This post is co-authored by Seth Orkand, co-chair of Robinson+Cole’s Government Enforcement and White-Collar Defense Team.

Massachusetts has expanded regulatory oversight of health care transactions by imposing False Claims Act liability on health care owners and investors for changes including failure to disclose violations. On January 8, 2025, Governor Maura Healey signed into law H.5159, An Act enhancing the market review process (the Act). Among other matters, the Act aims to strengthen oversight of private equity investors and related entities in the health care industry, including the expansion of the investigatory and enforcement powers of the Massachusetts Attorney General as they relate to health care activities. The Act also intends to fill perceived gaps in regulatory oversight, that many view as contributors to the Steward Health Care bankruptcy and related hospital closures across Massachusetts, by directly addressing regulation of for-profit health care entities and private equity ownership.

The following Act provisions expand the authority of the Massachusetts Health Policy Commission (HPC), Center for Health Information and Analysis (CHIA), and Attorney General’s Office (AGO) to oversee private equity investors and related entities, including through expansions of HPC’s existing oversight authority and extension of the Commonwealth’s state False Claims Statute (MA FCA) to owners and investors of violators. The Act also contains myriad changes impacting the health care industry. It strengthens regulatory oversight over private equity, pharmacy benefit managers, real estate investment trusts (REITs), management service organizations (MSOs), and other industry participants.

Expansions of HPC and AGO authority under the Act:

  • Establish new definitions for entities involved in, or related to, private equity operations [1]:
    • “Health care real estate investment trust,” a real estate investment trust, as defined by 26 U.S.C § 856, whose assets consist of real property held in connection with the use or operations of a provider or provider organization.
    • “Private equity company,” any company that collects capital investments from individuals or entities and purchases, as a parent company or through another entity that the company completely or partially owns or controls, a direct or indirect ownership share of a provider, provider organization or management services organization; provided, however, that “private equity company” shall not include venture capital firms exclusively funding startups or other early-stage businesses.
    • “Significant equity investor,” (i) any private equity company with a financial interest in a provider, provider organization, or management services organization; or (ii) an investor, group of investors, or other entity with a direct or indirect possession of equity in the capital, stock, or profits totaling more than ten percent of a provider, provider organization, or management services organization; provided, however, that “significant equity investor” shall not include venture capital firms exclusively funding startups or other early-stage businesses.
    • “Management services organization,” a corporation that provides management or administrative services to a provider or provider organization for compensation.
  • Revise the composition, necessary expertise, and responsibility for appointments to the HPC Board [2]. While the Board will continue to consist of 11 members, the Commissioner of Insurance is now a required member, as are appointed individuals with expertise in representing hospitals and hospital systems and in health care innovation, including pharmaceuticals, biotechnology, or medical devices. However, the HPC will no longer require membership of the Secretary for Administration and Finance, a Primary Care Physician, and an individual with expertise as a health insurance purchaser representing management. Finally, the auditor is no longer responsible for appointments to the HPC Board; all members, other than the Secretary of Health and Human Services and Commissioner of Insurance, will now be appointed solely by the Governor or Attorney General. These changes may reflect a shift in priorities for regulatory oversight of hospital administration, health care innovation, and health care insurance.
  • Expand the HPC Notice of Material Change process [3]. As previously required, every provider or provider organization must provide notice of a “material change” not less than 60 days before the date of the proposed change. 
    • The previous statutory Notice of Material Change reporting requirements only covered:
      • mergers or acquisitions of hospitals or hospital systems;
      • a corporate merger, acquisition or affiliation of a provider or provider organization and a carrier;
      • an acquisition of insolvent provider organizations; and
      • mergers or acquisitions of provider organizations which will result in a provider organization having a near-majority of market share in a given service or region [4].
    • The Act expands the above-referenced statute mandating the reporting of “material change” requiring notice to the applicable government agencies to also include the following: 
      • significant expansions in a provider or provider organization’s capacity;
      • transactions involving a significant equity investor which result in a change of ownership or control of a provider or provider organization;
      • significant acquisitions, sales, or transfers of assets including, but not limited to, real estate sale lease-back arrangements; and
      • conversion of a provider or provider organization from a non-profit entity to a for-profit entity.
    • The Act also changes the current material change reporting threshold for mergers or acquisitions of a provider organization, which will result in a provider organization having a near-majority market share in a given service or region to a “dominant” market share in a given service or region.
    • Adoption of implementing regulations. While the Act does not include financial thresholds for reporting, the Act does direct the HPC to adopt regulations for administering the section, conduct cost and market impact reviews, and allow filing thresholds to be adopted in the regulations, subject to annual adjustments based on inflation [5]. 
  • Expands the HPC Cost and Market Impact Review process as follows:
    • HPC may now require significant equity investors, as well as other parties involved, in a given transaction to submit documents and information in connection with a Notice of Material Change or Cost and Market Impact Review [6].
    • HPC may require submitting certain information regarding the significant equity investor’s capital structure, general financial condition, ownership and management structure, and audited financial statements.
    • HPC may require submitting certain post-transaction data and information for up to five years following the material change date. Such data collection significantly expands the power and task, including the ability to assess post-transaction impacts. 
    • Expands the factors HPC may consider as part of the Cost and Market Impact Review by also reviewing [7]:
      • the size and market share of any corporate affiliates or significant equity investors of the provider or provider organization;
      • the inventory of health care resources maintained by the DPH; and
      • any related data or reports from the Office of Health Resource Planning.
  • Expands the scope of the HPC’s examination of costs, prices, and cost trends, as follows [7]:
    • The HPC cost trends hearings will include an examination of any relevant impacts of significant equity investors, health care REITs, and MSOs on costs, prices, and cost trends. Stakeholders from these organizations associated with a provider organization will now be required to testify at the HPC’s annual cost trends hearing concerning: “health outcomes, prices charged to insurers and patients, staffing levels, clinical workflow, financial stability and ownership structure of an associated provider or provider organization, dividends paid out to investors, compensation including, but not limited to, base salaries, incentives, bonuses, stock options, deferred compensations, benefits and contingent payments to officers, managers and directors of provider organizations in the commonwealth acquired, owned or managed, in whole or in part, by said significant equity investors, health care real estate investment trusts or management services organizations.”
    • The HPC will utilize new data collected as part of the Registered Provider Organization process. The Act revised this process to require submissions from significant equity investors, health care real estate investment trusts, and management services organizations regarding ownership, governance, and organizational information.

Given the broad, sweeping nature of the changes, additional regulations and guidance should be expected. Our team will continue to monitor such activity to help provider organizations transacting in Massachusetts to prepare for the implementation of the statute and forthcoming regulations.

[1] To be codified at M.G.L. c. 6D, §. 1.

[2] To be codified at M.G.L. c. 6D, §. 2.

[3] To be codified at M.G.L. c. 6D, § 13.

[4] To be codified at M.G.L. c. 6D, § 13.

[5] To be codified at M.G.L. c. 6D, § 13.

[6] To be codified at M.G.L. c. 6D, § 13.

[7] To be codified at M.G.L. c. 6D, §§ 13, 8.

This post is co-authored by Seth Orkand, co-chair of Robinson+Cole’s Government Enforcement and White-Collar Defense Team.

Under a new 2025 law, Massachusetts is one of the first in the nation to broaden its state False Claims Act (FCA) to require disclosures by investors and owners of health care entities. On January 8, 2025, Governor Maura Healey signed into law H.5159, An Act enhancing the market review process (the Act), significantly changing Massachusetts’s regulatory and enforcement landscape. As discussed in further detail here, the law imposes FCA liability against investors and focuses on private equity and corporate ownership in health care. While this Act appears to be the first direct codification of FCA liability, it is consistent with the Department of Justice (DOJ) and Office of the Inspector General, U.S. Department of Health and Human Services’ (HHS-OIG) recent focus on private equity and the impact on health care.[1] While the DOJ has focused on private equity firms that allegedly knew of misconduct at portfolio companies and failed to stop it through their involvement in the operations of those companies, the MA FCA goes further by imposing liability on health care investors for merely being aware of misconduct and failing to report it to the state.

H. 5159 expands the scope of the MA FCA enforced by the Commonwealth’s Attorney General[2] to apply to any person who has an “ownership or investment interest” and any person who violates the false claim statute that “knowingly” or “knows” about the violation[3] and fails to disclose the violation to the government within 60 days of identifying the violation. This is a significant expansion of the traditional protections afforded by the corporate veil and appears to be designed to hold private equity and other owners liable if they become aware of any MA FCA violations and fail to take action. 

As part of the expansion, the Act defines “ownership or investment interest” as any: (1) direct or indirect possession of equity in the capital, stock, or profits totaling more than ten percent of an entity; (2) interest held by an investor or group of investors who engages in the raising or returning of capital and who invests, develops, or disposes of specified assets; or (3) interest held by a pool of funds by investors, including a pool of funds managed or controlled by private limited partnerships, if those investors or the management of that pool or private limited partnership employ investment strategies of any kind to earn a return on that pool of funds. This amendment clearly expands MA FCA liability to private equity investors and appears to codify the Massachusetts Attorney General’s approach in an October 2021 settlement with a private equity firm and former executives of South Bay Mental Health Center, Inc. for allegedly causing the submission of false claims submitted to MA’s Medicaid program.[4] 

Additional enforcement mechanisms codified in the Act include expanding the Attorney General’s authority to obtain information as part of a civil investigative demand from significant equity investors, health care real estate investment trusts, or management services organizations.[5]

We will continue to monitor this activity and any resulting litigation and its possible impact on organizations transacting business in Massachusetts.

[1] https://www.mass.gov/news/private-equity-firm-and-former-mental-health-center-executives-pay-25-million-over-alleged-false-claims-submitted-for-unlicensed-and-unsupervised-patient-care.

[2] To be codified at MGL 12, s. 11N.

[3] For example, see Justice Department, Federal Trade Commission and Department of Health and Human Services Issue Request for Public Input as Part of Inquiry into Impacts of Corporate Ownership Trend in Health Care, available at https://www.justice.gov/opa/pr/justice-department-federal-trade-commission-and-department-health-and-human-services-issue; see also, https://www.hhs.gov/about/news/2025/01/15/hhs-releases-report-consolidation-private-equity-health-care-markets.html

[4] To be codified at MGL 12, §§ 5A and 5B. 

[5] The Act clarifies that “knowing,” “knowingly,” or “knows” all mean “possessing actual knowledge of relevant information, acting with deliberate ignorance of the truth or falsity of the information or acting in reckless disregard of the truth or falsity of the information; provided, however, that no proof of specific intent to defraud shall be required.”

At the close of 2024, the Office for Civil Rights (OCR) at the U.S. Department of Health and Human Services (HHS) issued a Notice of Proposed Rulemaking (the Proposed Rule) to amend the Security Rule regulations established for protecting electronic health information under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The updated regulations would increase cybersecurity protection requirements for electronic protected health information (ePHI) maintained by covered entities and their business associates to combat rising cyber threats in the health care industry.

The Proposed Rule seeks to strengthen the HIPAA Security Rule requirements in various ways, including:

  • Removing the “addressable” standard for security safeguard implementation specifications and making all implementation specifications “required.”
    • This, in turn, will require written documentation of all Security Rule policies and encryption of all ePHI, except in narrow circumstances.
  • Requiring the development or revision of technology asset inventories and network maps to illustrate the movement of ePHI throughout electronic information system(s) on an ongoing basis, to be addressed not less than annually and in response to updates to an entity’s environment or operations potentially affecting ePHI.
  • Setting forth specific requirements for conducting a risk analysis, including identifying all reasonably anticipated threats to the confidentiality, integrity, and availability of ePHI, identifying potential vulnerabilities, and assigning a risk level for each threat and vulnerability identified.
  • Requiring prompt notification (within 24 hours) to other healthcare providers or business associates with access to an entity’s systems of a change or termination of a workforce member’s access to ePHI; in other words, entities will now be obligated to immediately communicate changes if an employee’s or contractor’s access to patient data is altered or revoked to mitigate the risk of unauthorized access to ePHI.
  • Establishing written procedures on how the entity will restore the loss of relevant electronic information systems and data within 72 hours.
  • Testing and revising written security incident response plans.
  • Requiring encryption of ePHI at rest and in transit.
  • Requiring specific security safeguards on workstations with access to ePHI and/or storage of ePHI, including anti-malware software, removal of extraneous software from ePHI systems, and disabling network ports pursuant to the entity’s risk analysis.
  • Requiring the use of multi-factor authentication (with limited exceptions).
  • Requiring vulnerability scanning at least every six (6) months and penetration testing at least once every year.
  • Requiring network segmentation.

The Proposed Rule notably includes some requirements specific to business associates only. These include a proposed new requirement for business associates to notify covered entities (and subcontractors to notify business associates) within 24 hours of activating their contingency plans. Business associates would also be required to verify, at least once a year, to their covered entity customers that the business associate has deployed the required technical safeguards to protect ePHI. This must be conducted by a subject matter expert who provides a written analysis of the business associate’s relevant electronic information systems and a written certification that the analysis has been performed and is accurate.

The Proposed Rule even includes a specific requirement for group health plans, requiring such plans to include in their plan documents requirements for their group health plan sponsors to comply with the administrative, physical, and technical safeguards of the Security Rule, requiring any agent to whom they provide ePHI to implement the administrative, physical, and technical safeguards of the Security Rule; and notify their group health plans no more than 24 hours after activation of their contingency plans.

Ultimately, the Proposed Rule seeks to implement a comprehensive update of mandated security protections and protocols for covered entities and business associates, reflecting the significant changes in health care technology and cybersecurity in recent years. The Proposed Rule’s changes are also a tacit acknowledgment that current Security Rule standards have not kept up with threats or operational changes.

The government is soliciting comments on the Proposed Rule, and all public comments are due by March 7, 2025. Given the scope of the proposed changes and the heightened obligations for all individuals and entities subject to HIPAA, there will likely be many comments from various stakeholders. We will continue to follow the Proposed Rule and reactions thereto. The Proposed Rule is available here.

This post is also being shared on our Data Privacy + Cybersecurity Insider blog. If you’re interested in getting updates on developments affecting data privacy and security, we invite you to subscribe to the blog.

*This post was authored by Nicole Benevento, law intern at Robinson+Cole. Nicole is not admitted to practice law.

The Food and Drug Administration (FDA) is being sued in two lawsuits after releasing its Final Rule on Laboratory Developed Tests (LDTs). The Final Rule requires laboratories to adhere to the same preapproval and post-marketing requirements of mass-produced medical devices.

In its Final Rule, the FDA emphasizes that the agency has always had the discretion to enforce legal requirements concerning LDTs. However, the FDA refrained from exercising this authority under the Medical Device Amendments of 1976, since LDTs were initially manufactured by specialized personnel in smaller volumes for a local patient population. Now that the landscape is riskier since LDTs are manufactured nationwide for diverse populations, the FDA holds that it may enforce these other applicable legal requirements.

After the Final Rule, two cases were filed challenging it. In American Clinical Laboratory Association et al v. U.S. Food and Drug Administration et al. (ACLA) and Association for Molecular Pathology and Michael Laposata v. U.S. Food and Drug Administration et al. (AMP), the plaintiffs argue that forcing labs to require the FDA to regulate professional laboratory testing will be a massive setback for the medical community, hindering medical innovation, reducing competition, imposing billions of dollars in regulatory mandates, and jeopardizing the health of millions of Americans. Both cases have been consolidated under ACLA and are pending in the United States District Court, Eastern District of Texas.

The now consolidated complaint asserts that the FDA has exceeded its statutory authority. Citing the Congressional Record, the plaintiffs argue that Congress authorized the FDA to regulate medical devices, specifically distinguishing between mass-produced medical devices manufactured for third-party use and customized LDTs, which are developed and performed by highly trained health care professionals working within a licensed and accredited facility. The complaint adds that Congress has not provided the FDA with the appropriate resources to implement this authority over thousands of testing services. The plaintiffs further contend that LDTs have already been subject to a distinct regulatory regime under the Clinical Laboratory Improvement Amendments (CLIA.) 

The plaintiffs filed a motion for summary judgment earlier this year, and the FDA filed a cross-motion for summary judgment and in opposition to the plaintiffs’  motion for summary judgment. On December 23, 2024, the plaintiffs filed their reply in the case, completing the briefing.

Docket Timeline

  • September 20, 2024:­ The motion to consolidate both lawsuits under ACLA was granted.
  • September 27, 2024: AMP plaintiffs submitted a summary judgment motion.
  • October 7, 2024: The Association for Diagnostics & Laboratory Medicine, American Association of Bioanalysts, American Society for Clinical Pathology, American Society for Microbiology, and the Infectious Disease Society of America filed an amicus brief supporting the plaintiffs’ position that the FDA’s final LDT rule exceeds the agency’s statutory authority. The brief urges the court to strike down the rule to avoid patient harm.
  • October 25, 2024: The defendants jointly respond to plaintiffs’ briefs.
  • November 25, 2024: Plaintiffs’ closing briefs filed.
  • December 23, 2024: Defendants’ closing brief in support of their cross-motion is filed.
  • Q1 2025: Oral argument before the court is anticipated.
  • May 6, 2025: Labs expected to comply with Final Rule Phase 1 requirements unless the challenge is successful or otherwise changed.

Plaintiffs’ Motion for Summary Judgement

ACLA’s September 2024 motion for summary judgment urged the court to vacate the Final Rule and enjoin the defendants from its enforcement. ACLA argued in principle that (1) the FDA faces a heavy burden to justify its classification of laboratory testing services as medical devices; (2) Congress did not grant the FDA authority to regulate professional laboratory-developed testing services in light of the major questions doctrine and statutory construction; and (3) the FDA lacks justification.

Similarly, AMP’s motion for summary judgment urges the court to vacate the Final Rule and enjoin the defendants from enforcement. AMP argues that (1) the Federal Food, Drug, and Cosmetic Act (FDCA) does not authorize the FDA to regulate LDTs as medical devices, and (2) the Final Rule is arbitrary and capricious.

The plaintiffs collectively assert that Congress only authorized the FDA to regulate devices (defined as tangible goods) to provide premarket review and postmarket action against misbranded or adulterated devices. As defined by Congress, LDTs are neither tangible goods nor commercially distributed. Under CLIA, LDTs are not devices, but as AMP noted, “multi-step, protocol-based procedures developed and performed by highly trained professionals within a laboratory.” Further, the FDA has never exercised oversight, and even when Congress strengthened CLIA’s regulatory framework in 1988, it refrained from extending laboratory oversight. The amended regulations imposed stringent quality and performance standards while allowing laboratories the flexibility needed to meet patient demand. The plaintiffs argue that per CLIA, laboratories’ biennial certification process is designed to continuously improve testing procedures.

In contrast, the FDA’s quality requirements are designed to keep commercial devices “static” and only monitor for adverse events. The motion also notes that, since 1976, the FDA has never formally expressed its belief that LDTs fall under the agency’s regulatory authority, nor at any point did Congress identify the agency as a regulator. Both plaintiffs argue that the FDA may not attempt to assert power under decades-old legislation after Congress has repeatedly declined to grant the agency that power. As a result, this is a “major questions” issue for the court to interpret.

The AMP motion also highlights that the FDCA clearly prohibits the FDA from interfering with or limiting the authority of a health care practitioner to prescribe any legally marketed device to a patient.

AMP also asserted that the Final Rule is arbitrary and capricious. AMP argues that the Final Rule mischaracterizes anecdotal reports the FDA used to justify the rule’s implementation. For instance, the FDA argues its “concerns” about LDTs have worsened over time; however, of the 160,800 LDTs currently in use, it has only identified 52 concerns since 2008. In response, AMP maintains that subjecting LDTs to the FDA’s enforcement process is not based on reasoned agency thinking and will instead incur billions per year in compliance costs, reduce competition, close laboratories, stifle innovation, and harm patients.

Both ACLA and AMP rely on the 2024 headline case of the Loper Bright Enterprises v. Raimondo decision to argue against the discretion given to the FDA. The Loper Bright ruling limited the extent to which federal agencies may interpret vague laws passed by Congress. In the motions, plaintiffs urge the court not to defer to an agency interpretation of a vague law but to rather “exercise its own independent judgment” and decide “whether the FDCA clearly and unambiguously authorizes FDA to regulate LDTs.”

FDA/DOJ Closing Reply Brief

The defendants’ closing reply brief,  asked that the court not order universal vacatur and, if the court rules against the defendants, to allow for further briefing on the subject of an appropriate remedy. In defense of their position, the defendants focused on: (1) the Final Rule did not implicate the major questions doctrine or the rule of lenity; (2) the FDA has “unambiguous” statutory authority over LDT testing; and (3) the Final Rule is not arbitrary and capricious.

The defendants continue to assert that they have unambiguous authority to implement the Final Rule and that they “did not make [their] own policy judgment that [they] should have jurisdiction over laboratory-made IVD tests. Rather, the agency simply implemented Congress’s plain textual directive that it does.”[1] The FDA significantly challenged the plaintiffs’ interpretation and analogies of the statutory language and impact and argues that the plaintiffs’ statutory interpretation is “artificially narrow.” The FDA further argued that there is no conflict with CLIA and that it is empowered to ensure there are clinically valid results to protect patients’ safety and the efficacy of treatments relying on the results. Finally, the defendants argue that the action was not arbitrary and capricious because the FDA considered the laboratory industry’s current interests and weighed that interest against problematic testing.

Next Steps

The case is now fully briefed before the court. Whether or not the plaintiffs will be successful is yet to be seen. So far, no other changes have been announced. We will continue to monitor this and any other updates related to the Final Rule.

[1] Defendants’ Reply Brief, available at https://www.amp.org/AMP/assets/File/advocacy/DOJ_ClosingBrief_12_23_2024.pdf?pass=40

The Office for Civil Rights of the Department of Health and Human Services (OCR) was busy negotiating and settling enforcement actions in November and early December. Since October 31, 2024, the OCR has settled five separate cases of alleged HIPAA violations. The settlements include resolution agreements and civil monetary penalties.

One of the settlements and resolution agreements continues to show OCR’s emphasis on patients’ rights to access their protected health information. That settlement, dated November 19, 2024, was against Rio Hondo Community Mental Health Center in California required the covered entity to pay the OCR $100,000.

On November 26, 2024, the OCR settled with Holy Redeemer Family Medicine over the disclosure of a patient’s protected health information, including reproductive health information, to the patient’s prospective employer without her consent. The OCR alleged that the patient provided consent for the covered entity to send the results of one test that had no relevance to her reproductive health to the prospective employer. Instead, the covered entity sent “her surgical history, gynecological history, obstetric history, and other sensitive health information concerning reproductive health care” to the prospective employer. Holy Redeemer paid $325,581 and agreed to a corrective action plan with monitoring by the OCR for two years.

On December 3, 2024, the OCR imposed a $1.19 million penalty against Gulf Coast Pain Consultants (GCPC) for alleged violations of the HIPAA Security Rule. The OCR started an investigation against GCPC after a data breach notification. OCR’s investigation found that impermissible access to patients’ protected health information occurred on three occasions when a former contractor of GCPC accessed GCPC’s “electronic medical system to retrieve PHI for use in potential fraudulent Medicare claims.” The impermissible access affected 34,310 patients, including their names, addresses, dates of birth, Social Security numbers, insurance information, and primary care information.

On December 5, 2024, the OCR imposed a penalty against Children’s Hospital Colorado for $548,265 for alleged HIPAA Privacy and Security Rules violations. According to the OCR, Children’s Hospital Colorado notified the OCR following two breaches of email accounts following phishing attacks. In the first phishing attack, an email account containing the personal health information (PHI) of 3,370 individuals occurred because multi-factor authentication was disabled on the email account. Three email accounts containing 10,840 individuals’ PHI were compromised in the second incident. The OCR found that employees gave up their credentials to the threat actor in the attack, allowing unauthorized access to the email accounts.

On December 10, 2024, the OCR settled with Health Care Clearinghouse and Inmediata Health Group over allegations that they left PHI unsecured on the internet. According to the OCR, between May 2016 and January 2019, 1,565,338 individuals’ PHI “was made publicly available online.” The PHI included names, dates of birth, addresses, Social Security numbers, claims information, and treatment information. During its investigation, the OCR found “multiple potential HIPAA Security Rule Violations,” including failing to conduct a compliant risk analysis and to monitor and review the health information systems’ activity; the entities agreed to pay the OCR $250,000. They previously agreed to implement corrective actions with 33 states that addressed OCR’s findings. All of these actions and settlements provide clues to covered entities about the OCR’s priorities and conduct it finds violative of HIPAA. It has been an active two months for enforcement. We will continue to follow the OCR’s enforcement actions and see what the new year brings regarding its enforcement priorities.

This post is also being shared on our Data Privacy + Cybersecurity Insider blog. If you’re interested in getting updates on developments affecting data privacy and security, we invite you to subscribe to the blog.

*This post was co-authored by Paul Palma, legal intern at Robinson+Cole. Paul is not admitted to practice law.

In November 2024, the Department of Health and Human Services Office of Inspector General (OIG) published the results of its audit assessing hospital compliance with the federal Hospital Price Transparency Rule (HPT Rule). OIG determined that 37 out of the 100 hospitals sampled failed to comply with some element of the HPT Rule’s publicly available charges requirements.

As a reminder, the HPT Rule requires hospitals to make certain pricing information publicly available and easily accessible on their websites to increase competition and reduce the cost of health care. The HPT Rule is enforced by the Centers for Medicare & Medicaid Services (CMS).

Under the HPT Rule, hospitals are obligated to (1) publish a comprehensive machine-readable file that includes a list of standard charges for all items and services and (2) display a list of CMS-specified shoppable services in a consumer-friendly format; this requirement may be met by using an online price estimator tool allowing consumers to obtain free estimates for up to 300 shoppable services. The 37 noncompliant hospitals identified in the audit failed to comply with either one or both of the foregoing requirements.

Specifically, OIG found that:

  • “34 hospitals did not comply with one or more of the requirements associated with publishing comprehensive machine-readable files;” and
  • “14 hospitals did not comply with one or more of the requirements associated with displaying shoppable services in a consumer-friendly manner.”

Based on the audit results, OIG estimates “that 46% of the 5879 hospitals that were required to comply with the HPT rule did not comply with the requirements to make information on their standard charges available to the public.”

In response to its findings, OIG provided CMS with specific recommendations on increasing compliance with the HPT Rule. The report indicated that CMS concurred with all recommendations and proposed corrective actions. The recommendations included the following:

  • Reviewing the specific hospitals identified by OIG as potentially noncompliant and pursuing enforcement measures if CMS determines such hospitals are out of compliance with the HPT Rule;
  • Considering changes proposed by hospitals to clarify aspects of the HPT Rule, such as providing written guidance on the definition of “shoppable services” and developing training and compliance programs tailored for small hospitals; and
  • Continuing to strengthen internal CMS controls, including allocating sufficient internal resources to monitor hospital compliance with the HPT Rule.

This OIG audit report and its affirmative direction to CMS to step up enforcement efforts demonstrates that HPT Rule enforcement remains a priority of regulators. According to the report, CMS has already initiated compliance reviews of certain hospitals included in OIG’s sample. Hospitals would, therefore, be well-advised to review the report closely, to assess their current compliance with the HPT Rule, and to consider proactive efforts to ensure continued compliance with the HPT Rule’s requirements. Notably, CMS created an online tool to aid hospitals in determining if their files are compliant with the HPT rule.

As part of its 2025 Physician Fee Schedule Final Rule (PFS Rule), the Centers for Medicare & Medicaid Services (CMS) finalized two crucial updates to federal Medicare overpayments regulations (sometimes referred to as the “60-Day Rule”) that (1) align the standard for when an overpayment is identified with the applicable standard under the False Claims Act (FCA), and (2) give health care providers up to 180 days to conduct good faith investigations to determine the existence of related overpayments after identifying an overpayment, respectively. 

These two changes address areas of significant uncertainty for health care organizations in recent years. Previously, there was uncertainty concerning the standard for “reasonable diligence” for identifying overpayments and how that standard squared with the FCA’s knowledge (scienter) requirement for liability thereunder. In addition, the changes also indicate the expectation by the government that, upon identifying an overpayment, health care organizations conduct timely good faith investigations to determine the existence of related overpayments to fulfill their 60-Day Rule obligations.

Medicare Overpayments Rule & Reasonable Diligence Standard

As a reminder, the 60-Day Rule was established as part of the Affordable Care Act (ACA) and requires a health care provider that receives an overpayment to report and return the overpayment by the later of (i) 60 days after the provider identifies the overpayment or (ii) the date any corresponding cost report is due. Failure to report and return an overpayment in a timely manner subjects the provider to significant potential liability under the FCA for a so-called “reverse false claim” for wrongful retention of the overpayment. However, the ACA did not define when an overpayment has been “identified.” This issue was addressed in rulemaking by CMS in 2014 (for Medicare Parts C and D) and 2016 (for Medicare Parts A and B), wherein CMS indicated that a provider “identifies” an overpayment when it determines, or should have determined, that the provider received an overpayment (this exercise is referred to as the “reasonable diligence” standard).

In 2018, a federal court overturned the reasonable diligence standard for Medicare Parts C and D in response to litigation brought by Medicare Advantage organizations. The court held that the reasonable diligence standard impermissibly established FCA liability for “mere negligence” and noted that the FCA had a specifically-defined knowledge standard that does not encompass negligence.

Updated Knowledge Standard for Identifying Overpayments

In response to the federal court’s ruling, and to promote consistency across Medicare programs, in December 2022, CMS proposed updating its 60-Day Rule regulations to align the knowledge standard for identifying an overpayment with the standard under the FCA (please see here for our previous discussion of that proposed rule).

In the PFS Final Rule, CMS has finalized its proposal without changes. As of January 1, 2025, under the 60-Day Rule, a person has identified an overpayment when the person:

  1. Has actual knowledge of an overpayment;
  2. Acts in deliberate ignorance of the truth or falsity of information regarding the overpayment; or
  3. Acts in reckless disregard of the truth or falsity of information regarding the overpayment.

Updated Reporting Deadline to Permit Good Faith Investigation of Related Overpayments

In the PFS Final Rule, CMS also provides additional guidance and finalizes regulations concerning providers’ potential obligation to determine the existence of related overpayments upon identifying an overpayment. CMS acknowledges the challenge in determining when the 60-day “clock” starts for reporting and returning an overpayment. 

CMS states that the 60-day period begins when a provider “has actual knowledge of the overpayment” or if the provider “acts in deliberate ignorance or reckless disregard of the existence of the overpayment,” that period starts when the provider “acted in deliberate ignorance or reckless disregard of the truth or falsity of information regarding the overpayment.”

A lingering question for many health care organizations has been whether, upon discovering a single overpayment, the organization has an obligation under the 60-Day Rule to investigate whether an underlying compliance issue could have resulted in other overpayments. CMS responds affirmatively in the PFS Final Rule, stating “we agree… that where a single overpayment is found and other related overpayments are suspected, the provider or supplier should investigate and calculate the aggregate overpayment prior to its return.”

Consequently, CMS is finalizing a related regulation under the 60-Day Rule, which “suspends the 60-day report and return obligation for up to 180 days, to allow persons time to complete a good-faith investigation to determine the existence of related overpayments that may arise from the same or similar cause or reason as the initially identified overpayment.” In other words, the 60-day clock can be delayed for up to 180 days to allow providers time to conduct a good faith investigation of potential related overpayments to ensure a comprehensive reporting and returning of overpayments.

Conclusion

The 60-Day Rule updates in the PFS Final Rule provide important guidance and assurances to health care organizations regarding the standard for identifying overpayments and the government’s expectations for providers to proactively investigate, identify, and return such overpayments. Health care organizations should carefully review the final 60-Day Rule regulations and preamble commentary guidance from CMS and update their compliance processes accordingly in order to mitigate the potential risk of FCA liability and whistleblower lawsuits for reverse false claims. 

If you have any questions regarding the PFS Rule and 60-Day Rule overpayment regulations, please do not hesitate to reach out to the authors or your contact at Robinson & Cole LLP for specific guidance.

In a highly anticipated decision on an issue facing courts across the country, the Massachusetts Supreme Judicial Court held in late October that Massachusetts hospitals’ use of online tracking technologies that collect and transmit browsing activities of website visitors does not violate the Massachusetts Wiretap Law. 

The Court determined that online interactions between visitors and the hospitals’ websites did not unambiguously qualify as a “wire communication” subject to the wiretap law, and therefore, the hospitals merited the benefit of the doubt under the “rule of lenity.” The Court accordingly reversed the trial court’s denial of the hospital-defendants’ motions to dismiss the complaints.

The case was brought as a class action alleging that two Massachusetts hospitals violated the Massachusetts Wiretap Law by “aiding… third-party software providers” in unlawfully intercepting communications involving the individuals. The communications in the complaint were the browsing activities of each individual on the hospitals’ websites, including obtaining information about specific doctors and conditions, as well as accessing medical records through a patient portal. The plaintiffs alleged that the hospitals’ collection of information on website users (such as URLs, IP addresses, and device characteristics) and third-party tracking software to monitor user activities on the websites constituted impermissible interceptions under the Massachusetts Wiretap Law. The plaintiffs sought civil remedies under that law. Notably, the allegations mirrored similar actions brought against other hospitals in Massachusetts (under the same state law) and hospitals in different states (often under those states’ analogous wiretap laws).

The Court undertook a statutory construction analysis of the specific terms in the Massachusetts Wiretap Law. It concluded that the interactions between a user and the website were not unambiguously “communications” accepted under the wiretap law (e.g., person-to-person communications). The Court observed that when visiting a website, the “user is not communicating with another person but instead interfacing with pre-generated information on a website” and that a website visitor is not “engaging in a conversation but accessing published information and databases.” The Court noted that although the Wiretap Law dates to 1968 —long before the internet age — it contains a “forward-looking mandate” concerning its applicability to new technologies, citing a 2013 decision affirming the applicability to cell phone calls and text messages. However, the Court was unwilling to expose the hospitals to potential civil and criminal penalties for “activities that do not capture such person-to-person communications or messaging” because “the text of the wiretap act is inconclusive at best as to whether website browsing is a “communication” protected by the act.”

The decision has been welcomed by hospitals and health care organizations in Massachusetts, many of whom have litigated similar allegations under the same state law – while also seeking to align with changing federal guidance on tracking technologies – for several years. Nonetheless, health care organizations should strongly consider the use and disclosures associated with website tracking technologies since the Court acknowledged the alleged conduct “raises serious concerns” and could potentially “violate various other statutes and give rise to common-law causes of action” involving protecting confidential medical information. Moreover, the decision included a lengthy dissent from one judge , who strongly disputed the majority holding and criticized the hospitals’ activities.

*This post was co-authored by Paul Palma, legal intern at Robinson+Cole. Paul is not admitted to practice law.

On November 15, 2024, the Drug Enforcement Administration (DEA) and the Department of Health & Human Services (HHS) jointly announced an extension of current COVID-era tele-prescribing flexibilities for another year – through December 31, 2025 – via a Third Temporary Rule. Accordingly, health care practitioners will continue to be allowed to establish relationships with patients involving the prescription of controlled substances via telemedicine, even if the practitioner has not conducted an in-person medical evaluation of the patient, through the end of 2025.

In the Third Temporary Rule, the DEA and HHS continue to work on finalizing permanent tele-prescribing rules that appropriately balance public health and access issues with the potential diversion risks associated with telemedicine. The Second Temporary Rule (discussed below) had been scheduled to expire on December 31, 2024, and the agencies jointly determined it was necessary to issue another one-year extension to provide more time to finalize new regulations.

The DEA and HHS intend to provide “a smooth transition for patients and practitioners that have come to rely on the availability of telemedicine for controlled medication prescriptions” by considering stakeholder input and giving practitioners and patients sufficient time to comply with the new regulations once they are finalized.

As a reminder for health care organizations and industry stakeholders, please find a summary of the prior temporary rules below:

  • On February 24, 2023, the DEA issued a set of proposed rules (previously discussed here) to make certain “telemedicine flexibilities” established during the COVID-19 pandemic permanent prior to the scheduled end of the COVID-19 public health emergency on May 11, 2023. The proposed rules were more restrictive than the COVID-era telemedicine flexibilities and notably sought to end the tele-prescribing of certain narcotics without an in-person medical evaluation.
    • The DEA received over 38,000 comments on these proposals, with several opposing the sudden end of tele-prescribing flexibilities involving the prescription of certain controlled substances.
  • On May 9, 2023, the DEA issued the First Temporary Rule (discussed here), extending all COVID-19 flexibilities for the prescription of controlled substances through November 11, 2023, and allowing practitioners to continue forming new relationships involving the prescription of controlled substances via telemedicine without requiring an in-person medical evaluation.
    • The First Temporary Rule was issued in lieu of finalizing the previously proposed rules, and it also provided a one-year grace period allowing practitioner-patient relationships established as of November 11, 2023, to continue via telemedicine until November 11, 2024, before requiring an in-person visit to continue prescribing controlled substances via telemedicine.
  • On October 10, 2023, the DEA issued a Second Temporary Rule (discussed here), waiving the grace period established by the First Temporary Rule and extending the period during which practitioner-patient relationships involving the prescription of controlled substances could be formed via telemedicine through December 31, 2024.
    • The Third Temporary Rule now further extends that period until December 31, 2025.

The Third Temporary Rule’s text is available here. It will be published in the federal register on November 19, 2024.

On October 22, 2024, Microsoft issued a threat trend research report entitled “US Healthcare at risk: Strengthening resilience against ransomware attacks.” In it, Microsoft declares that ransomware attacks against the healthcare sector are “emerging as one of the most significant” cybersecurity threats to healthcare organizations. The attack surface of hospitals “grows more complex” with digital operations, which heightens “their vulnerability to attacks.”

According to the report, “the healthcare/public health sector was one of the top 10 most impacted industries in the second quarter of 2024.” Further, “ransomware attacks have surged” against health care organizations “by 300% since 2015.” In 2024, “389 U.S. healthcare institutions were hit by ransomware, causing network shutdowns, offline systems, delays in critical medical procedures, and rescheduled appointments,” with one estimate “showing healthcare organizations lose up to $900,000 per day on downtime alone.” The average ransom paid by organizations surveyed was $4.4 million.

The report declares that these attacks have a “grave impact on patient care,” as ransomware attacks can “severely impact the ability to effectively treat patients.” The effect of such attacks includes “increased emergency department patient volume, longer wait times, and additional strain on resources, particularly in time-sensitive care like stroke treatment.”

The report outlines four case studies that illustrate how ransomware attacks had “far-reaching effects” on different types of healthcare organizations.

The reason healthcare organizations are getting hit so hard by ransomware attacks include the fact that they have a reputation for paying ransoms, have limited budgets for implementing security measures, have outdated legacy systems in place, and there is an expanding attack surface to try to protect. According to Microsoft, “email remains one of the largest vectors for delivering malware and phishing attacks for ransomware attacks.” The report urges the healthcare sector to adopt better cybersecurity strategies and defenses, investing in the ability to quickly restore operations following an attack, and “building a security-first workforce,” which includes robust education and training of users. Although the report outlines the same lessons we have advocated for years, the statistics this year on the rise of ransomware attacks against healthcare organizations, and that the number one way threat actors are successful in deploying ransomware is still phishing emails, should be proof enough that education and awareness should be a top priority in defending against these attacks. Spend the time and resources to develop and implement a robust cybersecurity training program and keep users apprised of the new tricks and trades of threat actors.

This post is also being shared on our Data Privacy + Cybersecurity Insider blog. If you’re interested in getting updates on developments affecting data privacy and security, we invite you to subscribe to the blog.