U.S. Supreme Court – the FAA Preempts State Court Ruling in Nursing Home Arbitration Case

On May 15, 2017, in a closely-watched case involving arbitration clauses in nursing home contracts and powers of attorney, the U.S. Supreme Court held that the Federal Arbitration Act preempted a rule applied by the Kentucky Supreme Court when it refused to enforce two binding arbitration agreements between a nursing home and individuals holding general powers of attorney on behalf of two former residents of the nursing home.  Kindred Nursing Centers Ltd v. Clark, et al. 

As part of the nursing home’s resident intake process, the two individuals holding powers of attorney entered into arbitration agreements on behalf of their relatives that contained a provision requiring that “[a]ny and all claims or controversies arising out of or in any way relating to . . . the Resident’s stay at the Facility” would be resolved through “binding arbitration.” After the death of their family members, the individuals holding powers of attorney sued in state court, alleging that the nursing home had delivered substandard care, causing the deaths of their family members. The Kentucky Supreme Court applied a “clear-statement rule” in holding that both arbitration agreements were invalid because the powers of attorney did not specifically state that the representatives could enter into an arbitration agreement, and therefore the individuals holding powers of attorney were prohibited from restricting their relatives’ rights of access to the courts and trial by jury guaranteed under the Kentucky Constitution.

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DOJ Settles Allegations of Fraudulent Loan Program Between Hospital System and FQHC

The U.S. Department of Justice (DOJ) recently announced a settlement with a hospital operated by Indiana University Health, Inc. and a federally qualified health center operated by HealthNet, Inc. to resolve claims that the parties violated the Anti-Kickback Statute, the Federal Claims Act and Indiana law. Each of the parties will pay over $5 million to the United States and approximately $3.9 million to the State of Indiana. The lawsuit was originally brought by a qui tam relator, a physician and former employee of the hospital and HealthNet, and later joined by the DOJ and the State. The Anti-Kickback Statute prohibits, in relevant part, the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal health care program, such as Medicaid. Claims submitted to federal health care programs in violation of the Anti-Kickback Statute are false claims under the False Claims Act. The government alleges that the parties had, for over a decade, established a series of illegal referral based relationships to guarantee that Medicaid beneficiaries were directed to the hospital for both inpatient and outpatient services and collaborated to provide services focused on collections for patient services, rather than improving health outcomes, in violation of the federal Anti-Kickback Statute and Indiana law. In particular, the government alleges that, in exchange for a no-interest loan to HealthNet, the hospital was guaranteed that high-risk maternity patients would deliver at the hospital, thereby allowing the hospital to benefit from expensive services provided to critically ill infants. Continue Reading

Anthem Terminates Cigna Merger Following D.C. Circuit Setback

On May 12, 2017, Anthem Inc. announced that it had terminated its merger agreement with Cigna Corporation, a deal that would have united the second and third largest sellers of health insurance to large companies in the country. Anthem’s termination of the merger came two weeks to the day after the U.S. Court of Appeals for the D.C. Circuit rejected Anthem’s appeal of an injunction blocking the merger issued by a U.S. District Court earlier this year. Anthem terminated the merger one week after filing a petition for a writ of certiorari with the U.S. Supreme Court that sought guidance on the viability of the “efficiencies defense” under antitrust law.

Anthem and Cigna initially entered into a merger agreement in July, 2015 that was subsequently challenged on antitrust grounds by the Department of Justice, eleven states, and the District of Columbia. The government alleged that the merger would violate Section 7 of the Clayton Act (15 U.S.C. §18) by substantially lessening competition in the insurance markets for (i) national accounts (i.e., insurance purchased by employers with 5000+ employees), and (ii) large group employers (those with 50+ employees) in various geographic areas throughout the country. Continue Reading

Federal Court Holds Online Medical Products Auction Contract Violates the AKS

The U.S. District Court for the District of Connecticut granted a motion for summary judgment in favor of Becton, Dickinson & Co. (BDC), a medical products provider, on the grounds that its contracts with MedPricer.com, Inc. (MedPricer), a company operating an online auction platform, violated the federal Anti-Kickback Statute (AKS), and were therefore unenforceable under Connecticut state law. MedPricer.com, Inc. v. Becton, Dickinson & Co., 2017 U.S. Dist. LEXIS 30854 (Memorandum opinion).

As described in the opinion, MedPricer enters into service agreements with hospitals and other health care providers to host online “auctions” for the sale of medical equipment. The health care provider determines which vendors to invite to the online auction and MedPricer sends invitations to the vendors. In order to participate in the MedPricer auction, a vendor must, among other things, accept the terms of a click-through user agreement. Vendors that accept the terms of the agreement may submit bids to the health care provider in response to requests for quotes. The agreements at issue before the Court required BDC to pay MedPricer a fee of 1.5% of the value of any purchase from the vendor, whether or not the sale occurs during the auction events or afterward.

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Class Action Initiated Against Telehealth Provider for Disclosure of Sensitive Information

A class action was filed in Fort Lauderdale, Florida this week against a national telehealth provider, MDLive Inc. (MDLive) for its mobile app’s alleged secret capture of screenshots containing sensitive patient information without restricting access to medical providers who have a legitimate need to view the information. The lawsuit was filed by Utah resident, Joan Richards, who is seeking class certification of a class that she estimates will include thousands of other MDLive users and more than $5 million damages. Continue Reading

Recent OCR Settlements

The Office for Civil Rights (OCR) recently announced settlements with healthcare-related entities, including:

  • The OCR entered into a settlement with The Center for Children’s Digestive Health (CCDH) for $31,000.  CCDH is a small for-profit health care provider with seven locations in Illinois. The settlement arose out of an OCR compliance review initiated in August 2015 after an investigation of a CCDH business associate that stored inactive paper medical records for CCDH.  While CCDH had been disclosing PHI to the vendor since 2003, neither party could produce a business associate agreement in effect prior to October 12, 2015.  In addition to the settlement payment, CCDH has also entered into a corrective action plan with OCR.
  • The OCR issued a press release announcing that it has settled alleged HIPAA violations with MHHS for $2.4 million for disclosing PHI in a media press release.  According to the Resolution Agreement it has inked with the OCR, MHHS must also implement a corrective action plan, including updating its policies and procedures, training staff and requiring all of the facilities in the system to “attest to their understanding of permissible uses and disclosures of PHI, including disclosures to the media.”  Read more here.
  • The OCR announced on April 24, 2017, that it has settled alleged HIPAA violations with CardioNet, a wireless health services provider based in Pennsylvania, for $2.5 million.  CardioNet self-reported a data beach in January 2012, stating that an unencrypted laptop of one of its employees was stolen from a vehicle parked outside the employee’s home.   CardioNet self-reported a data beach in January 2012, stating that an unencrypted laptop of one of its employees was stolen from a vehicle parked outside the employee’s home. Read more here.

These posts are also being shared on our Data Privacy +Security Insider blog. If you’re interested in getting updates on developments affecting data privacy and security, we invite you to subscribe to the blog.

CMS Issues Proposed IPPS Rule

On April 14, 2017, the Centers for Medicare & Medicaid Services (CMS) released the FY 2018 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) Prospective Payment System (PPS) Proposed Rule, and Request for Information (Proposed Rule). The Proposed Rule outlines proposed updates to Medicare payment rates under the Inpatient Prospective Payment System (IPPS) and policies for hospital admissions. The goals of the Proposed Rule include relieving regulatory burdens on providers, supporting the doctor-patient relationship, and promoting transparency, flexibility, and innovation in the delivery of care.

CMS is also soliciting ideas for regulatory, policy, practice and procedural changes to better achieve transparency, flexibility, program simplification and innovation through a Request for Information (RFI).  The RFI is seeking clear, concise proposals to encourage the development of a new Medicare delivery system to reduce existing burdens for clinicians, providers and patients, while increasing effectiveness and decreasing costs. Proposals must include data and specific examples, and if applicable, should address CMS’ authority to implement such proposals. CMS does not plan to respond to RFI comments, but will consider them in developing future regulatory proposals or guidance.

The IPPS was established under § 1886(d) of the Social Security Act and utilizes a national base payment rate for inpatient hospital stays, adjusted for factors such as patient conditions and the cost of hospital labor depending on geographic area. CMS is required to issue annual updates for IPPS hospital payment rates. The Proposed Rule would affect hospital and LTCH payments for discharges occurring on or after October 1, 2017. Continue Reading

Ninth Circuit Denies Health Care Providers’ ERISA Claims

The Ninth Circuit affirmed two district court judgments dismissing ERISA actions brought by health care providers in DB Healthcare v. Blue Cross Blue Shield of Arizona, No. 14-16518, and Advanced Women’s Health Center v. Anthem Blue Cross Life & Health Insurance Co., No. 14-16612.  The health care providers’ argument was two-fold:  (1) health care providers were “beneficiaries” under Section 502(a) of ERISA, and thus could bring suit directly under ERISA; and (2) the plaintiffs in these cases could bring derivative claims under ERISA because the subscribers had assigned their claims under the plans to the plaintiffs.  The Court denied both these claims. Continue Reading

Massachusetts’ Health Policy Commission Further Limits Health Care Cost Growth

On March 29, 2017, the Massachusetts Health Policy Commission voted to decrease its annual health care cost growth benchmark from 3.6 percent to a 3.1 percent, effective in 2018. The benchmark applies to hospitals, certain physician groups and individual health insurers. The Commission also voted to finalize regulations to require those entities that fail to comply with the benchmark to file and follow performance improvement plans. Non-compliant entities will be subject to oversight by the Commission, during which they will be required to file monthly progress reports and demonstrate that they are taking steps to slow their cost growth. The regulations also authorize the Commission to assess civil penalties against non-compliant entities in certain circumstances, such as when an entity willfully neglects to file a required performance improvement plan. Continue Reading

CMS Proposes Delay of Home Health Agency Conditions of Participation

The Centers for Medicare & Medicaid Services (CMS) is proposing to delay the effective date for the revised Conditions of Participation (CoPs) for Home Health Agencies (HHAs).  The original effective date was July 13, 2017.  The proposed delay would extend the effective date for an additional six months, until January 13, 2018.  In a previously published post, we discussed the HHA CoPs. Continue Reading

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