Healthcare & Life Sciences

After a 2-year hiatus, health care transactional attorneys and related industry professionals descended upon Nashville, TN April 25th – 27th for the 2022 American Health Law Association (“AHLA”) Health Care Transactions Conference. Aside from hot chicken and honky tonks, this conference was largely a celebration of the strength and resiliency of the health care industry during the past two COVID19-impacted years. Here are some of our main takeaways from the conference: Strong Transaction Activity: Health care-related deal value and volume has been at an all-time high, with evidence of continued growth. COVID19 increased federal and private health care funding and also highlighted various inefficiencies in the market. These factors have contributed to record transactional activity that takes advantage of the increased value and the opportunity to improve health care delivery in a post-COVID world. Industry experts do not expect this trend to slow down any time soon, especially with increased private equity and corporate investment in the space. Private Equity Leads the Charge: While not necessarily new to the world of health care transactions, private equity (“PE”) groups have taken a strong interest in increasing investment. PE groups view the health care space as a potentially untapped resource for short-term high rates of return. For the past 20 years, return on investment in health care transactions has largely edged out returns in all other industries. PE groups are not the only non-traditional players increasingly navigating health care transactions. Corporate investment from the likes of Walmart and Amazon continue to shift care delivery away from independent practice to a more corporate-backed model. Further, the growth of telehealth as a more accepted form of care delivery also makes the health care industry particularly inviting, considering what would traditionally be limited to local practice can now be expanded nationwide with relative ease. Of course, with increased corporate involvement comes increased scrutiny. Antitrust Overhaul: Federal and state enforcement of antitrust rules is on the rise. On July 9, 2021, President Biden issued an executive order urging the Federal Trade Commission (“FTC”) to bolster its antitrust review of health care transactions. The FTC is now actively reviewing its horizontal and vertical merger guidelines to determine whether such guidelines are too permissive. One of the items the FTC is considering is requiring that more information be provided on a pending transaction on a quicker timeline. Additionally, certain states (e.g., Nevada, Washington, Oregon, and Massachusetts) are beginning to implement their own pre-closing transaction notification requirements that would encompass a broader range of health care transactions (as compared to the current HSR filing threshold of $101 million). Stark and Anti-Kickback: Recent changes to the Stark and Anti-Kickback rules highlight that regulators may be starting to take a more business-oriented approach to framing acceptable compensation arrangements. This is mainly shown in the changes/clarifications made to language related to fair market value, commercially reasonable transactions, and the volume/value standard. For additional discussion of these rules, please see our previously published blog here. The 2022 AHLA Health Care Transactions Conference covered a lot of ground. If you have any questions on the topics covered, please do not hesitate to reach out to the author or your regular Dorsey attorney.  

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Katherine Chaves for the following post on the FCA Now blog: Following a record year for False Claims Act (“FCA”) settlements and judgments in 2021, the Department of Justice (”DOJ”) continues to aggressively pursue the prosecution of not only corporations, but also the individuals connected to corporate criminal cases. Within the first quarter of 2022, the DOJ has already announced numerous False Claims Act violations involving corporate defendants, including a $260 million settlement with pharmaceutical company Mallinckrod, a $48.5 million settlement with TriMark USA, LLC, and a $20 million settlement with BayCare Health System Inc. A notable theme emerging from the DOJ’s stream of FCA prosecution press releases, however, is its focus on holding individual defendants accountable for crimes committed in connection with their corporate activity. Read the rest of the article here.  

With the enactment of the Eliminating Kickbacks in Recovery Act (“EKRA”) in 2018, the permissibility of commission-based compensation to laboratory sales representatives based on volume, revenue, or profit has come under question, and there is still little case law interpreting the Act. Despite EKRA being a relatively newer law, laboratories should remain mindful of how the more established Anti-Kickback Statute (the “AKS”) impacts the permissibility of such commission-based compensation as well. Under current law, commission-based payments (including commission based on volume, revenue, profit, etc.) should be permissible when paid to employee sales representatives. However, labs should be cautious when considering commission-based compensation to independent contractor sales representatives. I. The Anti-Kickback Statute The AKS subjects to criminal and civil penalties anyone who knowingly and willfully offers, pays, solicits, or receives remuneration to induce or reward the referral of business reimbursable under any federal health care programs. 42 U.S.C. § 1320a-7b(b). Importantly, the AKS extends beyond paying value in exchange for direct patient referrals; it also prohibits paying remuneration intended to induce or reward someone to arrange for or recommend that others purchase, lease, or order any good, facility, service, or item reimbursable by any federal health care program. See Id. The AKS contains numerous safe harbors, the compliance with which protects parties from violation of the AKS. One of these is the employment safe harbor, which permits any payments to an employee if there is a bona fide employment relationship. 42 U.S.C. § 1320a-7b(b)(3)(B). This safe harbor does not extend to independent contractors. Id. II. The Eliminating Kickbacks in Recovery Act EKRA subjects to criminal penalties anyone who, with respect to services covered by certain public health care benefit programs, knowingly and willfully: (1) solicits or receives any remuneration in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or (2) pays any remuneration to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory or in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory. 18 U.S.C. § 220(a). Laboratory is defined to include all laboratories, not just those that perform testing related to substance abuse. 18 U.S.C. § 220(e)(4). Notably, EKRA’s language appears to be limited to paying for direct referrals. Unlike AKS, EKRA does not include language that extends its prohibitions to paying for arranging or recommending others to make referrals or order services. In addition, EKRA does not have an employee safe harbor analogous to the employee safe harbor under AKS, but rather has a narrower exception permitting payments made under a bona fide employment relationship (including with independent contractors, unlike under the AKS employment safe harbor) where the payment does not vary based on the procedures performed, or amounts billed or received from the health care benefit program from the individuals referred. 18 U.S.C. § 220(b)(2). In 2021, a federal district court in Hawaii issued the first and, to date, only judicial opinion interpreting EKRA in S&G Labs Haw., LLC v. Graves, 2021 U.S. Dist. LEXIS 200365. The district court held that while the employment agreement with Graves (a client account manager) provided for commission-based payments that varied based on the number of tests S&G performed, the arrangement did not violate EKRA since there was only an attenuated connection between the commission-based payments and patient referrals: “Undoubtedly, Graves’s commission-based compensation structure induced him to try to bring more business to S&G . . . However, the ‘client’ accounts they serviced were not individuals whose samples were tested at S&G. Their ‘clients’ were ‘the physicians, substance abuse counseling centers, or other organizations in need of having persons tested.’ However, S&G was not compensated by those ‘clients’; S&G was ‘compensated for the testing services on a ‘per test’ basis by third party insurers, government agencies under the Medicare and Medicaid programs, and direct self-pay by some individuals.’ There is no evidence that Graves’s client accounts included individuals who self-paid for S&G to perform urinalysis on their samples.” Id. at 33-34. The district court concluded that since “Graves was not working with individuals, the compensation that S&G paid him was not paid to induce him to refer individuals to S&G.” Id. at 34. In other words, the district court concluded that because Graves was not himself a source of lab referrals, EKRA’s prohibitions could not reach the volume-based compensation arrangement between Graves and his laboratory employer. III. Commissions to Employee Sales Representatives vs. Independent Contractor Sales Representatives Under current law discussed above, labs should generally be able to make commission-based payments (including commissions based on volume, revenue, profit, etc.) to employee sales representatives, but should carefully consider the AKS when proceeding with respect to independent contractor sales representatives. A. Employee Sales Representatives Commission-based payments, including commission based on volume, revenue, profit, etc., to employee sales representatives are permissible under the AKS. Such payments would fall within the AKS employment safe harbor so long as a bona fide employment relationship exists. Per the S&G Labs interpretation of EKRA, commission-based payments, including commission based on volume, revenue, profit, etc., to employee sales representatives are also permissible under EKRA, provided that a lab’s employee sales representatives have a similar relationship to their client accounts as that described in S&G Labs, wherein sales representatives are working with physician clinics, hospitals, and other organizations and facilities that would utilize the lab, and are not working with individual patients. B. Independent Contractor Sales Representatives Based on the only case law to address the issue at this point, so long as independent contractor sales representatives work with organizations and facilities, and are not in a position to refer individual patients, then EKRA should not bar commission-based payments to a lab’s independent contractor sales representatives. However, commission-based payments to independent contractor sales representatives remain an issue under the AKS if the laboratory business involves federal health care programs. Such payments fall outside of the employment safe harbor to the AKS, and the broad reach of the AKS prohibition on arranging or recommending that others order items and services could extend to payment arrangements with independent contractor sales representatives. Consequently, laboratories should proceed cautiously when considering compensating independent contractor sales personnel based in whole or in part on a volume- or value-based methodology. We will continue to closely monitor the state of EKRA and the AKS for guidance, revisions to the law, and enforcement. If you have further questions or need advice on how to restructure compensation arrangements to comply with EKRA and the AKS, please contact the authors or your regular Dorsey attorney.  

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Ryan Cole for the following post on the FCA Now blog: The Department of Justice recently announced that a home-health services company has agreed to pay over $45,000 to resolve alleged False Claims Act (“FCA”) violations.  Professional Family Care Services, Inc. (“PFCS”), a North Carolina corporation, faced allegations of fraudulent billing for work by an employee that was convicted of wire fraud and sentenced to prison for her role in the alleged scheme. Read more here.

There is a lot going on right now for healthcare employers.  The first phase of CMS’s vaccine mandate is in full effect nationwide (now including Texas), the CDC has changed masking guidance in some circumstances, and it has been two months since OSHA let the Health Care Emergency Temporary Standard expire.  To help you navigate where things stand, we’ve provided an update on each of those topics below. CMS Vaccine Mandate On November 4, 2021, CMS enacted an Interim Final Rule (“IFR”) requiring staff at certain Medicare or Medicaid providers and suppliers (“Covered Healthcare Employers”) to be fully vaccinated against COVID-19 unless they qualify for a medical or religious exemption.  That rule was temporarily enjoined in 25 states on November 29, 2021.  On January 13, 2022, the Supreme Court lifted the temporary injunction.  Thus, Covered Healthcare Employers nationwide have an obligation to ensure that staff (defined broadly by the IFR) are vaccinated against COVID-19 or risk citation from CMS.  See our prior blog post on this topic for more details about the IFR. The IFR broadly defines the term “staff” to include “facility employees; licensed practitioners; students, trainees, and volunteers; and individuals who provide care, treatment, or other services for the facility and/or its patients, under contract or other arrangement.” The fact that care may not be provided in a formal clinical setting does not relieve staff from the mandate.  How frequently a person physically enters a Covered Healthcare Employer’s setting is also irrelevant.  Only those staff who perform 100 percent of their work remotely (for example, telehealth or payroll) are fully exempt from the vaccine mandate. Note that the IFR’s definition of “staff” includes those providing services “under contract or other arrangement.”  That means, to demonstrate compliance with the IFR, Covered Healthcare Employers must be able to establish that contract staff (for example, from agencies or locum providers) are fully vaccinated against COVID-19 or have approved medical or religious exemptions from the vaccine.  Covered Healthcare Employers must have access to documentation regarding the vaccinations of the contract employees, or approved exemptions, during a compliance survey. CMS has previously stated that Covered Healthcare Employers are not expected to maintain on-site physical copies of proof of vaccination or exemption for contractors. Because of that, some Covered Healthcare Employers used attestation forms to verify the vaccination status of contracted employees or included vague language in contracts such as, “Agency will provide vaccinated employees to provider organization.”  CMS has clarified that, if used, an attestation must be specific, and a blanket attestation will not be sufficient. CMS provided the following examples: Acceptable: “Staff X is fully vaccinated against COVID-19” or “Staff Y has been granted an exemption that meets the requirements of the rule.” Unacceptable: “Contracting organization X will send to provider organization Y only staff who are either fully vaccinated or who have been granted an exemption that meets requirements of the rule.” Because all Covered Healthcare Employers must be able to obtain and submit to surveyors proof of vaccination status and information regarding exemptions and accommodations for all staff (as defined by the IFR) upon request, Covered Healthcare Employers should include COVID-19 vaccination language in new contracts and amend existing contracts to include such language. Changes to the CDC’s Masking Guidance On February 25, 2022, the CDC (once again) revised its masking guidance.  Now, regardless of vaccination status, individuals are advised to consult the CDC’s COVID-19 Community Level data to help guide masking decisions.  That guidance, however, does not apply in healthcare settings.  Rather, healthcare entities should continue to use the COVID Data Tracker.  Specifically, the CDC states: CDC’s new COVID-19 Community Levels recommendations do not apply in healthcare settings, such as hospitals and nursing homes. Instead, healthcare settings should continue to use community transmission rates and continue to follow CDC’s infection prevention and control recommendations for healthcare settings. This has caused a bit of whiplash for healthcare employers, who may have employees asking why masks are still required if community levels are “Low.”  The simple explanation is that the COVID Data Tracker utilizes different metrics, so even though community levels may be “Low,” community transmission may be “High,” thus requiring continued masking in healthcare settings.  We anticipate clarification and/or further changes may be coming from the CDC, but for now, healthcare entities must continue to follow the masking guidance based on the COVID Data Tracker. Expiration of the OSHA Emergency Temporary Standard  OSHA’s ETS expired on December 21, 2021.  On December 27, 2021, OSHA issued a statement that included the following explanation: OSHA announces today that it intends to continue to work expeditiously to issue a final standard that will protect healthcare workers from COVID-19 hazards, and will do so as it also considers its broader infectious disease rulemaking. However, given that OSHA anticipates a final rule cannot be completed in a timeframe approaching the one contemplated by the OSH Act, OSHA also announces today that it is withdrawing the non-recordkeeping portions of the healthcare ETS. The following are the recordkeeping portions of the healthcare ETS that covered employers must still follow: establishing and maintaining a COVID–19 log to record each instance identified by the employer in which an employee is COVID–19 positive, regardless of whether the instance is connected to exposure to COVID–19 at work; making records available upon request for examination and copying, including all versions of the employer’s written COVID-19 policy, the individual COVID-19 log entry for a particular employee, a version of the COVID-19 log that removes employee identifying information; and reporting COVID–19 fatalities and hospitalizations to OSHA. With the expiration of OSHA’s ETS, healthcare employers are no longer required—under the ETS—to screen employees for COVID-19.  However, that does not necessarily mean that employers should stop screening altogether.  It is prudent for healthcare employers to continue some level of a screening process to ensure compliance with OSHA’s general duty clause, which requires all employers to provide a work environment “free from recognized hazards that are causing or are likely to cause death or serious physical harm.”  (Recall that when OSHA issued the ETS for healthcare employers, it identified COVID-19 as a recognized hazard).  While screening won’t guarantee that employees will avoid catching COVID-19 at work, ongoing screening for the duration of the public health emergency will serve an important role in demonstrating an employers’ mitigation strategies in the event an employer is audited or must respond to an OSHA complaint. This approach of ongoing screening is further underscored by the following from OSHA’s December 27, 2021, statement, in which OSHA encouraged employers “to continue to implement the ETS’s requirements in order to protect employees from a hazard that too often causes death or serious physical harm to employees.” What Should Healthcare Employers Do? Healthcare employers should consider the following practices: Include language in agency or other contractor agreements that addresses CMS’s vaccine mandate, and/or amend existing agreements. Follow CDC masking guidance for healthcare facilities. Continue to screen for COVID-19. Dorsey’s employment and health care attorneys will continue to monitor the developments related to COVID-19 requirements, and will update our health law blog with changes.  Feel free to reach out to the authors or to your regular Dorsey attorney if you have any questions about the vaccine mandate, language for agency or other contractor agreements, screenings, OSHA obligations and record keeping.

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Alex Hartzell for the following post on the FCA Now blog: Fresh off the new year, the Department of Justice (“DOJ”) continues to announce new settlements under the False Claims Act, 31 U.S.C. § 3729 et seq (“FCA”)—further cementing the trend of private parties suing borrowers for violating requirements of the Paycheck Protection Program (“PPP” or the “Program”). Two new FCA settlements were announced earlier this month involving relators’ allegations that borrowers made false statements when applying for PPP loans in violation of Program rules. Read more here.

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Stephen Lucke, Melinda Maher, Katie Ervin Carlson and Flossie Neale for the following article: Although large employers are no longer subject to OSHA’s vaccine-or-test mandate, some may choose to require testing on their own. There are a number of factors employers must consider in determining whether to voluntarily implement a vaccine-or-test policy for employees. One significant factor for self-funded employers is who pays for testing under such policies. In this article, published earlier this month by Bloomberg Law, we summarize current laws and regulations governing payment of both “over the counter” and traditional Covid-19 tests. Among other things, employers who wish to cover such should consider compliance issues, and self-funded employers should consider how testing costs may affect their health care spend. Read More >

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Michael Lindsay, Jamie Stilson, Anthony Badaracco and David Racine for the following e-newsletter update: Increase in HSR Reportability Thresholds and Other HSR Developments In January 2022, the Federal Trade Commission (FTC) made two important announcements for M&A practitioners. First, on January 24, the FTC announced the annual adjustment of the thresholds that trigger premerger reporting obligations under the Hart-Scott-Rodino (HSR) Act. The new thresholds will apply to transactions closing after February 23, 2022. Second, the FTC announced the annual adjustment for maximum daily civil penalties for noncompliance with the HSR Act’s requirements (failure to file, failure to observe the mandatory waiting period, or failure to make a complete filing). This article summarizes the HSR Act’s requirements and reports on several relevant developments in 2021. On January 24, the FTC also announced adjusted thresholds that trigger prohibitions on certain interlocking memberships on corporate boards of directors. These new thresholds became effective immediately on publication in the Federal Register. Both these and the HSR Act thresholds will remain in effect until the 2023 adjustments. (Read the rest of the article here.)

Health care employers are not alone in feeling overwhelmed by the constantly changing legal status of the various federal vaccine mandates.  On Thursday afternoon, the Supreme Court made its rulings on two preliminary challenges to workplace mandates related to the COVID-19 pandemic: the Occupational Safety and Health Administration (OSHA)’s Emergency Temporary Standard (ETS) for large employers (100+ employees), and the Centers for Medicare and Medicaid Services (CMS) vaccine mandate for health care employers.  This article focuses on the current status of CMS’s Interim Final Rule (IFR), issued on November 4, 2021.  The IFR detailed staff vaccination requirements as a condition of receipt of Medicare or Medicaid funds.  CMS estimated that there would be more than 180 million staff, patients, and residents employed or treated at facilities covered by the rule. Legal Challenges to CMS’s Vaccine Mandate On November 29, 2021, a federal court in Missouri stayed the CMS vaccine mandate in Alaska, Arkansas, Iowa, Kansas, Missouri, Nebraska, New Hampshire, North Dakota, South Dakota, and Wyoming.  On December 15, 2021, a federal court in Louisiana stayed the CMS rule for fourteen additional states: Louisiana, Montana, Arizona, Alabama, Georgia, Idaho, Indiana, Mississippi, Oklahoma, South Carolina, Utah, West Virginia, Kentucky and Ohio.  Therefore, at that time, the CMS rule was on hold in the 25 (referred to in this article as the “injunction states”) and enforceable in the rest of the country (referred to in this article as the “non-injunction states”).  A few days later, though, CMS indicated that it would temporarily halt enforcement nationwide. The next day, the federal government filed a Petition asking the Supreme Court to lift the CMS IFR stay in the 25 injunction states.  The Supreme Court heard oral arguments on that Petition, as well as whether the OSHA ETS nationwide stay, on January 7, 2022. The Supreme Court’s Ruling On January 13, 2021, the Supreme Court overturned the stay of the CMS vaccine mandate in the injunction states in a 5-4 decision. In the ruling, a majority of Supreme Court justices held that CMS’s IFR “fits neatly within the language of the statute” that authorizes the Secretary of Health and Human Services to impose conditions on the receipt of Medicare and Medicaid funding that are “necessary in the interest of the health and safety of individuals who are furnished services.”  This includes other vaccination requirements, such as hepatitis B, influenza, and measles, mumps, and rubella. The court focused on the fact that those seeking health care services at this time are likely more susceptible to contracting the COVID-19 virus, and stated: [E]nsuring that providers take steps to avoid transmitting a dangerous virus to their patients is consistent with the fundamental principle of the medical profession: first, do no harm. It would be the “very opposite of efficient and effective administration for a facility that is supposed to make people well to make them sick with COVID–19.” For their part, the dissenting justices were concerned with a federal agency forcing health care workers to choose between getting a vaccine that they have thus far failed to receive and remaining employed.  In addition, the dissent disapproved of CMS’s decision to issue the vaccine mandate prior to receiving and addressing public comments. Finally, the dissent took issue with the federal government getting involved in an issue (vaccine mandates) typically reserved for states.  According to the dissent, “[i]f Congress had wanted to grant CMS authority to impose a nationwide vaccine mandate, and consequently alter the state-federal balance, it would have said so clearly.  It did not.”  Somewhat in response to that argument, the majority cautioned that while federal agencies’ ability to exercise their powers is not limitless, “such unprecedented circumstances provide no grounds for limiting the exercise of authorities that the agency has long been recognized to have.” With the majority of the Supreme Court voting to lift the stay, the CMS IFR is back on. CMS Guidance Regarding its Vaccine Mandate Prior to the ruling (on December 28, 2021), CMS issued QSO-22-07-ALL, Guidance for the Interim Final Rule.  That guidance essentially rescinded CMS’s temporary halt on nationwide enforcement of the IFR and established compliance deadlines and additional guidance for covered facilities operating in the non-injunction states.  The Guidance included provide-specific instructions for each type of facility covered by the CMS IFR (for example, Long Term Care and Skilled Nursing Facilities, Ambulatory Surgical Centers, Hospitals, Community Mental Health Centers, and Outpatient Physical Therapy. The Supreme Court’s ruling did not change the requirements of the CMS IFR.  In essence, covered facilities must: Implement a process or plan to vaccinate all eligible staff by the compliance deadline (which is different for the injunction and non-injunction states). The CMS IFR is not a “vaccinate-or-test” mandate like the OSHA ETS.  Rather, under the IFR, vaccination is the only option unless staff qualify for a medical or religious exemption. Implement a process or plan to consider requests medical and religious exemptions. Implement a process or plan to track and document staff vaccines and exemptions so each facility can produce the documentation during a survey. Our prior blog post, available here, provides additional detail on the IFR’s requirements as well as practical recommendations for compliance and next steps. In response to the Supreme Court’s ruling, on January 14, 2022 CMS issued additional guidance, QSO-22-09-ALL for the IFR, applying to all but one of the injunction states (Texas was exempted from the new guidance due to ongoing separate challenges, and CMS instructed state surveyors in the guidance to not undertake any efforts to enforce the IFR at this time).  That new CMS guidance contains the same provider-specific instructions as the previous guidance, except that there are new compliance deadlines for the injunction states. Under QSO-22-07-ALL and QSO-22-09-ALL: Penalties for non-compliance in nursing homes, home health agencies, and hospice include civil monetary penalties, denial of payments, and as a final measure, termination of participation in Medicare and Medicaid programs. Penalties for non-compliance for hospitals and other acute and continuing care providers is termination of participation in Medicare and Medicaid programs. However, “CMS’s primary goal is to bring health care facilities into compliance.” Termination from the Medicare and Medicaid programs will generally only occur after CMS gives a facility an opportunity to come into compliance. Absent approved medical or religious exemptions, CMS will consider facilities non-compliant if facility staff (as defined by the IFR) vaccination rates are under 100%. To provide covered facilities an opportunity to reach that 100% vaccination rate, CMS has adopted a phase-in period: Facilities are considered compliant with CMS’s IFR if, 30 days after the applicable QSO: 1) the facility has policies and procedures developed to ensure all facility staff are vaccinated for COVID-19, and 2) 100% of staff have at least dose of a COVID-19 vaccine (unless exempted) or 80% of staff have at least one dose of a COVID-19 vaccine and the facility has a plan to achieve 100% vaccination within 60 days. For the non-injunction states, the 30-day deadline is January 27, 2022.  For the injunction states, the 30-day deadline is February 13, 2022. Facilities are considered non-compliant with CMS’s IFR if, 60 days after the applicable QSO, less than 100% of all non-exempted staff have at least one dose of a one-dose COVID-19 vaccine or two doses of a two-dose series. In that case, the facility will receive a notice of non-compliance, except that facilities with a vaccination rate (less exemptions) above 90% with a plan to reach 100% (less exemptions) within 30 days will not be subject to additional enforcement action.  For the non-injunction states, the 60-day deadline is February 28, 2022.  For the injunction states, the 60-day deadline is March 15, 2022. Facilities are considered non-compliant with CMS’s IFR if, 90 days after the applicable QSO (and anytime thereafter), less than 100% of all non-exempted staff have received at least one dose of a one-dose COVID-19 vaccine or two doses of a two-dose series.  These facilities may be subject to enforcement action.  For the non-injunction states, the 90-day deadline is March 28, 2022.  For the injunction states, the 90-day deadline is April 14, 2022. It is important to note that the Supreme Court did not rule on the merits (legality) of the CMS IFR.  Last week’s ruling is limited to whether the CMS IFR should be enjoined prior to a ruling on the merits.  The merits question is still yet to be resolved and when federal courts make those decisions, they will almost certainly make their way back to the Supreme Court for a final decision.  Given the language and reasoning of the Supreme Court’s injunction decision, it appears there is a high likelihood that a majority of Supreme Court justices would uphold CMS’s vaccine mandate on the merits. The bottom line is that the CMS IFR is now in effect throughout the country, except in Texas, and despite CMS’s message that it will provide entities with some leeway as described above, covered entities should immediately take steps to become compliant.  Dorsey’s health care and labor & employment attorneys are available to assist any health care provider with questions about implementation of CMS’ vaccine mandate.

On November 8, 2021, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) released a revised Provider Self-Disclosure Protocol, renamed Health Care Fraud Self-Disclosure Protocol (“SDP”).  Prior to this update, the SDP had not been updated since 2013.  While many of the revisions were procedural only, some of the revisions were notable, including an increase in the minimum amount required to settle fraud claims under the SDP. Background.  The SDP was established in 1998 as a mechanism for health care providers, suppliers and other persons subject to the OIG’s civil monetary penalty (“CMP”) authorities to voluntarily disclose self-discovered evidence of possible fraud implicating federal health care program funds.  Benefits of the SDP include potentially minimizing costs and disruptions for the disclosing party by avoiding a government-initiated investigation and accompanying litigation, paying a lower multiplier on damages than would be required in a government-initiated investigation, and a release from the OIG’s permissive exclusion authorities without integrity agreement obligations.  The OIG has a website related to the SDP with additional information, including a list of recently settled SDP submissions.  The OIG reported in the revised SDP that, between 1998 and 2020, it resolved over 2,200 disclosures, resulting in recoveries of more than $870 million to the federal health care programs.  Certain conduct is not eligible for the SDP, such as disclosure of an arrangement that involves only liability under the federal physician self-referral law (or “Stark Law”) without also involving potential liability under the federal anti-kickback statute (“AKS”).  The CMS Self-Referral Disclosure Protocol (“SRDP”) is available for conduct that involves only liability under the Stark Law. Updates. The most important update in the revised SDP is that the OIG increased the minimum amount required to settle fraud claims under the SDP in conformity with 2018 changes to statutory minimum penalty amounts for CMPs.  The new minimum settlement amounts are $100,000 for kickback-related SDP submissions (up from $50,000) and $20,000 for all other SDP submissions (up from $10,000). In addition, all SDP submissions must now be made through OIG’s website (rather than either by mail or through the website), an SDP submission must disclose whether the disclosing party is subject to a Corporate Integrity Agreement, Corporate Integrity Agreement reportable events can be disclosed through the SDP, and an SDP submission must separately list damages to each impacted federal healthcare program as well as total damages. Next, the OIG clarified that the Department of Justice may participate in the settlement of a matter disclosed through the SDP and resolve it under the False Claims Act.  The OIG also clarified that grant- or government contract-related disclosures should be done through the OIG’s Grant Self-Disclosure Program or Contractor Self-Disclosure Program, respectively, not the Health Care Fraud SDP.  Finally, the OIG made several miscellaneous changes to statistics, terminology, and background information. Many of the core requirements for SDP submissions have not changed, however, such as timing and content requirements and damages calculation methodologies.  In addition, the potential benefits of SDP submissions have not changed, including a potential exclusion release and lower multiplier for damages calculations. If you have any questions about the SDP or a potential disclosure through the SDP, please contact the authors or your regular Dorsey attorney.

On November 29, 2021, a federal court in Missouri enjoined the Centers for Medicare and Medicaid Services’ (CMS) vaccine mandate in the following states: Alaska, Arkansas, Iowa, Kansas, Missouri, Nebraska, New Hampshire, North Dakota, South Dakota, and Wyoming.  Those ten states filed a lawsuit on November 10, 2021, challenging the vaccine mandate and requesting a preliminary injunction.  The new CMS vaccine mandate which we wrote about here requires covered staff to receive their first COVID-19 vaccine dose by December 5, 2021 and be fully vaccinated by January 4, 2022.  In granting the preliminary injunction, the district court specifically ordered: Defendants are preliminarily enjoined from the implementation and enforcement of 86 Fed. Reg. 61,555 (Nov. 5, 2021), the Interim Final Rule with Comment Period entitled “Medicare and Medicaid Programs; Omnibus COVID-19 Health Care Staff Vaccination,” against any and all Medicare- and Medicaid-certified providers and suppliers within the States of Alaska, Arkansas, Iowa, Kansas, Missouri, Nebraska, New Hampshire, North Dakota, South Dakota, and Wyoming pending a trial on the merits of this action or until further order of this Court. Defendants shall immediately cease all implementation or enforcement of the Interim Final Rule with Comment Period as to any Medicare- and Medicaid certified providers and suppliers within the States of Alaska, Arkansas, Iowa, Kansas, Missouri, Nebraska, New Hampshire, North Dakota, South Dakota, and Wyoming. What this means is that as of November 29, 2021, the December 5, 2021, and January 4, 2022 deadlines are on hold for employers covered by the CMS mandate in Alaska, Arkansas, Iowa, Kansas, Missouri, Nebraska, New Hampshire, North Dakota, South Dakota, and Wyoming.  Any vaccine mandates enforced by covered employers in those states will be considered voluntary and subject to any state laws regarding vaccine mandates.  Of the ten states, only Arkansas, Iowa, and Kansas have laws regulating COVID-19 vaccine mandates for private employers: Arkansas – On October 13, 2021, Arkansas’ Governor allowed several vaccine-related bills to become law without his signature. The bills require employers to allow employees to obtain a waiver from a COVID-19 vaccine mandate if the employee produces a negative COVID-19 test once a week or provides proof of COVID-19 antibodies once every six months. Iowa – On October 29, 2021, Iowa’s Governor signed a law requiring employers to grant exemptions from vaccine mandates beyond those required by federal law. Specifically, in addition to waivers for sincerely held religious beliefs, Iowa employers that voluntarily implement vaccine mandates must grant a waiver if an employee submits a statement that receiving the vaccine would be injurious to the health and well-being of the employee or an individual residing with the employee.  In addition, Iowa employees discharged for not complying with an employer’s vaccine mandate are eligible for unemployment benefits under the new law. Kansas – On November 22, 2021, the Governor of Kansas signed a law with medical waiver requirements similar to Iowa’s law. On religious waivers, Kansas’ law goes beyond what is required by federal law, mandating that employers grant requests for religious exemptions “without inquiring into the sincerity of the request.” The law also outlines a complaint and investigation procedure for alleged violations and provides for monetary penalties that increase depending on the size of the employer. In addition, like the Iowa law, Kansas employees discharged for not complying with an employer’s vaccine mandate are eligible for unemployment benefits. The Biden Administration will almost certainly appeal the preliminary injunction.  The Eighth Circuit Court of Appeals would consider the appeal and could overturn the injunction and reinstate the mandate.  Given the timeline, we expect that new compliance deadlines would be established in the event the preliminary injunction is overturned. What should employers do? Covered employers in the ten states at issue who do not wish to proceed with a voluntary vaccine mandate may pause their current efforts to comply with the CMS vaccine mandate, but should at a minimum proceed with preparing a policy, religious and medical exemption forms, and an exemption review process so that employers are ready to proceed within any established deadlines if the preliminary injunction is lifted and the mandate is reinstated.  This is the same recommendation we have given to large employers covered by the Occupational Safety and Health Administration’s COVID-19 Vaccination and Testing Emergency Temporary Standard (OSHA ETS), which was stayed by the Fifth Circuit Court of Appeals on November 12, 2021.[1] Employers looking for consistency when it comes to COVID-19 vaccine mandates will not find it in today’s ruling and healthcare employers can once again add themselves to the list of employers who operate in multiple states and must undertake the task of wading through the various federal mandates and their legal statuses.  It is both possible and probable that multi-state healthcare employers will be required to comply with CMS’s federal vaccine mandate in one state while operating in another state wherein, at least for now, CMS’s federal vaccine mandate no longer exists. Dorsey’s employment and health care attorneys will continue to monitor the developments in this matter and will update our blog with changes.   [1] On November 23, 2021, the Biden Administration asked the Sixth Circuit Court of Appeals to reinstate the OSHA ETS vaccine mandate, following a lottery that assigned to that Circuit multiple challenges to the vaccine mandate.

**Note that a federal court has issued a temporary injunction stopping the CMS COVID-19 vaccine mandate in certain states.  Please read our blog post here for the latest information on this injunction. Last week, the Centers for Medicare and Medicaid Services (CMS) and the Occupational Safety and Health Administration (OSHA) published their much-anticipated rules mandating COVID-19 vaccinations.  This article focuses on the new CMS rules, and you can read about Dorsey’s analysis of the new OHSA Emergency Temporary Standard (ETS) here. Please note that if the CMS COVID-19 vaccine mandate applies to your facility, you must comply with the CMS COVID-19 vaccine mandate instead of with the new OSHA ETS. However, the above link to our article on the new OSHA ETS provides useful guidance on topics which apply generally to employers such as how to handle vaccine exemption requests. On November 4, 2021, the Centers for Medicare & Medicaid Services (CMS) issued its interim final rule (IFR) with comment period regarding staff vaccination requirements as a condition of receipt of Medicare or Medicaid funds.  CMS estimates that there will be more than 180 million staff, patients, and residents employed or treated at facilities covered by the rule, making the impact colossal.  The IFR is an emergency regulation, meaning that it takes effect on the date it is published in the federal register, November 5, 2021, and prior to the comment period.  Stakeholders will have 60 days, until January 4, 2022, to submit formal comments.  At that point, CMS will consider the comments in any future rulemaking it undertakes.  CMS also issued a press release and published FAQs to assist health care facilities in the understanding of these new regulations. The IFR applies to the following Medicare/Medicaid certified providers and suppliers: Ambulatory Surgical Centers (ASCs) Hospices Psychiatric residential treatment facilities (PRTFs) Programs of All-Inclusive Care for the Elderly (PACE) Hospitals (acute care hospitals, psychiatric hospitals, hospital swing beds, long term Care hospitals, children’s hospitals, transplant centers, cancer hospitals, and rehabilitation hospitals/inpatient rehabilitation facilities) Long Term Care (LTC) Facilities, including Skilled Nursing Facilities (SNFs) and Nursing Facilities (NFs), generally referred to as nursing homes Intermediate Care Facilities for Individuals with Intellectual Disabilities (ICFs-IID) Home Health Agencies (HHAs) Comprehensive Outpatient Rehabilitation Facilities (CORFs) Critical Access Hospitals (CAHs) Clinics, rehabilitation agencies, and public health agencies as providers of outpatient physical therapy and speech-language pathology services Community Mental Health Centers (CMHCs) Home Infusion Therapy (HIT) suppliers Rural Health Clinics (RHCs)/Federally Qualified Health Centers (FQHCs) End-Stage Renal Disease (ESRD) Facilities[1] Indian Health Service (IHS) Facilities   A. What Must Covered Facilities Do? Under the IFR, the above-described “covered facilities” must develop, by December 5, 2021, a plan and procedure for requiring the COVID-19 vaccine for covered staff (as defined below),[2] collecting and storing vaccination data, considering medical and religious exemptions for covered staff, and contingency planning for unvaccinated staff.  Individuals are on a deadline to be fully vaccinated against COVID-19, with accommodations considered as required by law (discussed below). Unless exempted, staff must have their first dose of a two-dose COVID-19 vaccine or a one-dose COVID-19 vaccine by December 5, 2021. Staff must complete the vaccination series, and be “fully vaccinated”, by January 4, 2022. Fully vaccinated is defined as two or more weeks after the completion of a vaccination series; staff members will be considered compliant even if not fully vaccinated by January 4 as long as they have completed the vaccination series by then.[3]   A previous COVID-19 infection will not be considered a substitute for proof of vaccination.  Staff hired after December 5, 2021 must receive their first vaccine dose prior to providing any care, treatment, or other services. The IFR defines the term “staff” to include “facility employees; licensed practitioners; students, trainees, and volunteers; and individuals who provide care, treatment, or other services for the facility and/or its patients, under contract or other arrangement.”[4]  The fact that care may not be provided in a formal clinical setting does not relieve staff from the mandate.  How frequently a person physically enters a covered healthcare setting is also irrelevant. Only those staff who perform 100% of their work remotely (i.e. telehealth or payroll) are fully exempt from the vaccine mandate. This means that even staff who “occasionally encounter fellow staff, such as in an administrative office or at an off-site staff meeting, who will themselves enter a health care facility or site of care for their job responsibilities,” also must be vaccinated under the IFR. The IFR lists the following as acceptable proof of vaccination: CDC COVID-19 vaccination record card (or a legible photo of the card), documentation of vaccination from a health care provider or electronic health record, or a state immunization information system record.  Covered facilities must keep the proof of vaccination confidential, i.e. with a facilities immunization record, health information files, or other relevant confidential documents.    Facilities may choose how to collect and store this information. B. Exemptions from COVID-19 Vaccination Requirements and Conflicts with State Laws Title VII of the Civil Rights Act of 1964 (Title VII) and the Americans with Disabilities Act (ADA) allow for religious and medical exemptions, respectively, to the COVID-19 vaccine.  The IFR specifically directs healthcare entities to provide exemptions from the COVID-19 vaccine consistent with federal law, but medical exemptions appear narrow, including certain allergies and recognized medical conditions that make the COVID-19 vaccine contraindicated.  The IFR specifically directs facilities to the CDC’s Summary Document for Interim Clinical Considerations for Use of COVID-19 Vaccines Currently Authorized in the United States. Medical exemption request must be supported by documentation that is: Signed and dated by a licensed practitioner, who is not the individual requesting the exemption, and who is acting within their respective scope of practice as defined by, and in accordance with, all applicable State and local laws. Such documentation must contain all information specifying which of the authorized COVID-19 vaccines are clinically contraindicated for the staff member to receive and the recognized clinical reasons for the contraindications; and a statement by the authenticating practitioner recommending that the staff member be exempted from the facility’s COVID-19 vaccination requirements based on the recognized clinical contraindications. But, what happens when there are conflicts with state laws on exemptions?  New state laws signed by the governors of Texas and Iowa, for example, provide employees with exemptions beyond those required by these federal laws.  For example, employers in Texas must allow exemptions from the COVID-19 vaccine based on an employee’s “reason of personal conscience.”  This Texas law expands the application of religious exemptions beyond a “sincerely held religious belief, practice or observance” which is the standard for a waiver under Federal law.  In Iowa, employers must allow exemptions from the COVID-19 vaccine based on an employee’s statement that receiving the vaccine “would be injurious to the health and well-being of the employee or an individual residing with the employee.”  The Iowa law not only expands the medical exemption beyond the ADA, but also removes the requirement that a medical exemption be supported by a licensed practitioner. Anticipating such conflicts, the IFR explicitly states: We understand that some states and localities have established laws that would seem to prevent Medicare- and Medicaid-certified providers and suppliers from complying with the requirements of this IFC.  We intend, consistent with the Supremacy Clause of the United States Constitution, that this nationwide regulation preempts inconsistent State and local laws as applied to Medicare- and Medicaid-certified providers and suppliers. . . . As is relevant here, this IFC preempts the applicability of any State or local law providing for exemptions to the extent such law provides broader exemptions than provided for by Federal law and are inconsistent with this IFC. (Emphasis added) The FAQs issued by CMS underscore this position, stating that no exemptions should be granted if not legally required under the ADA or Title VII, nor should an exemption be granted to someone “who requests an exemption solely to evade vaccination.”[5] In response to the federal government’s simultaneous release of the equally long-awaited Emergency Temporary Standard (ETS) from OSHA, Iowa Governor Kim Reynolds announced plans to challenge the ETS in court.  She made no similar plans regarding the IFR.  In addition, Arkansas, Alaska, Missouri, Iowa, Montana, Nebraska, New Hampshire, North Dakota, South Dakota and Wyoming joined in a federal lawsuit filed last week in Missouri challenging the government’s vaccination requirements for federal contractors and subcontractors.  The OSHA ETS was promptly stayed in court, and as of the publication of this article, we are awaiting a decision about whether the ETS will be permitted to proceed. Healthcare employers are encouraged by CMS to follow the guidance released by the Equal Employment Opportunity Commission (EEOC) related to medical and religious exemptions for employees.  Employers should develop a process for fairly reviewing medical and religious exemptions on an individualized basis that shows thoughtful consideration and analysis of each request.  If employers grant exemptions, they must take steps to minimize the risk of COVID-19 transmission.  Such steps could include additional or enhanced personal protective gear, separation barriers, elimination or substitution of less critical job duties, temporary modification of work schedules, or moving the location of where one performs work. C. How the Federal Rules Interact: Conflicts Between Federal Laws In addition to potential conflicts between state laws and the federal rules, healthcare facilities may also have questions about which of the federal rules reign supreme.  The IFR’s FAQs address this as well: If a Medicare- or Medicaid-certified provider or supplier falls under the requirements of CMS’s IFR, the IFR must be followed. If facilities participate in and are certified under the Medicare and Medicaid programs and are regulated by the CMS health and safety standards known as the Conditions of Participation (CoPs), Conditions for Coverage (CfCs), and Requirements for Participation (RoPs), then they, too, are expected to abide by the requirements established in CMS’s IFR. Importantly, the IFR takes priority over other federal vaccination requirements (i.e. the Executive Order for federal contractors and subcontractors, and the OSHA ETS for employers with 100+ employees). The Executive Order for federal contractors and subcontractors may apply to staff who are not subject to the vaccination requirements outlined in the IFR. If a facility is subject to both the Executive Order and the new OSHA ETS for large employers, the facility should follow the Executive Order for federal contractors and subcontractors. The OSHA ETS for employers with 100+ employees applies to employers that are not subject to the CMS IFR or the Federal Contractor and Subcontractor Executive Order. Additionally, employers subject to the OSHA COVID-19 Healthcare ETS need not also comply with the new OSHA ETS for large employers. The bottom line is that the federal government does not intend for an employer or covered facility to assure compliance with more than one federal rule.  If there is some question about with rule applies to a particular entity, entities should comply with the strictest federal rule applicable to the entity. Vaccine mandate laws, interpretations and challenges are rapidly developing across the U.S.  If you have any questions about vaccine mandates, please contact your regular Dorsey attorney or any of the authors of this article. [1] The IFR does not apply to other healthcare entities not regulated by CMS (i.e. physician offices, Assisted Living Facilities, Group Homes, home and community-based services, or schools), but those entities could be subject to other federal vaccine requirements.  In addition, Religious Nonmedical Health Care Institutions (RNHCIs), Organ Procurement Organizations (OPOs), and Portable X-Ray Suppliers are not covered by the IFR even though those entities are regulated by CMS.  However, it is important to note that staff of these entities may be indirectly included in CMS’ vaccine requirements through their service arrangements with hospitals, long term care facilities, and other providers and suppliers who are covered under the IFR.  Further, it is possible that staff may be required by other federal or state laws to obtain a COVID-19 vaccination. [2] Covered individuals will be referred to throughout this post as “staff,” because coverage of the rule extends beyond those individuals who are employed by covered facilities, but also includes medical staff, contractors and volunteers, as discussed herein. [3] The IFR references booster vaccines but does not require them. [4] CMS considered limiting vaccine requirements to full-time employees.  Ultimately, CMS concluded that including a broader group of those required to be vaccinated would be manageable without creating major issues for compliance, enforcement, and record-keeping. [5] The FAQs also add that the IFR preempts any contrary state laws pursuant to the Supremacy Clause of the United States Constitution.  

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Samuel Audley  for the following FCA Now blog post: On August 30, 2021, the Department of Justice (“DOJ”) announced that Sutter Health and several of its affiliated entities (“Sutter”) agreed to pay a total of $90 million to settle allegations that Sutter violated the False Claims Act (“FCA”), 31 U.S.C. §§ 3729-3733, by “knowingly submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans.” Read more here.

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Katie Ervin Carlson and Aaron Goldstein for the following e-newsletter update: On October 25, 2021, the Equal Employment Opportunity Commission (“EEOC”) released additional guidance for employers navigating their way through employee requests for religious exemptions from COVID-19 vaccine mandates.  The update supplements guidance initially released by the EEOC in May, and attempts to address some of the situations employers have faced as workplace COVID-19 vaccine mandates grow in popularity and as the Occupational Safety and Health Administration (”OSHA”) and the Centers for Medicare & Medicaid Services (“CMS”) prepare to issue federal mandates in addition to those already in place for federal contractors. You can read the rest of the article, by clicking here.

On August 1, 2021, an overhaul of the licensing requirements for Minnesota assisted living facilities (codified at Minn. Stat. 144G.08-9999) went into effect. Under the new law, which was also discussed in a previous Dorsey Health Law Blog post, Minnesota assisted living facilities are now required to obtain either an assisted living facility license or, for those that also provide dementia care services to any residents, an assisted living facility with dementia care license. The licensure scheme ushers in many new requirements aimed at protecting consumers, and the Minnesota Department of Health (“Department of Health” or “Department”) surveys facilities to ensure compliance. On August 15, 2021, the Department of Health began surveying the state’s 1,973 licensed assisted living facilities and on October 11, 2021, the Department released a report on the primary violations of the new requirements discovered in the first 17 facilities surveyed. The primary violations fall into three main categories: (1) failure to provide required disclosures, (2) failure to comply with fire safety requirements, and (3) failure to comply with internal systems requirements. Required disclosures A facility must display its license at the main public entrance of each building on its campus. A facility must provide all residents with the Assisted Living Bill of Rights (available on the Department of Health’s website) in addition to the facility’s Uniform Disclosure of Assisted Living Services & Amenities (UDALSA), which was completed by facilities as a component of the license application. The UDALSA must be provided to prospective residents prior to signing any contract and an updated UDALSA must be provided to residents and the Department of Health when services and amenities offered at the facility change. Facilities should also ensure they are in compliance with other miscellaneous notice requirements set forth in Minn. Stat. 144G.90. Fire safety Facilities must have an interconnected smoke alarm system with one alarm in each sleeping room and outside each separate sleeping room. If a facility is not fully outfitted with sprinklers, there must be smoke alarms on each story of a dwelling, including basements. A facility must have enough portable fire extinguishers such that the nearest one is within a 75 foot distance. Internal systems requirements Facilities must have in place certain required policies, including but not limited to those set forth in Minn. Stat. 144G.41. Facilities must comply with the contract requirements set forth in Minn. Stat. 144G.50. Facilities must comply with the statutory scheme’s electronic charting requirements. A facility’s clinical nurse supervisor must develop the facility’s staffing plan and the facility must post a daily staffing schedule. Finally, facilities must have an emergency plan in place that complies with Minn. Stat. 144G.42 and Rule 4659.0100. The Department of Health has publicly posted all of the forms it uses to survey assisted living facilities, and providers should take advantage of these resources to conduct a self-audit. Providers should ensure compliance in order to have a successful survey and avoid fines or other penalties, as described in Minn. Stat. 144G.31. If you have further questions about this new law, please contact the authors or your regular Dorsey attorney.

There are now less than three months until changes to the federal physician self-referral law (“Stark Law” or “Stark”) group practice definition special compensation rule go into effect on January 1, 2022.  As we wrote about here, these changes include revisions to the rule related to overall profits to prohibit pooling and distributing profits from designated health services (“DHS”) on a service-by-service basis, which is sometimes referred to as “split pooling.”  As of that date, profits from all the DHS of the practice, or a component of the practice that consists of at least five physicians (a “5+ physician pod”), must be aggregated before distribution.  Group practices that use split pooling need to modify their compensation methodologies to account for this change by January 1.  Because of the time and effort involved in modifying physician compensation methodologies, now is the time for physician practices to evaluate whether any modifications to their compensation methodologies are needed in order to comply with this change. For a detailed summary of the Stark regulatory changes and their implications, please see the article we wrote earlier this year available here.

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Ryan Mick, Katie Ervin Carlson and Andrew James for the following e-newsletter update: On September 30, 2021, the Federal Acquisition Regulation (“FAR”) Council issued a memorandum requiring that most federal contractors and subcontractors include a clause in future contracts and subcontracts that require employees to be vaccinated.  This directive follows President Biden’s September 9 announcement, as well as the Safer Federal Workforce Task Force Guidance (the “Guidance”) issued on September 24. Read more here.

On May 28, 2021, a group of Houston Methodist Hospital employees filed a lawsuit challenging the hospital’s COVID-19 vaccine mandate for employees.  The lawsuit, filed by 117 employees, was the first to challenge a health care employer’s COVID-19 vaccine mandate.  The employees’ grievances included that the vaccine is unsafe and that employers may not treat an employee like “a human guinea pig.”  At that time, all three COVID-19 vaccines were still being administered under the Food and Drug Administration “FDA”)’s Emergency Use Authorization (“EUA”). On June 12, 2021, a federal district judge dismissed the lawsuit.  The judge cited several reasons in dismissing the suit, including the Equal Employment Opportunity Commission (“EEOC”)’s guidance that, with medical and religious exemptions, employers can require employees to get the COVID-19 vaccine.  In response to the claim that the hospital was violating employees’ human rights by requiring the COVID-19 vaccine, the judge stated: The hospital’s employees are not participants in a human trial.  They are licensed doctors, nurses, medical technicians, and staff members.  The hospital has not applied to test the COVID-19 vaccines on its employees, it has not been approved by an institutional review board, and it has not been certified to proceed with clinical trials. As to the employees’ argument that they were being coerced into getting the vaccine or risk termination, the judge held: If a worker refuses an assignment, changed office, earlier start time, or other directive, he may be properly fired.  Every employment includes limits on the worker’s behavior in exchange for his remuneration.  That is all part of the bargain. The idea that employers routinely set workplace rules by which employees can either choose to abide or find other employment was central to a recent decision by a court in the Eastern District of Kentucky on September 24, 2021.  That case, Beckerich, et. al. v. St. Elizabeth Medical Center, et. al., was filed on September 3, 2021, by 40 hospital employees challenging the hospital system’s COVID-19 vaccine mandate.  The employees argued several violations, including that the mandate constituted fraud on behalf of the hospital, the United States Government, the Biden Administration, and the media.  One difference between the Houston Methodist and the St. Elizabeth case is that on August 23, 2021, the FDA gave full approval to the Pfizer-BioNTech COVID-19 Vaccine.  That full approval likely ended the likelihood that any employees going forward will be able to seriously argue that requiring the vaccine was tantamount to human experimentation. In denying the employees’ request for a temporary injunction (which would have halted the hospital’s mandate from going forward until the case could be fully decided on the merits), the court rejected the employees’ attempt to make constitutional claims on the basis that the hospital, by receiving federal funds, is essentially a governmental actor.  To that argument the court stated, “[p]rivate hospitals, no matter how much federal funding they may receive, are generally not state actors for purposes of constitutional questions.” The court also examined how the “greater good” should be analyzed in the context of legal challenges to COVID-19 vaccine mandates, asking, “[i]s the ‘greater good’ made up of many different individual liberties, is it a singular collective liberty, or is it both?”  The court then looked to a United States Supreme Court case from 1905 upholding Massachusetts’ small pox vaccine mandate.  We previously discussed that case in an update outlining President Biden’s COVID-19 Action Plan. Like the court in Houston Methodist, the judge in St. Elizabeth noted that employers make rules all the time, and employees have a choice whether to follow those rules or find work elsewhere: “To work at St. Elizabeth, Plaintiffs agree to wear a certain uniform, to arrive at work at a certain time, to leave work at a certain time, to park their vehicle in a certain spot, to sit at a certain desk and to work on certain tasks.  They also agree to receive an influenza vaccine, which Defendants have required of their employees for the past five years. These are all conditions of employment, and ‘“every employment includes limits on the worker’s behavior in exchange for his remuneration.’ . . . If an employee believes his or her individual liberties are more important than legally permissible conditions on his or her employment, that employee can and should choose to exercise another individual liberty, no less significant – the right to seek other employment.” While these cases involve challenges to voluntary COVID-19 vaccine mandates, the legal reasoning utilized by the courts might prove to be a roadmap for challenges to the vaccine mandates that are part of President Biden’s COVID-19 Action Plan.  That includes an expansion of a previously announced but not yet released requirement that health care employers (previously just long term care providers) require the COVID-19 vaccination as a condition of receipt of Medicare and Medicaid funds.

On September 9, 2021, the Biden Administration announced its new COVID-19 Action Plan (the “Action Plan”), which outlines a six-pronged approach to combat the pandemic.  The wide-ranging Action Plan lays out plans to vaccinate the unvaccinated, further protect the vaccinated, keep schools safely open, increase testing and masking, protect the economic recovery, and improve care for those with COVID-19.  Three components of the Action Plan’s “vaccinate the unvaccinated” prong impose new requirements for employers.  Those components are: Require all employers with 100 or more employees to ensure their workers are vaccinated or tested weekly and to provide paid time off for employees to get vaccinated; Require COVID-19 vaccination for all federal workers and all employees of federal contractors and subcontractors; and Require COVID-19 vaccination for health care workers at Medicare and Medicaid participating hospitals and other health care settings. On the same day he issued the Action Plan, President Biden issued two executive orders requiring vaccination for all federal employees and directing the Safer Federal Workforce Task Force to issue COVID-19 safety-related guidance.  President Biden also instructed the Occupational Safety and Health Administration (“OSHA”) to issue an Emergency Temporary Standard (“ETS”) to implement the Action Plan’s employer obligations. A BRIEF HISTORY OF GOVERNMENT VACCINATION MANDATES, OSHA ETS AUTHORITY, AND EXISTING OSHA COVID-19 RULES In 1905, the United States Supreme Court upheld Massachusetts’s compulsory small pox vaccination law in a case challenging the constitutionality of the state’s vaccination mandate.  The decision did not address the constitutionality of a federal vaccination mandate or, if permissible, whether such a mandate may be issued by President without legislative action.  The decision did, however, provide analysis of the government’s ability to enact laws intending to protect the health and welfare of citizens during an outbreak or pandemic that will likely be relied on in any upcoming challenges to the Action Plan.  In response to claims that notions of liberty preclude government vaccine mandates, the Court stated: The liberty secured by the Constitution of the United States does not import an absolute right in each person to be at all times, and in all circumstances, wholly freed from restraint, nor is it an element in such liberty that one person, or a minority of persons residing in any community and enjoying the benefits of its local government, should have power to dominate the majority when supported in their action by the authority of the State. OSHA has authority to issue an ETS when “employees are exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful or from new hazards” and when such emergency standard is “necessary to protect employees from such danger.”  OSHA’s ETS authority allows it to forego its normal what rulemaking process.  An ETS can remain in place for up to six months, at which time OSHA must replace it with a permanent standard adopted through the normal rule making process.  The last ETS OSHA issued before its June 2021 ETS for the prevention of COVID-19 in healthcare employment was a 1983 rule addressing workplace asbestos exposure that the Fifth Circuit Court of Appeals (covering Louisiana, Mississippi, and Texas) struck down months later in part on the grounds that OSHA did not provide sufficient support for its claim that 80 workers would die from asbestos exposure in the 6 months the ETS would cover. On June 10, 2021, OSHA issued the first nationwide workplace-safety rule in an ETS for health care employers in response to the COVID-19 pandemic, and it was codified in the Federal Register on June 21, 2021.  The motivation behind OSHA’s June 2021 ETS addressing COVID-19 protections for health care workers was OSHA’s determination that a “grave danger” to employee health existed related to the virus.   OSHA’s August update states “OSHA has determined that CDC’s guidance on health care settings has not changed and that the requirements of the health care ETS released on June 10, 2021, remain necessary to address the grave danger of COVID-19 in health care.”  OHSA indicates it will monitor and assess monthly the need for any updates or changes to the health care ETS. The Biden Action Plan in many ways follows OSHA’s August 13, 2021 advisory guidance aimed at mitigating and preventing the spread of COVID-19 in the workplace, but also imposes new legal obligations regarding COVID safety in the workplace. WHAT DOES THE BIDEN ACTION PLAN REQUIRE? A.   Employers with 100+ Employees. Vaccination or Weekly Testing Requirement OSHA is developing a rule that will require all employers with 100 or more employees to ensure their workforce is fully vaccinated or require any workers who remain unvaccinated to produce a negative test result on at least a weekly basis before coming to work.  OSHA will issue an ETS to implement the requirement.  This requirement is expected to affect over 80 million workers in private sector businesses with 100 or more employees. Several questions remain regarding exactly how OSHA will implement the COVID-19 Action Plan for private employers, including how OSHA will determine whether an employer has more 100 or more employees for purposes of the ETS, who will pay for the weekly testing, the deadline for meeting the ETS standards, and how OSHA will apply penalties for non-compliance.  While there is little doubt that the ETS will contain exceptions for employees who are unable to be vaccinated due to a disability or sincerely held religious belief, as is protected under federal and state laws, it will remain to be seen whether states which have enacted laws prohibiting employers from mandating vaccinations for employees will bring legal challenges to the ETS and the Action Plan more broadly. It is widely anticipated they will. Paid Leave for Vaccination. OSHA’s ETS will also require employers with more than 100 employees to provide paid time off for vaccination and, if needed, post-vaccination recovery.[1] B.   The Federal Government, Federal Contractors, and Federal Subcontractors. President Biden issued an Executive Order requiring all federal agencies to require COVID-19 vaccination for all of their employees, with exceptions only as required by law (e.g. religious and medical reasons).  The Order directs The Safer Federal Workforce Task Force to issue compliance guidance by September 16, 2021. The President signed a second Executive Order that applies to organizations that contract with the federal government and subcontractors to those contracts.  While the Executive Order itself does not contain a vaccine mandate, President Biden’s Plan indicates that the requirement that all federal employees receive the COVID-19 vaccine will “be extended to employees of contractors that do business with the federal government.” As to the contracts themselves, the Executive Order applies to any: (1) new contract, (2) new contract-like instrument, (3) new solicitation for a contract or contract-like instrument, (4) extension or renewal of an existing contract or contract-like instrument, or (5) exercise of an option on an existing contract or contract-like instrument.  The Executive Order covers these contracts or contract-like instruments that are for services, construction, or a leasehold interest in real property; for services covered by the Service Contract Act; for concessions; or in connection with federal property or lands and related to offering services for Federal employees, their dependents, or the general public. The Executive Order requires agencies to take steps to include by October 8, 2021 required language for all contracts and contract-like instruments entered into or otherwise meeting the criteria above on or after October 15, 2021. Extensions and options are used by the federal government pursuant to the Federal Acquisition Regulation, which permits solicitations and contracts to include an option clause that allows the government “to require continued performance of any services within the limits and at the rates specified in the contract.”  An option provision can be exercised more than once, but the total time of extension cannot exceed six months. The Executive Order governing federal contractors and subcontractors does not apply to: (1) grants, (2) contracts, contract-like instruments, or agreements with Indian Tribes under Public Law 96-638, (3) contract or contract-like instruments with value equal to or less than the simplified acquisition threshold as defined by the Federal Acquisition Regulation, (4) employees who perform work outside of the United States, or (5) subcontracts solely for the provision of products. In defining “contract-like instruments,” the Executive Order refers to the Department of Labor’s proposed rule, “Increasing the Minimum Wage for Federal Contractors,” 86 Fed. Reg. 38816, 38887 (July 22, 2021). The Executive Order requires executive departments and agencies to ensure that contracts and contract-like instruments include a clause that contractors and subcontractors must incorporate into lower-tier subcontracts.  The clause will mandate compliance with “all guidance for contractor or subcontractor workplace locations published by the Safer Federal Workforce Task Force” and will apply to any locations in which an individual works in connection with a federal contract or contract-like instrument.  The Task Force is to issue such guidance no later than September 24, 2021.  Thus, the Executive Order does not require contractors and subcontractors to create vaccination mandate language.  Rather, their responsibility will be to include required language in contracts and develop workplace plans that ensure compliance it. For contracts not covered by the Executive Order, the President has “strongly encouraged” contractors and subcontractors to follow any safety protocols developed by the Safer Federal Workforce Task Force. C.  Medicare and Medicaid Participating Hospitals and Other Health Care Settings. Prior to the Action Plan’s launch, organizations that advocate for long-term-care facilities urged the Administration to mandate the COVID-19 vaccine throughout the health care industry, citing concerns over existing staffing shortages that facilities feared would worsen if long-term-care workers who wished to decline the vaccine had the option to work in other health care facilities.  In response, on August 18, 2021, President Biden announced plans to require long-term-care facilities to have “fully vaccinated” workforces as a condition of receiving Medicare or Medicaid funding.  Details of those requirements are yet to be released, but in the Action Plan, he expanded that mandate to all healthcare workers at Medicare and Medicaid-participating healthcare organizations, including, but not limited to, hospitals, dialysis facilities, ambulatory surgical settings, and home-health agencies. While OSHA’s June 2021 ETS was broadly aimed at protecting health care workers amid the COVID-19 pandemic, it stopped short of requiring vaccines. President Biden’s COVID-19 Action Plan goes further by requiring vaccinations for many employees in the healthcare industry. D.   All Employers For months, the Equal Employment Opportunity Commission (“EEOC”) has opined that all employers under its jurisdiction may elect to mandate COVID-19 vaccination for their employees. As we have previously discussed, employers that mandate the vaccine must make exceptions for medical and religious reasons or risk violating state and federal anti-discrimination laws. Small employers who hope to avoid vaccine mandates may also incentivize employee vaccination.  The EEOC’s guidance explains that employers that administer vaccines may incentivize vaccination, as long as the incentives are non-coercive. PRACTICAL STEPS FOR EMPLOYERS Employers with 100 or more employees should begin considering and developing a vaccination policy that will comply with the Action Plan. All employers mandating vaccines should consider the potential for exemptions for reasonable accommodations for religious belief and disabilities, pursuant to Title VII of the Civil Rights Act of 1964 (“Title VII”) and the Americans with Disabilities Act (“ADA”), as well as applicable state law. Employers should confirm whether they are a federal contractor or subcontractor. Federal contractor status is present if an organization has a contract with the federal government.  Federal subcontractor status can be determined through a letter from a government contractor stating your organization is a subcontractor necessary for the performance of a government contract or undertaking a federal contractor’s obligation under its contract. Other ways to assess federal-contractor/subcontractor status include a search on the Federal Procurement Data System or USA spending either by searching for the organization name or Dun & Bradstreet number. Employers with under 100 employees, and those without existing federal contracts not subject to the Executive Order, should consider whether to adopt vaccine mandates or incentives as outlined by the EEOC. Employers should anticipate changes to new requirements due to COVID-19 itself (Delta, Mu, and other variants) and how to respond to such changes. [1] President Biden’s COVID-19 Action Plan states that private employers with “100 or more” employees must require vaccination, but that private employers with “more than 100” employees must provide paid vaccination leave.  While this may be an unintentional typo, we recommend employers presume that if they are required to mandate the vaccine, they are also required to provide paid vaccination leave.

The Centers for Medicare & Medicaid Services (“CMS”) released Advisory Opinion No. CMS-AO-2021-01 in June 2021, which gave the requestor the green light to provide designated health services (“DHS”) through wholly-owned subsidiaries while the parent and subsidiaries could qualify as a “single legal entity” under the “group practice” definition of the federal physician self-referral law (or “Stark Law”). As a result, the requestor is eligible for the in-office ancillary services (“IOAS”) exception to the Stark Law. This opinion is notable because CMS issues advisory opinions infrequently and, particularly given recent changes to the CMS advisory opinion regulations (as we wrote about here), other entities may use this opinion as guidance in forming similar arrangements. As background, under the IOAS exception, a physician practice may make referrals for DHS within the practice, but only if it qualifies as a group practice.  The term “group practice,” defined in the Stark regulations, requires, among other things, that the practice is a “single legal entity” that operates “primarily for the purpose of being a physician group practice.”  Accordingly, a “single legal entity” does not include physicians who are only informally affiliated for the purpose of sharing profits from referrals, but a single legal entity may itself own subsidiary entities.  The recent advisory opinion focuses on whether a physician practice with wholly-owned subsidiary physician practices qualifies as a “single legal entity” for the purposes of the IOAS exception. The Advisory Opinion In short, the advisory opinion allows for a group practice with wholly-owned subsidiaries to provide services through those subsidiaries, even if the subsidiaries do not themselves qualify as group practice. The group practice and the subsidiaries, for purposes of the IOAS exception, qualify as a single legal entity. The Arrangement The requestor (“Group Practice”), was the sole owner of two subsidiary physician practices (the “Subsidiaries”). Group Practice was looking to provide services, including DHS, to patients, both directly and through the Subsidiaries. Group Practice attested that, while the Subsidiaries would retain their own Medicare enrollment and use billing numbers assigned to them to bill Medicare for items and services they furnish to beneficiaries, the material assets and business functions of the Subsidiaries would be transferred to Group Practice or the practice’s management company. The management company would provide non-clinical services to both Group Practice and the Subsidiaries. The revenue and expenses of the Subsidiaries would be attributed to Group Practice. Furthermore, the clinical employees and contractors of the Subsidiaries would become employees and contractors of Group Practice, and the patients served by the Subsidiaries would be considered patients of Group Practice. Group Practice certified that it met all requirements of a group practice itself and that the arrangement with the Subsidiaries would meet all other requirements of a group practice, such as having centralized decision-making. The Subsidiaries did not qualify as group practices on their own, and Group Practice specifically sought to determine if it, in its arrangement with the Subsidiaries, could qualify as a “single legal entity” for the purposes of the group practice definition, thus meeting this requirement of the IOAS exception. CMS Analysis CMS found that Group Practice and the Subsidiaries would qualify as a single legal entity. In concluding this, CMS focused heavily on two aspects of the relationship: (1) the revenue and expenses of the Subsidiaries would be attributed to Group Practice, and (2) the clinical employees and contractors of the Subsidiaries would become employees and contractors of Group Practice. CMS found the first factor to be adequate even though the Subsidiaries maintained their own Medicare enrollments and payor contracts separate from Group Practice. What This Means for Physician Practices Reliance on Advisory Opinions On January 1, 2020, the Stark regulations regarding advisory opinions were revised.  Prior to this revision, only the entity requesting the advisory opinion and others who were parties to the specific arrangement could rely on the opinion.  Under the revised advisory opinion regulations, the Secretary of HHS will not pursue sanctions against other entities who did not make the request for the opinion and who are not parties to the specific arrangement, as long as their arrangement is ”indistinguishable in all its material aspects” from an arrangement which received a favorable advisory opinion from CMS.  See our detailed analysis of the revised advisory opinion regulations here. This means that other physician practices outside of Group Practice and the Subsidiaries can make referrals to wholly-owned subsidiaries if such arrangements are indistinguishable in all material aspects from the one described in the opinion and otherwise meet the requirements of the group practice definition and IOAS exception.  Below is a brief list and description of factors that would likely be considered material to this arrangement, and thus necessary for physician practices seeking to rely on Advisory Opinion No. CMS-AO-2021-01. Referrals to Subsidiaries Parent-Subsidiary Relationship The parent-subsidiary relationship is a key factor in the “single legal entity” analysis. As stated above, physicians that are only informally affiliated do not qualify as a group practice. Further, the advisory opinion expressly states that Group Practice and the Subsidiaries qualify as a single legal entity “provided that [Group Practice] is the sole owner of the Subsidiaries.” However, it is not necessary for the subsidiary physician practice itself to qualify as a group practice. Below are two diagrams: Diagram 1 illustrates affiliated entities that do not qualify as a group practice, and Diagram 2 illustrates the parent-subsidiary relationship that CMS deemed appropriate in the advisory opinion. Revenue and Expenses Attributed to Parent Given the emphasis CMS put on the framework of Group Practice and the Subsidiaries’ revenue and expenses, this element would likely be considered material. Therefore, subsidiary revenue and expenses should be attributed to the group practice if the entities are looking to qualify as a single legal entity. However, as mentioned above, it is not necessary for a subsidiary physician practice to bill Medicare under the parent. A subsidiary may have its own Medicare number and bill separately from the parent, as long as the revenue and expenses of the subsidiary are ultimately attributed to the parent. Employees and Contractors are Those of the Parent Similarly, if a subsidiary’s employees and/or contractors are not considered to be the employees and/or contractors of the group practice, it is unlikely that the arrangement would fall within the exception, because this, too, was a focus of the opinion and thus is likely material from CMS’s point of view. Conclusion Following issuance of Advisory Opinion No. CMS-AO-2021-01 and recent regulatory changes regarding reliance on advisory opinions, parent physician practices may make referrals for DHS to wholly-owned subsidiary practices as a single legal entity if all other elements of the group practice definition and IOAS exception are met. This advisory opinion only addresses the definition of a single legal entity. Entities must ensure that the other elements of the group practice definition and IOAS exception to the Stark Law are also met if they choose to form a parent/subsidiary referral relationship. Please contact the authors or your regular Dorsey attorney with any questions. Summer Associate Hannah McCallum provided substantial assistance in the drafting of this article.    

As we have previously written, the landscape for employers in the time of COVID-19, particularly health care employers and long term care facilities, is ever-changing and quickly moving.  In the last year, health care employers have had to navigate state laws, Centers for Disease Control and Prevention (“CDC”) and Centers for Medicare & Medicaid Services (“CMS”) guidance, EEOC guidelines, as well as compliance with a complex Emergency Temporary Standard (“ETS”) issued by the Occupational Safety and Health Administration (“OSHA”). In the midst of all that, health care providers have grappled with whether to implement policies requiring COVID-19 vaccinations for employees absent a religious or medical exemption.  In Iowa, Unity Point Health, Sanford Health, MercyOne, Genesis Health System, and Trinity Health will require employees to be vaccinated for COVID-19 in the next few weeks and months.  This includes long term care facilities administered by those entities. In a somewhat unexpected twist, the Biden Administration announced today that CMS and the CDC are “developing an emergency regulation requiring staff vaccinations within the nation’s more than 15,000 Medicare and Medicaid-participating nursing homes.”  According to the announcement, a rule is expected in the coming weeks.   The Administration’s order will surely generate multiple lawsuits challenging the legality of the mandate.  We estimate that those lawsuits will likely not be successful, in part based how quickly similar lawsuits against hospital employers have been dismissed by courts across the country.  For example, this summer a court swiftly dismissed a lawsuit filed by employees of Houston Methodist hospital challenging the hospital’s COVID-19 vaccine mandate. Last week, in addition to the OSHA ETS for healthcare employers published on June 21, 2021, OHSA issued new recommendations for all employers with a specific focus on protecting unvaccinated workers.  To combat the continued spread of COVID-19, OSHA recommends that employers do the following: Assist employees in getting vaccinated for COVID-19, including paid time off to get and recover from vaccines. Some employers can receive tax benefits for voluntarily paying employees under these and other circumstances. Remove employees with known or suspected COVID-19 exposure from the workplace for either 14 days or until the employee receives a negative test result. Make sure that unvaccinated and high risk employees physically distance from others, limit the number of unvaccinated and high risk employees at one place at any given time, allowing remote working for unvaccinated and high risk employees, and installing transparent barriers when physical distancing is not feasible. Require employees to wear masks indoors (unless other PPE is otherwise required for the job), and provide face coverings to employees who do not have their own. Educate employees on workplace COVID-19 policies and procedures, including providing materials in multiple languages as needed. Suggest that unvaccinated customers, vendors, visitors, or other guests wear a mask. Maintain properly working ventilation systems. Follow CDC guidelines regarding cleaning and disinfection. Record and report workplace infections and deaths related to COVID-19. Implement policies and procedures to ensure that employees who raise concerns about COVID-19 in the workplace are not subject to retaliation. Follow any other applicable mandatory OSHA standards. In sum, OSHA recommends that, for the most part, all employers follow the requirements set forth for healthcare providers in the ETS. We want to help all employers keep their employees safe and protected from COVID-19, and we want to help you do your part to prevent the spread of the virus.  If you have any questions about what you are required by law to do in your workplace, or what is not required but recommended, please contact a qualified employment and healthcare attorney.  

Overview On July 1, 2021, the Department of Health and Human Services (HHS), along with other federal agencies, released an interim final rule implementing certain provisions of the No Surprises Act.[1] The No Surprises Act aims to protect health plan participants and beneficiaries from surprise medical bills when they receive items and services in certain settings from out-of-network providers and health care facilities. The rule will be enforced beginning January 1, 2022. The rule includes requirements applicable to: (1) group health plans and health insurance issuers that offer group or individual health insurance coverage; (2) certain types of health care providers; and (3) health benefit plans offered by carriers under the Federal Employees Health Benefits Act.  This article will focus on provider requirements under the new rule. Provider Requirements Under the Interim Final Rule Under the No Surprises Act, nonparticipating providers, facilities, and air ambulance providers are prohibited from balance billing individuals.  This means that the nonparticipating provider, facility, or air ambulance provider may not bill an individual for a dollar amount that exceeds the individual’s in-network cost-sharing obligations.  A nonparticipating provider is any physician or other health care provider acting within the scope of their licensure under applicable state law and who does not have a contractual relationship with the health plan or health insurance issuer. The balance billing prohibition applies to the following health care services: (1) emergency services provided by a nonparticipating provider or nonparticipating emergency facility; (2) non-emergency services provided by a nonparticipating provider at a participating health care facility; and (3) air ambulance services furnished by a nonparticipating air ambulance service provider.  For purposes of the balance billing prohibition for non-emergency services provided by a nonparticipating provider at a participating health facility, a participating health care facility is a hospital, hospital outpatient department, critical access hospital or ambulatory surgical center that has a direct or indirect contractual relationship with the health plan or health insurance issuer with respect to the item or service furnished. Any participants, beneficiaries, or enrollees in a group health plan or group or individual health insurance coverage offered by an issuer, including Federal Employees Health Benefits beneficiaries, are covered by the rule’s protections. Disclosure Requirements The No Surprises Act requires providers, facilities, plans and issuers to disclose the patient protections against balance billing to individuals. Per the interim final rule, the disclosure must: (1) contain clear and understandable language of the protections, including how to contact federal and state agencies for suspected violations; (2) be provided within the required time frame, and (3) comply with federal civil rights laws regarding communication and language barriers.  Air ambulance service providers are exempt from the disclosure requirements.  For providers and facilities, the deadline for providing disclosure depends on the circumstances.  If an appointment is scheduled at least 72 hours before the date of the appointment, then disclosure must be made no later than 72 hours prior to the date of appointment.  If an appointment is schedule within 72 hours of the appointment, disclosure must be provided on the same date as, and at least three hours prior to, the appointment. Disclosure must be provided via three channels: Public location. Providers must post the required disclosure in a prominent, central location where services are provided, such as near a scheduling or check-in desk. Public website. The public website disclosure must be searchable and accessible free of charge and without any login or personal information inputting requirements. Providers and facilities that do not have a website are exempt from this requirement. One-page notice. Individuals must be provided with a one-page notice of the disclosure. The notice must have a minimum of 12-point font, and it may be double-sided. Provider Exception To prevent duplicate disclosure notices to individuals, HHS created an exception to the disclosure requirement for providers. If a provider furnishes items or services covered by the plan or coverage at a facility, including hospital emergency departments and independent freestanding emergency departments, it satisfies the disclosure requirements if the facility agrees in writing to provide the required disclosure on behalf of the provider. This is available regardless of whether the provider and facility bill jointly or separately. If the facility fails to provide proper disclosure under the written agreement, the facility, not the provider, is in violation of the rule. Notice and Consent Exception Under the No Surprises Act, the prohibition on balance billing does not apply if notice is given to an individual, and the individual consents to waiving balance billing protections with respect to the providers and/or facilities named in the notice. What to Include Providers and facilities are required to use the standard notice and consent forms that will be issued by HHS for this exception to apply. These forms must be tailored to include certain specific information, including (1) the out-of-network providers and/or facilities to which it applies, and (2) a good-faith cost estimate for the applicable items or services. The notice, and subsequent consent, will only be valid for those providers and/or facilities named in the notice. How to Provide Notice The notice and consent documents must be given to the individual together, and they must be physically separate from, and not attached or incorporated into, any other documents. The documents may be given electronically if the individual so chooses. Additional Details Like the disclosure requirements, the notice and consent forms must meet language access and timing requirements specified by the rule. The individual may revoke their consent at any time prior to the furnishing of the relevant items or services by notifying the provider/facility in writing. Providers and facilities may refuse to treat individuals who do not consent, subject to other state and federal laws. Exceptions to the Exception In the following circumstances, the notice and consent exception is unavailable, and the balance billing prohibition always applies: Where notice is received by the individual, but consent is either not given or is revoked; Emergency services; Post-stabilization services, unless certain conditions are met; Air ambulance services; Items or services furnished as a result of unforeseen, urgent medical needs that arise at a time an item or service is furnished for which notice and consent was received; and Ancillary services, such as anesthesiology, pathology, radiology, and neonatology, whether provided by a physician or a non-physician practitioner. Penalties HHS may impose civil monetary penalties of up to $10,000 per violation on providers and facilities that violate the balance billing prohibition requirements. However, these penalties may be waived if a provider or facility unknowingly violates the statute and should not have reasonably known that it did so, and within 30 days withdraws the bill in violation and reimburses the plan or individual for the difference between the amount billed and the correct billable amount, plus interest. Conclusion The final interim rule makes clear that beginning January 1, 2022, providers and facilities must address the disclosure and balance billing prohibitions in the No Surprises Act. While this article is not meant to encompass all of the details, it offers providers an overview of what these expectations are and what measures must be taken to comply with the rule.   If you have questions regarding the No Surprises Act, please contact the authors or any member of Dorsey’s Health Transactions and Regulations practice group. [1]             Office of Personnel Mgmt. et al., Requirements Related to Surprise Billing; Part I, at *2 (2021). Summer Associate Hannah McCallum provided substantial assistance researching and drafting this article.

The COVID-19 pandemic required health care providers of all sizes to make drastic changes to the mode of patient care delivery. Telehealth quickly emerged as a safe alternative to in-person patient visits, and many providers quickly transitioned to virtual services. The pandemic-initiated expansion of telehealth was rapid and significant, but the pandemic likely accelerated existing trends more than creating new ones. The increased availability of telehealth has offered patients greater access levels and types of care that would otherwise be difficult to obtain due to geography, limited appointment availability, or affordability. Despite the increased access to care and positive experiences with telehealth over the past year and a half, many regulatory actions temporarily enabling the use of telehealth services have expired or will end in the coming months. What does the post-COVID future hold for tele health? Health care industry leaders are tracking the following developments: Licensing State professional licensure laws are major obstacles for telehealth providers wanting to offer telehealth services as an option for patients who reside or are otherwise located in other states. State laws governing the practice of medicine, nursing, social work, and other health professions generally require the provider furnishing care to be licensed in the state where the patient is located. At the beginning of the pandemic, the spike in demand for virtual care led states to quickly take action to loosen or waive professional licensure requirements. Many states allowed out-of-state health care providers of all types to provide telehealth services to their residents, including Hawaii, Idaho, and Vermont. States such as Illinois and Maryland permitted telehealth practice only where a provider had a pre-existing relationship with the patient, and others only relaxed requirements for physicians or mental health providers, such as in Minnesota. Post-pandemic, we expect to see continued efforts to remove licensing barriers faced by telehealth providers. Several states have enacted the Interstate Medical Licensure Compact or have entered into cross-border licensure waiver agreements with neighboring states, but these waiver agreements may only apply to certain practitioners or involve slow, costly application processes. Some states may follow the approach taken in Florida and Georgia, where health care providers can obtain a “telemedicine license” with less burdensome requirements. Action on the federal level is also possible. In response to COVID-19, the Centers for Medicare & Medicaid Services (“CMS”) temporarily waived the Medicare requirement that providers be licensed in the state they are delivering telemedicine services when practicing across state lines, subject to certain conditions. While this waiver does not exempt providers from licensure requirements under state law, subsequent action taken at the federal level may set a trend followed by state governments. Providers should also be aware of existing state laws permitting the practice of telehealth across state lines when an existing patient is on vacation or attending college in another state. For example, in Minnesota, out-of-state physicians are exempt from licensure requirements if only providing telehealth services on an “irregular or infrequent basis” as defined in Minn. Stat. § 147.032. And Colorado allows non-Colorado-licensed health care providers to provide occasional services or consultation via telehealth to patients in Colorado as long as they meet certain requirements, such as maintaining certain levels of insurance, not maintaining an office in the state, and not informally or formally agreeing to provide care on a regular or routine basis. See Colo. Rev. Stat. § 12-240-107. Reimbursement Before the pandemic, reimbursement options for telehealth were limited and low payment rates were a significant financial burden for providers seeking to provide telehealth services. As we described in a previous blog post, CMS implemented sweeping changes to Medicare reimbursement and coverage requirements at the start of the COVID-19 outbreak. Dozens of new services were added to the list of telehealth services covered by Medicare, restrictions on geography and originating sites were removed, and payment rates for telehealth services were raised to match the rates for the same in-person service. On July 13, CMS released its annual proposed rule for payments under the Medicare Physician Fee Schedule, which would make many temporary Medicare flexibilities for mental and behavioral health services permanent. If finalized, the rule would allow beneficiaries to receive such telehealth services from home, reimburse providers for audio-only services, and keep certain recently added services on the Medicare telehealth list through December 31, 2023. The rule would require an in-person visit within six months prior to an initial telehealth service and at least once every six months thereafter, but CMS is seeking input on whether a different interval may be necessary or appropriate. The agency is also soliciting comment on: Whether additional documentation should be required in the patient’s medical record to support the clinical appropriateness of audio-only telehealth; Whether or not audio-only telehealth for particular high-level services should be covered; and What additional guardrails should be put in place in order to minimize concerns about program integrity and patient safety. Several states have passed or proposed payment parity legislation that would permanently require insurance coverage and/or reimbursement for certain telehealth services at a level equal to in-person visits. For example, legislation was recently enacted in Oklahoma requiring payment parity for all telemedicine services. In states like Georgia and California, laws require equal coverage for both virtual and in-person services, but allow payers and providers to negotiate alternate payment rates. A recent Connecticut law requires payment parity for telehealth services under its state Medicaid program, and a Massachusetts law mandates payment parity for behavioral health services. Privacy In response to the pandemic, the Office for Civil Rights (“OCR”) announced several telehealth flexibilities to allow providers to care for patients remotely during the pandemic. OCR announced it would not impose penalties on providers for noncompliance with certain HIPAA obligations in connection with their “good faith provision of telehealth” using any non-public communication platform, such as FaceTime or Zoom. Given increasing concerns about cybersecurity and privacy risks, we expect continued discussions at the federal and state level about how to safeguard patient’s health information while allowing continued access to telehealth services. Providers should conduct a comprehensive risk assessment of its privacy and security protections and vendor agreements to ensure all telehealth technologies and IT systems comply with HIPAA standards. Conclusion The COVID-19 pandemic has profoundly changed the health care delivery landscape. As emergency orders end and regulatory flexibilities expire, policymakers at the state and national level are considering how best to regulate telehealth post-pandemic. Telehealth services ease the burden of obtaining quality healthcare services for medically underserved populations, including communities of color, people with disabilities, and residents of rural areas.  Telehealth also gives patients the opportunity to conveniently obtain routine and preventative care, which could positively impact health outcomes and improve health equity. Dorsey attorneys are closely monitoring federal and state actions regarding telehealth. For more information on how to navigate the existing legal landscape and prepare for future developments, contact the authors or your regular Dorsey attorney.

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Steve Lucke, Melinda Maher, and Meredith Gingold for the following article: SCOTUS ACA Ruling Allows Employers to Consider Improvements Reproduced with permission. Published Jul. 7, 2021. Copyright 2021 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bloombergindustry.com

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Christopher DeLong for last week's FCA Now blog post: On June 28, 2021, the United States Supreme Court denied review of a Seventh Circuit decision affirming the Department of Justice (“DOJ”)-requested dismissal of a False Claims Act (“FCA”) suit alleging a drug kickback scheme.  Cimznhca LLC v. United States, No. 20-1138, 2021 U.S. LEXIS 3404 (June 28, 2021).  As a result, the circuit split regarding the standard that applies to a Government’s motion to dismiss an FCA action remains unresolved. To continue reading, click here.

On June 10, 2021, Dorsey’s Labor & Employment attorneys outlined an Emergency Temporary Standard (“ETS”) issued by OSHA.  At the time, the ETS was not an official regulation because it had not yet been published in the Federal Register.  On June 21, 2021, the ETS was published and, for covered healthcare employers, the compliance clock started ticking. As a refresher, the ETS applies to “all settings where any employee provides healthcare services or healthcare support services.”  1910.502(a)(1).  Broadly, the following activities are exempted from coverage: the provision of first aid by an employee who is not a licensed health care provider; the dispensing of prescriptions by pharmacists in retail settings; non-hospital ambulatory care settings where all non-employees are screened prior to entry and people with suspected or confirmed COVID–19 are not permitted to enter those settings; well-defined hospital ambulatory care settings where all employees are fully vaccinated and all non-employees are screened prior to entry and people with suspected or confirmed COVID–19 are not permitted to enter those settings; home health care settings where all employees are fully vaccinated and all non-employees are screened prior to entry and people with suspected or confirmed COVID–19 are not present; health care support services not performed in a health care setting (e.g., off-site laundry, off-site medical billing); or telehealth services performed outside of a setting where direct patient care occurs. In addition, for covered employers, ETS requirements regarding masking, physical barriers, and physical distancing do not apply to fully vaccinated employees in well-defined areas where there is no reasonable expectation that any person with suspected or confirmed COVID–19 will be present.  1910.502(a)(2)(i)-1910.502(a)(4). As to employee vaccinations, the ETS specifically contemplates that there may be medical conditions, disabilities, or religious reasons employees cannot be vaccinated.   Employers are reminded in the ETS guidance that they should make exceptions where appropriate.  We discussed EEOC guidance regarding employee vaccinations in a previous blogpost. Except for requirements regarding physical barriers, ventilation, and training, employers must comply with the ETS mandates by July 6, 2021.  Employers must become compliant with the physical barrier, ventilation, and training requirements by July 21, 2021. When OSHA first issued the ETS, little direction was available directly from OSHA in terms of how employers could comply with the ETS’s many mandates.  Since publication of the ETS in the Federal Register, OHSA has fortified existing resources and added new ones.  Employers should visit OSHA's ETS website for Fact Sheets, FAQs, Notification Removal and Return to Work Flow Charts for both Employers and Employees, Employee Training Presentations, and more. Further, it is important to understand how the new OSHA regulations interact with already existing guidance on similar COVID-19 related topics for health care providers which have been published by other federal and state agencies, such as the Centers for Medicare and Medicaid Services and the Centers for Disease Control and Prevention.  In most cases, the various guidance and regulations do not conflict, but a careful review of all related laws and agency guidance is prudent, in order to fully understand the rules that apply in a given situation, especially when there is a conflict. A qualified employment lawyer can assist employers with matters such as developing their COVID-19 Plan, planning the Workplace Hazard assessment, and conducting training; all things which are required by the ETS.  Please contact the author of this blog post or your regular Dorsey & Whitney labor and employment attorney with further questions about how to come into compliance with the new OSHA guidance by the July 6 and July 21 deadlines.

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Donna Reuter from Dorsey’s FCA Now blog for today’s post: Walmart successfully ended eight years of protracted litigation under the False Claims Act (“FCA”) on June 4, 2021, when the Sixth Circuit affirmed dismissal of Medicare and Medicaid fraud allegations against the major retailer.  The case was first filed in February 2013.  See United States ex rel. Sheoran v. Wal-Mart Stores E., No. 13-10568, 2019 U.S. Dist. LEXIS 140710, at *2 (E.D. Mich. Aug. 20, 2019). The case was originally filed by Ashwani Sheoran, a former Walmart pharmacist. (Read more here.)

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Rebecca Bernhard, Aaron Goldstein and Alyson Dieckman for the following e-newsletter update: OSHA Issues COVID-19 Workplace Safety Rule for Healthcare Employers On June 10, 2021, the Occupational Safety and Health Administration (“OSHA”) released the first nationwide workplace safety rule in response to the COVID-19 pandemic.  OSHA’s guidance is only binding on healthcare employers.  OSHA reported that it will issue supplemental voluntary guidance for other industries. (Read more here.)

One of the last pieces of legislation the Iowa legislature sent to Governor Kim Reynolds’ desk for guaranteed signature was a bill banning vaccine passports in Iowa.  House File 889 contains several prohibitions regarding inquiries into a person’s COVID-19 vaccine status.  For entities that contract with the state government or otherwise receive state funding, the law contains financial consequences for a violation (but is silent as to penalties for others).  While the law contains clear proscriptions, it also has notable explicit and implicit exclusions. Healthcare providers, and nursing home facilities specifically, have additional considerations under recently released CMS, CDC and OSHA guidance.  All employers have considerations under state and federal anti-discrimination laws and updated EEOC technical assistance. Iowa Law Iowa’s law prohibits the designation of COVID-19 vaccine status on state or political subdivision-issued identification cards.  That means there will be no COVID-19 notations on Iowa drivers’ licenses anytime soon.  The law also forbids businesses or governmental entities from requiring customers, patrons, clients, patients, or other persons invited onto the premises (“invitees”) to show proof of a COVID-19 vaccine. However, the law does not list employees in the category of people who are protected from having to show proof of a COVID-19 vaccine.  Therefore, under Iowa law, employers can legally require employees to show proof of a COVID-19 vaccine as a condition of employment. Further, the law explicitly excludes healthcare facilities from the definition of a business or a governmental entity.  Healthcare facilities include hospitals and other licensed inpatient centers, ambulatory surgical or treatment centers, skilled nursing centers and nursing facilities, residential treatment centers, diagnostic, laboratory and imaging centers, rehabilitation and other therapeutic health settings, and intermediate care facilities for people with mental illness or intellectual disabilities. CDC, CMS and OSHA Guidance On April 27, 2021, the Centers for Disease Control and Prevention (CDC) published updated health care infection prevention and control recommendations following the wide availability of COVID-19 vaccination, available here.  The CDC guidance includes updated COVID-19 testing recommendations, updated visitation guidance for health care facilities, and additional guidance for communal activities and dining in healthcare settings. Shortly thereafter, on May 11, 2021, CMS published updated guidance for long term care (LTC) facilities, called an interim final rule.  That rule, available here, focuses on COVID-19 vaccination education, consent, and refusal, as well as the procedures LTC facilities must follow in offering vaccinations to employees and residents.  It also includes recordkeeping requirements.  The guidance is silent regarding whether LTC facilities can require employee or resident vaccinations, instead simply stating, “[f]acilities should follow state law and facility policies with respect to staff refusal of vaccination.” In Iowa, that means long term care facilities could choose to require all staff and residents to be vaccinated. On June 10, 2021, OSHA published the first guidance for employers governing workplace safety rules related to COVID-19, which applies only to employment settings where employees provide healthcare services or healthcare support services in a healthcare setting.  The new OSHA rules are entitled, the “COVID-19 Healthcare Emergency Temporary Standard”, and they are available here.  FAQs regarding the new regulations were published by OSHA and are available here.  The scope of this article does not cover the new OSHA COVID-19 Healthcare Emergency Temporary Standard because Dorsey attorneys published a separate article on this new guidance including practical tips for its implementation, which is available here. EEOC Guidance Health care facilities adopting COVID-19 vaccination requirements should be mindful of state and federal anti-discrimination laws such as the Iowa Civil Rights Act (ICRA) and the Americans with Disabilities Act (ADA).  Both the ICRA and the ADA prohibit employers and places of public accommodation from discriminating against people on the basis of their religion or disability, among other things.  Public accommodations include, but are not limited to places that offer services, facilities, or goods for a fee or charge.  To name a few, a person’s health condition could prohibit them from getting a COVID-19 vaccine, a person’s religion might prohibit vaccinations, a person may be reluctant to get the vaccine while pregnant, and data has shown that minority communities disparately have lower vaccination rates.  Health care facilities mandating vaccines could run into legal issues if they are unwilling to make exceptions in certain circumstances. Additionally, on May 28, 2021, the EEOC updated its technical guidance regarding whether employers can provide COVID-19 vaccine incentives for employees in a technical assistance Q&A, available here.  The EEOC guidance echoes the considerations above, noting that employers must take care not to run afoul of state and federal employment laws when making decisions about vaccine requirements.  The guidance also states the vaccine incentives cannot be coercive, and that employers must keep vaccine information confidential. Practical Tips and Take Aways In light of the ever-changing status of employment and health laws and guidance related to COVID-19, healthcare facilities drafting or updating policies related to COVID-19 mitigation should consult with their employment and health care counsel to make sure the policies are consistent with Iowa’s vaccine passport law, state and federal employment laws and technical assistance, and any recent CDC and CMS publications. That said, the following tips may help to guide health care facilities’ development of employment-related COVID-19 policies and procedures: Healthcare employers, particularly LTC facilities, considering mandating the COVID-19 vaccine for employees should also think about the impact such a mandate might have on the available workforce. With data suggesting that only about half (or less) of Iowa’s LTC facility employees are fully vaccinated, employers might see crippling staff shortages if they start making the COVID-19 vaccination a condition of new or continued employment. Healthcare employers seeking to increase their workforce’s COVID-19 vaccination rates could come up with ways to fairly incentivize employees, consistent with the recent EEOC technical assistance. Regardless of the type of vaccine, if employers choose to require vaccinations as a condition of employment, they should remember to keep all vaccination information confidential pursuant to the ADA. If employers believe that a lack of convenient access is a contributing factor to low employee COVID-19 vaccine rates, employers could consider holding vaccine clinics consistent with the CMS guidance described and linked above. Employers who do choose to hold vaccine clinics or otherwise make the COVID-19 vaccine available to employees at work should be cognizant of their workforce and adjust accordingly. For example, employers should think about whether informational materials should be offered in languages other than English and whether some of the people administering vaccines should be bilingual. Healthcare employers which are covered under the new OSHA COVID-19 Healthcare Emergency Temporary Standard referenced above (generally, those with 10 or more employees) should ensure that the company’s written COVID-19 plan incorporates all of the elements required under the new COVID-19 Healthcare Emergency Temporary Standard, including providing reasonable time off and paid leave for vaccinations and vaccine side effects for employees. For more information on the new OSHA standards, see a separate post by our Dorsey colleagues, available here. Prior to taking any adverse action against an employee related to that person’s COVID-19 vaccination status, or any other conduct pertaining to COVID-19, employers should seek guidance from a knowledgeable employment law attorney. As described in an earlier blog post, COVID-19 related lawsuits against employers are on the rise (including in Iowa), and employers need to be proactive in ensuring their decisions are consistent with the ever-changing legal landscape on these issues.

On April 26, 2021, the Department of Health and Human Services Office of Inspector General (“OIG”) issued favorable Advisory Opinion No. 21-02 regarding a proposed investment in an ambulatory surgery center (“ASC”) by a health system, orthopedic surgeon and neurosurgeon employees of the health system, and a management company. This latest Advisory Opinion is notable because it is the first time that the OIG has considered a venture that included a health system and its employees.  As employment of physicians has grown, so have the number of potential ventures between employees and their health systems, making this latest Advisory Opinion particularly relevant.  OIG guidance on ASCs is also uncommon, and in fact, this is the first ASC Advisory Opinion in over a decade.  So, investors should review the OIG’s analysis carefully to understand the numerous elements that the OIG emphasized for mitigating risk. While the OIG concluded that the proposed investment would lead to sanctionable remuneration under the federal Anti-Kickback Statute (“AKS”) if the requisite intent were present, it determined that it would not impose sanctions on the requesting parties because of several integrated safeguards. A main takeaway from the OIG’s analysis was its conclusion that, with respect to the investments to be made by the health system and physician investors, the proposed investment presents a sufficiently low risk of fraud and abuse under the AKS for the combination of the following reasons. Physician Investors Who Can’t Meet the 1/3rd Income Test Still Integrate the ASC Into Their Regular Practice; Physician Investors Are Not Significant Source of Cross-Referrals Since neurosurgeons primarily perform inpatient procedures, one or more of the neurosurgeon investors may not comply with the safe harbor requirement that at least one-third of each physician investor’s annual income come from the performance of procedures that would be payable by Medicare when performed in an ASC. However, the OIG found it significant that the neurosurgeon investors would integrate use of the proposed ASC into their regular practice. In addition, the physician investors would personally perform almost all of their own referrals to the proposed ASC, rather than referring these procedure to other physicians. The health system estimated that only about 1% of the total number of ASC-qualified procedures done at the ASC would come from a different physician investor’s referral. Risk of Health System’s Influence on Referrals Mitigated The OIG also found that the proposed ASC had sufficient safeguards to mitigate the health system’s potential role in making or influencing referrals to the ASC. The health system certified that its affiliated physicians (i.e., employees, independent contractors, and members of the medical staff) would be paid consistent with fair market value and that such compensation would not be related, directly or indirectly, to the volume or value of their respective referrals to the ASC or its physician investors. The health system also certified that it would neither require nor encourage its affiliated physicians to refer patients to the ASC or its physician investors, and it would not track its affiliated physicians’ actual referrals. Reduce Risk of Rewarding Referrals through Structure of Investment Returns and Offers of Ownership Under the proposed ASC, potential investors’ opportunities to invest, and their investment returns, would not be based on anticipated or actual referrals to the ASC.  . Capital contributions and profit distributions would be based on an individual investor’s investment interest in the ASC. Additionally, the ASC and its investors would not be permitted to promise or provide loans for the purpose of another investor gaining an investment interest in the ASC, and investors would be required to invest directly in the ASC (as opposed to through a pass-through entity). Safeguards on Investors’ Other Financial Relationships The ASC committed that its space or equipment leases would comply with the AKS space and equipment rental safe harbors. Similarly, any services rendered by the health system or the real estate company jointly owned by the investors would comply with the applicable AKS safe harbor for personal services and management contracts and outcomes-based payments. In addition, all ASC patients referred by an ASC investor would be given full written notice of the investor’s financial interest in the ASC. Other Safeguards The OIG listed several other significant safeguards against fraud and abuse presented by the proposed ASC. First, the ASC and its investors would provide non-discriminatory treatment to patients covered under any federal health care program. Second, the health system certified that all ancillary services for ASC patients covered under a federal health care program would directly and integrally relate to the ASC’s primary procedures. Further, the health system certified that the ASC would not bill any federal health care program separately for ancillary services. Third, the health system certified that it would not include ASC costs on cost reports or claims for payment by a federal health care program (unless such reporting is otherwise required by the program). With respect to the investments to be made by the management company, the OIG determined that even while the management company may be in a position to directly or indirectly influence referrals and thereby increase its investment returns, the proposed ASC had sufficient safeguards to mitigate that risk. Similar to the health system and physician investors, the management company certified that it would not make or influence referrals to the ASC or its physician investors. Additionally, no physician would have any investment interest in the management company. For all of these reasons, the OIG concluded that the proposed ASC arrangement presents a sufficiently low risk under the AKS and that the OIG would not impose administrative sanctions against the requesting parties in connection with the ASC. While Advisory Opinion No. 21-02 may only be relied upon by the requesting parties, it does provide helpful insight into risk mitigation factors when considering other ASC structures. If you have any questions about ASCs, please contact the author or your regular Dorsey attorney. Summer Associate Laura C.S. Newberry provided substantial assistance researching and drafting this blog post.