Legal Insights and Perspectives for the Healthcare Industry

The FCC recently issued draft rules for a pilot funding program to enhance broadband service for connected care telehealth purposes, reflecting the agency’s recognition of the increasingly critical role that telehealth plays in the healthcare industry. The proposal for a $100 million fund to use advanced telehealth technologies to reach low-income Americans and veterans will be of great interest to many healthcare companies.

Members of the Morgan Lewis healthcare team joined more than 1,200 professionals in attendance at the 2019 Annual Meeting of the American Health Lawyers Association recently held in Boston. This year’s conference was notable for a group of educational sessions on how the acceleration of digital technology is redefining the healthcare industry. Presenters stressed the importance for healthcare systems to have a digital strategy in place for maintaining relevance in this fast-changing environment, which one speaker likened “to building a plane while you fly it.”

June is when spring makes way for summer’s guilty pleasures, and for Health Law Scan these included reading highly anticipated decisions by the US Supreme Court and state legislation signed into law. In the last month, Health Law Scan analyzed Supreme Court opinions on notice and comment rulemaking for Medicare policy changes with substantive legal effect, the exemption of proprietary information from disclosure under the Freedom of Information Act, and the “zombification” of Auer deference. We also evaluated enacted Texas legislation considered by many to be among the strongest drug price transparency laws in the nation. CMS changes to the Recovery Audit Program and draft guidance on hospital co-location arrangements rounded out the must-reads in our beach bag, along with the top five telehealth legal issues for this summer. So if you happened to miss a blog post or two while co-locating at the beach or pool, it’s not a worry because we’ve gathered them here.

US President Donald Trump issued the Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First on June 24, another in a long line of recent executive and legislative branch efforts to address the issue of healthcare pricing and the apparent “black box” nature of those prices to the average consumer. The prevalence of health savings accounts (HSAs), high-deductible health plans, and narrow insurance networks has exposed the underbelly of healthcare pricing to the American consumer. Disputes among providers and insurers that land in the laps of patients and consumers have reached a fever pitch. The executive order is a response to the call to action regarding healthcare pricing, along with several bills making their way through Congress this year.

The executive order calls for the issuance of a proposed rule by the secretary of the US Department of Health and Human Services (HHS) within 60 days that requires hospitals to publicly post standard charge information, “including charges and information based on negotiated rates and for common or shoppable items and services,” in a user-friendly format. While we are uncertain as to how far the proposed HHS rule is likely to go, what will be included in the categories of “shoppable” items and services, or what the eventual implications for antitrust law will be, the constitutionality of such disclosures is being called into question by some constitutional scholars. For example, noting that hospitals already provide consumers with information on pricing, the American Hospital Association has observed that “publicly posting privately negotiated rates could, in fact, undermine competitive forces of private market dynamics.” The industry will need to look closely at the HHS proposed rule once issued.

Paired with the recent decision in Azar v. Allina, the healthcare industry in particular can hope for a greater voice in the regulatory process in the wake of the US Supreme Court’s directives. With Allina’s requirement that all statements of policy or guidance with substantive legal effect must proceed through notice and comment rulemaking, and Kisor’s instructions for greater judicial diligence with respect to interpreting agency rules, the healthcare industry may have increased confidence that the courts can provide a meaningful role in protecting regulated parties from unchecked agency authority. This is of great value in an era of rapidly changing and thoroughly regulated healthcare delivery systems.

In an opinion with significant implications for the healthcare industry, the US Supreme Court has held that information that is both customarily and actually treated as private by its owner—and that is provided to the government under an assurance of privacy—is exempt from disclosure under the Freedom of Information Act (FOIA). As a result, federal agencies may refuse to disclose a much broader swath of proprietary commercial and financial information obtained from healthcare organizations under federal regulation, or as part of an investigation, or otherwise. There may be interesting interplay between this broader definition of “confidential” in the FOIA release context and the varying federal government policies under consideration for promoting or imposing greater transparency in pricing and quality reporting among healthcare providers. Ultimately, Congress will have the final say.

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On a fourth go-around, the Trump administration has issued another set of proposed tariffs on an additional $300 billion of goods related to China, this time adding a range of commercial goods across industries. With respect to healthcare products, this round affects medical devices and their components, certain chemicals and precursors that can be used in pharmaceuticals and dietary supplements, and other FDA-regulated products. The administration continues to try to use tariffs as a means of balancing the trade deficit with China and to bring the Chinese government to the negotiating table on a longstanding set of issues related to intellectual property (IP), cyber, and technology transfer. There are two steps to the tariff process:

The CMS draft guidance for state survey agency directors on hospital co-location arrangements offers insight into how CMS will evaluate hospitals that partner with other providers under the Medicare conditions of participation, or CoPs. Co-location occurs when two hospitals or a hospital and another healthcare entity are located on the same campus or in the same building and share space, staff, or services. Areas that CMS will review when surveying co-located facilities include staffing, contracted services, distinct and shared spaces, and emergency services.

In an unanticipated but welcome move, CMS is soliciting comments on the draft guidance by July 2. Stakeholders should be sure to use this opportunity to raise their compliance concerns associated with the proposed rules governing shared space and staffing arrangements under the Medicare program.

Read the full LawFlash for more details on the draft guidance.

HB 2536 requires pharmaceutical manufacturers to disclose to the Texas Health and Human Services Commission (HHSC) when a drug’s price increases 15% or more compared to the previous year, or 40% or more over three calendar years. The new law also requires annual reporting of detailed price information by manufacturers, pharmacy benefit managers, and health benefit plans, and charges the HHSC with making this information available online to the public.

Two Texas cities—Dallas and San Antonio—will soon require employers to offer paid sick leave effective August 1, 2019. While it appeared almost certain the 86th Texas legislature would act to stop the local ordinances, the legislation failed to pass by the end of the regular session on May 27, 2019. A similar ordinance adopted by Austin, Texas, and enjoined by the state’s Third Court of Appeals remains in litigation. A ruling on the Austin ordinance, which will likely also impact Dallas and San Antonio, may not come until the end of the year. Given this current state of affairs, what are employers in Dallas and San Antonio to do? Prepare to comply with the ordinances’ requirements by August 1, 2019.

Read the full LawFlash.