Healthcare Law Blog : Medical Groups, Health Plans, Hospital & Facility Lawyers & Attorneys: Sheppard Mullin Law Firm

By Aytan Y. Dahukey

Will bundled payments lead to restructuring of our primary care healthcare delivery system? Healthleaders has a great article discussing the vision for healthcare delivery system reengineering proposed by Thomas H. Lee, MD, the network president of Partners Healthcare and Michael E. Porter, PhD, Bishop William University Professor at the Harvard Business School. The two advocate for a revamping of our understanding of “primary care” doing away with the distinction between primary and specialty care in favor of an integrated care delivery model focused on patients. Lee and Porter propose grouping patients into categories and matching comprehensive physician services with patients. They promote embracing the bundled payment method of payment by insurers to provide incentive for these comprehensive services. The article specifically identifies several groups, including CareMore, as having already begun to transition into this coordinated care model.

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By David Douglass

The Ninth Circuit has reopened a door for off-label marketing prosecutions, and it is important to review your compliance and risk management programs in light of this recent decision. Last December, the pharmaceutical and medical device industries exhaled a sigh of relief in response to the influential Second Circuit’s decision in United States v. Caronia, holding that truthful off-label marketing is a form of protected First Amendment speech that cannot form the basis for a criminal prosecution under 21 U.S.C. §333 of the Food, Drug and Cosmetic Act (“FDCA”). The Caronia decision followed the Supreme Court’s decision in Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (June 23, 2011), which held that a Vermont statute prohibiting pharmaceutical companies from engaging in truthful marketing activities offended the First Amendment. The question after Sorell and Caronia became, can the government still prosecute off-label marketing? On March 4, 2013 the Ninth Circuit said yes, albeit in an unpublished opinion.

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The Centers for Medicare & Medicaid Services (CMS) recently announced that over 500 organizations will begin participating in the Bundled Payments for Care Improvement initiative. The large number of participating organizations now exceeds the number of Medicare ACOs, and makes the Bundled Payments initiative the largest voluntary Medicare payment innovation program. Participating organizations are located throughout the United States, and are displayed on CMS’s website.

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By Robert Rose 

Dr. Harkonen was the CEO of InterMune, Inc, a pharmaceutical company that developed, marketed and sold drugs for lung and liver diseases, including Actimmune. In 2002, the FDA had approved Actimmune to treat only two conditions: chronic granulomatous disease and severe malignant osteopetrosis. A year before the approval, an Austrian clinical trial concluded that Actimmune’s active ingredient was associated with improvement in patients with idiopathic pulmonary fibrosis (IPF), a rare and fatal disease of unknown origin. InterMune did its own clinical trial to confirm whether Actimmune was an effective treatment for IBF.

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By Eric Klein 

This week brought the announcement that WellPoint Inc. selected Joseph Swedish to become its next Chief Executive Officer. Swedish will leave his position as CEO of nonprofit Catholic health system Trinity Health, which has grown to almost $12 billion in assets under Swedish’s leadership and is moving through a merger to become the fifth largest hospital system in the country. Prior to Trinity, Swedish also had worked for for-profit hospital system HCA. Wellpoint, which operates Blue Cross and Blue Shield plans in 14 states, has received some criticism from Wall Street this week for this surprise selection, noting that Swedish is not a traditional insurance company executive. Other commentators have suggested that this selection may indicate an interest by WellPoint in increasing its provider alignment, such as the strategy that was initiated through WellPoint’s acquisition of Medicare Advantage HMO and senior care clinic provider CareMore in 2011. Does this move indicate a higher likelihood of new value-based arrangements between WellPoint’s health plans, on the one hand, and hospitals and medical groups on the other?

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The Centers for Medicare and Medicaid Services (CMS) have finally announced the final rule for the Physician Payments Sunshine Act, which will require applicable manufacturers of drugs, devices, biological, or medical supplies covered by Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP) to report payments or transfers of value provided to physicians or teaching hospitals and require applicable manufacturers and applicable group purchasing organizations to report physician ownership or investment interests. This long-awaited rule has been a subject of frustration for Senators Grassley and Kohl, which was supposed to be implemented in 2012. The final rule will be published in the Federal Register on February 8, 2013, but a pre-publication version is available here. Details on the final rule will be forthcoming on this blog.

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By Bora Rawcliffe 

The healthcare industry has been under increased SEC and DOJ scrutiny lately for potential FCPA violations. What has been described as an “industry sweep,” has focused primarily on medical device and pharmaceutical companies. These companies are particularly vulnerable to FCPA violations because the DOJ and the SEC have taken the stance that employees of state-owned and state-controlled hospitals or health care providers are considered “foreign officials” under the FCPA. For example, in 2012, enforcement actions against Smith & Nephew, Biomet, Orthofix, and Pfizer were all partly based on this enforcement theory. Enforcement actions such as these typically arise from the efforts of a company, its subsidiaries, or its distributors to influence doctors and other officials to purchase, prescribe, or obtain government regulatory approvals and registrations for a company’s products.

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By Barbara Taylor

Providers can voluntarily disclose potential fraud with respect to Federal health care programs—Medicare, Medicaid, and potentially private insurers to the extent Federal or state funds are involved—by following the Provider Self-Disclosure Protocol ("Protocol") issued by the Department of Health and Human Services, Office of the Inspector General ("OIG"). (See 63 FR 58399 (Oct. 30, 1998).) Before embarking on the Protocol journey, providers must understand that although there are concrete benefits to disclosure, it is not a panacea.

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By David R. Garcia and Helen C. Eckert 

Just three days after the Federal Trade Commission, jointly with the Pennsylvania Attorney General, issued an administrative complaint challenging Reading Health System’s (RHS) proposed acquisition of Surgical Institute of Reading L.P. (SIR), a 15-bed surgical specialty center, both entities abandoned the proposed acquisition, citing the high costs associated with a protracted court battle with the government. This FTC victory provides more valuable insight into how antitrust enforcement agencies are evaluating the increasing number of consolidations within the healthcare industry, particularly after passage of the Affordable Care Act. Specifically, this case highlights the government’s very granular analysis of effects on competition through highly specialized “service markets,” as well as the risk for entities that ordinary-course-of-business documents surrounding the proposed consolidation can play a significant role in the government’s challenge. It also appears to be another example of an FTC challenge to a transaction below the Hart-Scott-Rodino reporting threshold.

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By Robert Rose

Last month, in a joint letter by HHS and DOJ to five prominent hospital associations, the government warned that some providers are using electronic medical records (EMR) to “game the system.” The September 24th letter gave examples of “troubling indications” of EMR misuse:

• Cutting and pasting the same examination findings for multiple patients—known as “cloning”—to make it appear that physicians conducted more thorough exams that were actually done
• Upcoding the intensity or severity of a patient’s condition simply to profit without improving the quality of care

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By Eugene Ngai

New amendments to California’s local health care district law require districts to obtain a fair market value appraisal if the district transfers fifty percent or more of its assets (in sum or by increment) to one or more nonprofit corporations for less than fair market value, and disclose the fair market value of such assets to the voters for approval of the transfer. These amendments were enacted by SB 804, which Governor Brown signed into law on September 28, 2012.

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By Aleah Yung

On Saturday, September 22, 2012, Governor Brown signed SB 1095, which clarifies ambulatory surgery center (“ASC”) pharmacy licensure eligibility. This is great news for ASCs which have struggled since a controversial 2007 court decision had unintended consequences that effected the ability of ASCs to obtain pharmacy licenses.

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By Eugene Ngai

The Office of Inspector General has published its Work Plan for the 2013 Fiscal Year. This provides health care industry players with an insight into the activities that OIG plans to initiate or continue with respect to federal health care programs and operations in the upcoming fiscal year. Some new areas that OIG plans on investigating include:

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By David R. Garcia and Helen C. Eckert

California’s Attorney General has recently launched a broad investigation into whether increasing consolidation among hospitals and physician groups may be resulting in supra-competitive prices for medical care, according to several media sources. This investigation reflects increased scrutiny by antitrust regulators on a nationwide basis of rapid consolidation among the healthcare industry, which in large part has recently been motivated by the federal Affordable Care Act which encourages efficiency and higher quality through coordination of care among different groups of providers.

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