Riker Danzig Health Care Update December 22, 2015
New Jersey State: Selected Proposed and Adopted Legislation
- A.B. 4774 – Introduced – Establishes cap on amount that hospital can charge patients for laboratory services to 150 percent of Medicare.
- A.B. 4722 – Introduced – Establishes Prescription Drug Review Commission and requires production costs to be reported for certain prescription drugs.
- A.B. 4736 – Introduced – Maintains property tax exemption for certain non-profit hospitals with on-site for-profit medical providers. This is a direct response to the Morristown Medical Center tax ruling. See below In State Litigation.
- S. 3299/A.B. 4903 – Introduced – Maintains property tax exemption for certain nonprofits hospitals with on-site for-profit medical providers and requires these hospitals to pay community service contributions to host municipalities. Specifically, the payment formula for mandatory contributions would be $2.50 a day for each hospital bed and $250 a day for each facility providing satellite emergency care. Five percent of the payments under the measure would be sent to the county where the hospital is located. Any voluntary contributions by the hospitals would be deducted from the community service payments, and any hospital that is losing money could apply for an exemption from the payments.
- A.B. 3522/S. 2301 – Introduced – Regulates the practices of pharmacy benefit managers (PBMs). Specifically, it requires them to include in their yearly contracts with pharmacies the basis of prices for drugs, update the pricing information daily, and establish a reasonable process of notification to those pharmacies in their network of those daily changes.
- A.B. 4444/S. 20 – Amended version of the Out-of-Network Consumer Protection, Transparency, Cost Containment, and Accountability Act cleared the Assembly committee so it can reach the whole Assembly.
- S. 854/A.B. 1341 – Adopted – Requires that certain health care facilities be generator ready and allows health care facilities to qualify for NJEDA loans for the cost of the generators.
- N.J. Legis. 125 – Adopted – Requirements for the licensure of dementia care homes by the Department of Health and amending and supplementing various part of the statutory law.
- N.J. Legis. 131 – Adopted – An act concerning continuing education for psychologists and supplementing P.L. 1966.
- N.J. Legis. 130 – Adopted – An act concerning the dispensing of certain biological products, supplementing Title 45 of the Revised Statutes.
New Jersey State: Selected Adopted Regulations
47 N.J.R. 2873(a) – The New Jersey Individual Health Coverage Program Board is adopting amendments to N.J.A.C. 11:20 Appendix Exhibits A and B in order to comply with certain provisions of the Affordable Care Act.
Federal: Selected Proposed Legislation
- H.R. 4090 – Introduced – To amend the Social Security Act to improve choices available to Medicare eligible seniors by permitting them to elect (instead of regular Medicare benefits) to receive a voucher for various other services like a health savings account.
- S. 2312 – Introduced – To amend titles XVIII and XIX of the Social Security Act to make improvements to payments for durable medical equipment under the Medicare and Medicaid programs.
- H.R. 3016 – Introduced – An act to amend title 38, United States Code, to clarify the role of podiatrists in the Department of Veterans Affairs.
Federal: Selected Adopted Regulation
- 80 FR 70886-01 – (Nov. 16, 2015) This final rule with comment period addresses, among other things, the changes to the physician fee schedule. It also makes changes to how Practice Expenses (PEs) and Relative Value Units (RVUs) are determined.
- 80 FR 73274-01 – (Nov. 24, 2015) This final rule implements a new Medicare Part A and B Payment model under section 1115A of the Social Security Act, called the Comprehensive Care for Joint Replacement model, in which acute care hospitals in certain selected geographic areas will receive retrospective bundled payments for “episodes of care” for lower extremity joint replacement or reattachment of a lower extremity. All related care within 90 days of hospital discharge from the joint replacement procedure will be included in the episode of care.
- In June, a Judge of the Tax Court had stripped Morristown Medical Center of its tax-exempt status, saying that it had so intermingled its non-profit and for-profit services and finances that it could no longer qualify for a tax exemption. On Nov. 11, Morristown Medical Center reached an agreement with Morristown on its unpaid property taxes. Importantly, the agreement reached between the town and the medical center only included payment for the portions of the land occupied by private doctors and not the rest of the hospital. Some experts believe this will be a model for tax settlements between hospitals and townships around the state. As explained above, however, the State legislature is now involved with bills S. 3299/A.B. 4903.
- As of Nov. 20, seventeen hospitals designated as Tier 2 by Horizon’s OMNIA plan have appealed the decision of the DOBI commissioner not to halt the introduction of the plan slated to begin Dec. 26, 2015. See, Capital Health Regional Medical Center et. al. v. The New Jersey Division of Banking & Insurance in the Superior Court of New Jersey, Appellate Division. Then, on December 10, seven New Jersey hospitals sued Horizon for wrongly excluding them from the OMNIA plan. See, Capital Health System Inc. et al. v. Horizon Healthcare Services Inc. in the Superior Court of the State of New Jersey, Chancery Division, County of Bergen. Additionally, hearings have been conducted by State Assembly committees since the DOBI commissioner’s decision and legislation has been introduced, specifically S. 3300, which would halt the implementation of OMNIA until January 1, 2017.
- The New Jersey Supreme Court on Nov. 24, 2015 overturned a decision requiring an insurance company to provide medical malpractice coverage under a policy that was rescinded due to misrepresentations, saying the company did not have to cover the doctor once the policy was voided. The Supreme Court stated, “In summary, it is well established in this state that a professional who has made a misrepresentation of material fact in an application for professional liability insurance can expect that the policy may be rescinded on application of the insurer.” See, DeMarco v. Stoddard, Case Number 073949, in the New Jersey Supreme Court.
- On Nov. 10, after filing for Chapter 11 Bankruptcy, Saint Michael’s Medical Center, Inc. declared Prime Healthcare’s $62.2 million offer the winning bid for the bankrupt New Jersey hospital’s assets and this bid was subsequently approved by the Bankruptcy court. See, In re: St. Michael’s Medical Center Inc., Case Number 15-BK-24999 in the United States Bankruptcy Court, District of New Jersey. It is worth noting that Prime Healthcare is set to acquire the Memorial Hospital of Salem County, New Jersey.
- On Nov. 12, Associates Against Outlier Fraud attempted to convince the 2nd Circuit that whistleblowers, who lost in the suit, should not get stuck with costs of failed FCA claims. The whistleblowers were ordered to pay $15,000 in fees for depositions taken in the case. See, U.S. v. Huron et al., Case Number 15-425, in the U.S. Court of Appeals for the Second Circuit.
- On Nov. 13, in tossing the FTC’s data security suit against LabMD, an administrative law judge set a high bar for the agency to prove consumer harm over data breaches. Specifically, the judge required the FTC to show probable, not just possible, consumer injury in order for the FTC to sustain a data security claim. See, In the Matter of LabMD Inc., Docket Number 9357, before the FTC's Office of the Administrative Law Judges.
- Four people, including the former CFO for a Long Beach, California hospital at the center of a health care fraud and kickback scheme, have reached plea agreements, admitting to being involved in the nearly $600 million billing scheme over spinal surgeries. The physicians involved were paid thousands of dollars to refer patients to distant hospitals even though there were qualified hospitals nearby. See, U.S. v. Canedo, Case Number 8:15-cr-00077, U.S. v. Cohen, Case Number 8:15-cr-00142, U.S. v. Ivar, Case Number not available, U.S. v. Sobol, Case Number not available, and U.S. v. Randall, Case Number 8:12-cr-00023, all in the U.S. District Court for the Central District of California. The underlying case is State Compensation Insurance Fund v. Michael D. Drobot Sr. et al., Case Number 8:13-cv-00956, in the same jurisdiction.
- CMS has defended a $220 million hospital pay cut and hinted that an even larger cut may be appropriate. CMS’ defense was the result of a recent court decision that found the agency in 2013 did not properly explain its justification for a $220 million reduction in industrywide reimbursements. The 0.2 percent annual reduction was meant to offset the costs of a projected increase in admissions tied to Medicare’s new requirement for admissions to cross at least two midnights. See, Shands Jacksonville Medical Center et al. v. Sylvia Mathews Burwell et al., Case Number 1:14-cv-00263, in the U.S. District Court for the District of Columbia. A similar case was filed in Ohio. See Grant Medical Center, et al. v. Burwell, Case Number 2:15-cv-02995, in the U.S. District Court for the Southern District of Ohio, Eastern Division.
Selected Guidance Documents
- On Oct. 30, CMS finalized the calendar year 2016 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System policy changes, quality provisions, and payment rates. See 80 FR 70298-01.
- On Oct. 29, CMS created five waivers of federal healthcare fraud and abuse laws for Medicare Shared Savings Program (MSSP) participants: (1) the ‘pre-participation’ waiver; (2) the ‘participation’ waiver; (3) the ‘shared savings distribution’ waiver; (4) the ‘compliance with the physician self-referral law’; and (5) the ‘patient incentive’ waiver. The MSSP aims to encourage coordination and cooperation among providers to improve the quality of care for Medicare Fee-For-Service beneficiaries and reduce unnecessary costs. See, 80 FR 66726-01.
- On Nov. 16, CMS announced changes to the Stark Law coming in 2016. Specifically, the 2016 MPFS final rule added two new exceptions to Stark, (1) the “assistance to compensate a non-physician practitioner” and (2) the “time-share arrangements” exception. See, 80 FR 70886-01.
- On Oct. 14, the FTC provided guidelines for how state agencies may comply and move forward in regulating their fields in the wake of the 2015 Supreme Court decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission, where it was held that medical boards are subject to antitrust scrutiny unless they satisfy two requirements enumerated in the opinion. You can read the suggested guidelines at https://www.ftc.gov/news-events/blogs/competition-matters/2015/10/when-what-active-supervision.
In the News
- On Nov. 19, UnitedHealth Group, the nation’s largest health insurer, cited flagging enrollment and high-risk customers in suggesting that it may have to pull out of the Affordable Care Act’s exchanges in 2017. While UnitedHealth accounts for only 550,000 insureds in the exchanges, the concern is that it may have a ripple effect to other major insurers.
The list above does not include every proposed or adopted legislation, litigation or guidance document that may impact the health care industry. Instead, it includes only a select few chosen by the authors, and any information in this Update is not intended to provide legal advice. If you are concerned that a proposed or adopted legislation, litigation or guidance document may impact your practice, then you should seek legal advice. Nothing in this Update should be relied upon as legal advice in any particular matter. © 2015 Riker Danzig Scherer Hyland & Perretti LLP.
If you have any questions about the issues discussed in this Update, please contact the following Riker Danzig attorneys:
Glenn A. Clark, Partner
Khaled John Klele, Partner
Stephen M. Turner, Associate