG, but rather are intended to address near-term economic challenges. In the health care sector, these financial stresses could be especially severe.

Federal Political Climate. 2023 will be an especially crucial year for the implementation of ESG principles, as a divided federal government may spark efforts by ESG opponents to curtail or roll back ESG regulations and other initiatives.

10. Research-Related Developments to Watch

Rebecca Schaefer, K&L Gates, LLP

+Listen to Episode 10

Research continues to be an area of dynamic policy initiatives and regulatory change. Both the Biden administration and lawmakers in Congress have expressed interest in new investments in research, as well as streamlining certain regulatory requirements and increasing oversight requirements for others.

Harmonization of FDA and Common Rule Requirements for Cooperative Research. As researchers are aware, there are two primary regulatory frameworks governing human subjects protections in research: (1) the Federal Policy for the Protection of Human Subjects, known as the “Common Rule,” which applies to federally funded human subjects research;⁵⁶ and (2) the FDA regulations, which apply to human subjects research that involves clinical investigations regulated by FDA (FDA Rules).⁵⁷ For FDA-regulated studies that involve federal funding, both sets of rules apply. On September 28, 2022, the FDA issued two Notices of Proposed Rulemaking that seek to harmonize requirements in the FDA Rules with those in the Common Rule for human subjects research and for the review of cooperative research by a single institutional review board (IRB), to be effective 180 days after publication of the forthcoming final rules.⁵⁸ Specifically, the proposals would make certain changes to the FDA Rules intended to streamline the IRB review process and decrease certain administrative burden and coordination costs, without compromising human subject protection, as well as clarify investigational device exemption regulations. However, the proposed changes to the FDA Rules do not go as far as adopting all requirements of the Common Rule, for example, by declining to adopt provisions for broad consent. We anticipate the final rules to have additional clarifications based on public comments received when they are released in 2023.

ARPA-H. As part of its FY 2022 budget request for the National Institutes of Health (NIH), the Biden administration proposed to establish an Advanced Research Projects Agency for Health (ARPA-H) to drive transformational health research innovation and encourage large-scale, sustained, and cross-sector coordination primarily targeted at studying potential cures for diseases such as cancer, Alzheimer’s disease, and diabetes. To develop the ARPA-H, Congress proposed through FY 2022 appropriations to provide $1 billion to establish a new ARPA-H account at HHS, available until September 30, 2024.⁵⁹ While the specific goals, structure, and authority of the ARPA-H as proposed are somewhat uncertain in the absence of comprehensive legislation, there are a number of bills currently under consideration that would codify and outline the specific parameters of the program, and we anticipate further development into 2023.

Cures 2.0. The 21st Century Cures Act, passed in late 2016,⁶⁰ authorized funding for innovative drug research and encouraging a faster process for approval of drugs and medical devices. Lawmakers are now considering new legislation to promote biomedical innovation and the development of new drug treatments many are dubbing “Cures 2.0.” Specifically, proponents are advocating for a change in the way that Medicare reimburses providers for new treatments and technologies and for increased access to telemedicine services, particularly in a post-COVID world. While specific proposals have been met with bipartisan tension to date, there is some desire to coalesce on initiatives aimed at promoting research for new treatment options in the coming year.

President Biden’s Cancer Moonshot Initiative. Earlier in 2022, President Biden announced the intention to reignite the Cancer Moonshot, an initiative initially launched in 2016 to promote cancer research, as well as cancer screening.⁶¹ The Biden administration has communicated an intention to form a cabinet comprised of individuals across governmental agencies that will be dedicated to addressing cancer-related issues and to host a summit for biopharmaceutical companies, researchers, health care providers, and the public health community. The administration’s goals for these initiatives will be directed at prevention, early diagnosis, and targeted treatment, particularly for more rare, deadly, and childhood cancers.

Presidential Memo 33 (NSPM-33). The federal government has continued to scrutinize foreign influence in U.S.-funded scientific research. In January 2022, a subcommittee on research security of the executive office of the President published a guidance for implementing strategies to secure government-funded research.⁶² This guidance progresses implementation of NSPM-33, which requires all federal research agencies to strengthen and standardize investigator disclosure requirements and institutions receiving federal research dollars to enhance their security measures. Importantly, the guidance includes a section on consequences for violations, which may signal a shift in enforcement priorities from focusing on individual investigators to scrutinizing institutional controls. Institutions should watch for grant-making agencies’ incorporation of this guidance in their requirements, for example, the NIH through changes to the NIH Grants Policy Statement.

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Devon Minnick is an Associate with Epstein Becker & Green PC. Devon brings her analytical skills and solutions-oriented approach to help clients effectively navigate the regulatory thicket of managed care, behavioral health, Medicaid, Medicare, health privacy, and benefits issues. Devon also works regularly with a wide array of clients in the reproductive health care space, where she collaborates with her clients to execute creative, patient-focused programs in light of the Dobbs decision.

Alaap Shah is a Member of Epstein Becker & Green PC. Tech-savvy and solutions oriented, Alaap deftly guides clients through complex and ever-evolving privacy, cybersecurity, medical device, artificial intelligence (AI), interoperability, digital health, telehealth, fraud and abuse, and other laws and regulations. He helps clients build trust among stakeholders so that clients can robustly collect, share, analyze, and protect data and information technology assets.

Dionne Lomax is the Managing Director of Antitrust and Trade Regulation at Affiliated Monitors, Inc. where she serves as the independent monitor of conditions imposed on health care and other organizations by government agencies or courts as part of settlement agreements or orders. Dionne brings over 20 years of antitrust expertise to the world of independent monitoring. Dionne was a Trial Attorney at the DOJ Antitrust Division in the Health Care Task Force. Dionne is also a professor at Boston University where she serves as a Lecturer in the Markets, Public Policy and Law Department at the Questrom School of Business and the School of Law. Dionne is also Chair of AHLA’s Antitrust Practice Group.

Amy Joseph is a Partner in the business department of Hooper Lundy & Bookman PC. She advises health systems, academic medical centers, teaching hospitals, and a wide variety of other health care providers on business and regulatory matters. A significant portion of her practice is focused on fraud and abuse compliance, including counseling on compliance with federal and state anti-kickback and self-referral laws, and serving as lead deal counsel or regulatory counsel on mergers, acquisitions, and other strategic affiliations.

Jeremy Sherer is a Partner at Hooper Lundy & Bookman PC. Jeremy specializes in digital health matters and co-chair of the Firm’s Digital Health practice.  He counsels health care providers and suppliers, including hospital systems, provider organizations, national telehealth platforms, and digital health startups on issues involving regulatory compliance, transactions, and innovative business arrangements.

Melania Jankowski is an Associate in the business department of Hooper Lundy & Bookman PC. She assists health care providers and suppliers on issues involving transactions, regulatory compliance, and innovative business arrangements. Prior to joining Hooper Lundy & Bookman, Melania worked as an associate for a national law firm, focusing primarily on regulatory issues facing health care providers.

Dawn Hunter, JD, MPH is the Network for Public Health Law’s Southeastern Region Director. Dawn’s work focuses on research, analysis, implementation, and capacity building related to the use of law and policy to improve health outcomes and advance racial equity. She previously served as deputy state health official in New Mexico, where she led legislative planning and policy development, strategic planning, performance management, and public health accreditation. Currently, Dawn leads an ongoing assessment of declarations of racism as a public health crisis and related efforts to address health inequities. Over the past year, she has been facilitating the Collaborative for Anti-Racism and Equity.

Christopher C. Sabis is a Member of Sherrard Roe Voigt & Harbison PLC in Nashville, TN, and heads the firm’s Government Compliance & Investigations group. Chris concentrates his practice in the areas of Government Investigations and Litigation. He has extensive experience in FCA matters involving allegations of health care and procurement fraud, white-collar fraud investigations, and commercial litigation. Chris has significant experience in the mediation of FCA cases; he is a Rule 31 Listed General Civil Mediator by the Tennessee Supreme Court and a listed mediator and arbitrator with AHLA’s Dispute Resolution Service.

Valerie Breslin Montague, JD, CIPP/US, a Partner with Nixon Peabody LLP, is a health law and data privacy attorney who represents a variety of health care providers, digital health companies, and vendors of health care providers. She advises on compliance with the requirements of HIPAA and other federal and state health information privacy requirements, including breach analysis and notification and counsel during government investigations. She counsels organizations on compliant secondary uses of regulated health data. She also advises foreign and domestic organizations entering the health space on the U.S. data privacy requirements applicable to their business and how to structure operations in a compliant manner that also satisfies their business needs.

William (Bill) E. Hopkins focuses his law practice at Spencer Fane LLP on defending and representing health care entities and health care professionals in all relevant matters of regulatory compliance, litigation, and transactional matters. In this broad role, he advises on a number of topics including State licensure, compliance, and enforcement matters, with an emphasis on proactive measures to ensure compliance and minimize litigation risk and litigation. Mr. Hopkins has litigated on behalf of his clients in both State and Federal Administrative Courts, as well as the District Courts of Texas. As health care providers and companies seek to expand or modify how or where they practice, Bill has represented these groups in numerous transactions to facilitate those transitions. Mr. Hopkins has also spoken at the local, regional, and national level regarding licensure, compliance, enforcement, and transactional matters. He obtained his law degree from the University of Texas School of Law in 1995.

Todd Nova is a Partner with Hall Render Killian Heath & Lyman PC and currently serves on the firm’s Board of Directors. His practice focuses solely on health law issues for health care providers across the country including pharmacies, integrated health care systems, hospitals, and group purchasing organizations. Todd has extensive experience addressing issues unique to pharmacies of all types. These include retail chain pharmacies, specialty pharmacies, mail-order pharmacies, institutional pharmacies, home infusion pharmacies, long term care pharmacies, compounding pharmacies, outsourcing facilities, central fill pharmacies, and in-office physician pharmacies. Todd also leads one of the nation’s largest teams of attorneys focusing on 340B Program matters for 340B Covered Entities and Contract Pharmacies.

James Junger is an Associate with Hall Render Killian Heath & Lyman PC who focuses his practice on pharmacy and health care compliance issues. James assists clients, which include hospitals, health systems, federally qualified health centers and safety net providers, as they navigate the complex 340B program, drug distribution laws, and fraud and abuse rules that regulate the health care industry.

Michael W. Peregrine, a Partner at McDermott Will & Emery LLP, advises corporations, officers, and directors on matters relating to corporate governance, fiduciary duties, and officer-director liability issues.

Anne Murphy is a Partner in ArentFox Schiff’s nationally ranked Health Care practice and serves as trusted counsel to senior management, governing boards, and investors on complex business, regulatory, and risk mitigation projects. Anne provides strategic and nuanced legal advice on health sector mergers and acquisitions, corporate restructurings, facility closings and reconfigurations, service innovations, joint ventures, major contractual initiatives, and other significant enterprise events. She also counsels on enterprise risk and fiduciary duties, as well as on emerging health care delivery models in areas such as value-based purchasing, behavioral health, aging in place, health information and technology, and telemedicine. Her clients include health care systems, academic medical centers, clinician organizations, health service companies and their investors, health care innovation initiatives, and ACOs and other health value-based service delivery vehicles.

Rebecca Schaefer is a Partner in the K&L Gates, LLP’s Health Care practice, focusing her practice on health care and research regulatory and transactional matters. Rebecca has specialized knowledge of issues affecting academic medical centers, including those related to faculty practices, clinical research, mission support, governance, and privacy. She provides counseling to universities, health systems, physician practice groups and clinical research institutes and consortia related to strategic affiliations, joint ventures, big data initiatives and compliance matters. Areas of regulatory experience include the Stark Law, Anti-Kickback Statute, Civil Monetary Penalties Law, HIPAA and state privacy statutes, Common Rule and FDA regulations governing human subjects research, NIH grant rules and disclosure requirements, conflict of interest, research misconduct and medical school accreditation, among other areas.

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