Obamacare, Merger Fever Cases in Industry Spotlight

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By Mary Anne Pazanowski, Matthew Loughran, John T. Aquino, Dana A. Elfin and Eric Topor

Sept. 14 — The race to the end of 2016 is on, and many headline-grabbing health-care related cases remain on court dockets.

Here is a sampling of lawsuits filed, argued and/or awaiting decision that will impact the way providers are paid and how the industry meets new business and regulatory goals.

The mother lode of cases focus on one controversial piece of reform legislation: the Affordable Care Act. A goodly number, though, concern closely watched consolidations in the hospital and insurance industries.

ACA: Appropriations

Obamacare survived early challenges, as well as Republican efforts to derail it. But people are questioning if it will die a painful death anyway, given the numerous problems in programs designed to keep insurers from going broke while offering affordable plans.

  • U.S. House of Representatives v. Burwell, D.C. Cir., No. 16-5202, appeal filed 7/14/16 : Congressional Republicans challenged payments made to insurers by the Health and Human Services Department under a program designed to make health insurance more affordable by reducing or eliminating plan member cost-sharing, including copays and coinsurance. The lawmakers argued that the payments were illegal because Congress never appropriated the money. The district court agreed.

ACA: Three Rs

Widespread failures of the ACA's Consumer Operated and Oriented Plans (CO-OPs) and insurers' abandonment of the health-insurance exchanges are being viewed as further evidence of the ACA's impending demise.

Not all plans are giving up, though. Many sued the administration, arguing it has botched the three R—risk corridor, risk adjustment and reinsurance—programs designed to help them cope with losses everyone knew were coming.

  • Health Republic Ins. Co. v. United States, Fed. Cl., No. 1:16-cv-259, latest action 8/15/16 : A failed CO-OP sued on behalf of all eligible insurers to recover billions of dollars the government owes them under ACA's risk corridor program. The Oregon insurer Aug. 15 opposed an administration motion to dismiss the complaint.
  • Evergreen Health Coop., Inc. v. HHS, D. Md., No. 16-cv-2039, filed 6/13/16 : A CO-OP in Maryland is trying to escape a $22 million charge under the ACA's risk adjustment program. The payment is owed to a legacy insurer that showed it enrolled more people with greater health risks than Evergreen. The CO-OP said the Centers for Medicare & Medicaid Services's criteria for demonstrating entitlement to payment unfairly favored legacy insurers. Evergreen lost its preliminary injunction motion, but the case is proceeding after Evergreen abandoned its appeal from that ruling. The HHS Aug. 15 moved to dismiss the complaint.
  • Ohio v. United States, 6th Cir., No. 16-3093, appeal filed 2/4/16 : Ohio doesn't want to pay into the ACA's transitional reinsurance program. It sued, saying state employee health plans weren't group health plans required to help fund reinsurance payments to individual-market insurers. The district court dismissed the complaint. Briefing in the appeal is complete, and the Sixth Circuit set oral argument for Sept. 27.

ACA: Discrimination

Discrimination claims under the ACA's Section 1557 are on the rise, but could get derailed by litigation challenging the law.

  • Franciscan Alliance, Inc. v. Burwell, N.D. Tex., No. 16-cv-108, filed 8/23/16 : Several states and health-care providers sued to stop regulations implementing Section 1557, saying they would require objecting providers to perform gender transition surgery. An attorney told Bloomberg BNA the case eventually could make its way to the Supreme Court.

Antitrust: Health Insurers

This has been an active year for antitrust issues in the health-care industry. Some of the biggest cases are still to be decided. Currently, a federal trial court in Washington, D.C., is reviewing two Department of Justice challenges to mergers that would reduce the number of major health insurance companies in the country from five to three.

  • United States v. Anthem, Inc., D.D.C., No. 16-cv-1493, case management order 8/31/16 : Judge Amy Berman Jackson scheduled a trial to begin Nov. 21 in the DOJ's challenge to Anthem Inc.'s proposed $48 billion takeover of rival Cigna Corp. She expects to issue a decision by Jan. 4, 2017. Anthem, however, has said that it needs the court to decide the case by the end of 2016, so it has time to get state regulatory approvals for the combination by the merger deadline of April 30, 2017.
  • United States v. Aetna, Inc., D.D.C., No. 1:16-cv-1494, case management order 8/12/16 : Judge John D. Bates set a Dec. 5 start date for a 13-day trial in the DOJ's challenge to the proposed $37 billion merger of Aetna Inc. and Humana Inc. The court anticipates a decision in the matter sometime after Dec. 30. Pretrial briefs are due by Nov. 22.

Antitrust: Hospital Mergers

Two federal appeals courts are expected to rule on whether to allow the Federal Trade Commission to stop mergers of major hospitals in Chicago and Pennsylvania. After more than a decade of success challenging hospital mergers in federal court, the FTC ran into two consecutive roadblocks in analyzing hospital markets.

  • FTC v. Penn State Hershey Med. Ctr., 3d Cir., No. 16-2365, oral arguments 7/26/16 : The U.S. Court of Appeals for the Third Circuit July 26 heard oral arguments on whether the federal enforcement agency failed to account for the full market available to patients affected by the proposed merger of Penn State Hershey Medical Center and Pinnacle Health System in Harrisburg, Pa. A federal trial court earlier this year rejected the FTC's challenge to the merger. It said the agency didn't include hospitals that patients would willingly travel to in the event of a price increase by the new merged entity.
  • FTC v. Advocate Health Care Network, 7th Cir., No. 16-2492, oral argument 8/19/16 : The U.S. Court of Appeals for the Seventh Circuit Aug. 19 heard oral arguments in a similar case involving a challenge to the proposed merger between Advocate Health Care Network and NorthShore University Health System in Chicago's northern suburbs. In that challenge, the federal trial court also rejected the FTC's geographic market analysis, saying the agency shouldn't have disregarded hospitals that largely serve areas closer to downtown Chicago.


The fight between nursing homes and consumers over arbitration agreements goes on. It's now moving, once again, into the Supreme Court. Kindred Nursing Centers has asked the court to review a Kentucky Supreme Court decision that a resident's representative can't waive the resident's right to a jury trial unless the resident expressly gave the representative that right ( Kindred Nursing Ctrs. LP v. Clark, U.S., No. 16-32, petition for review filed 7/1/16 ). Opponents Sept. 6 urged the court to deny review.


The Biologics Price Competition and Innovation Act (BPCIA) is getting a lot of attention these days. Created to allow abbreviated approval of biologically similar versions of biologic drugs that are anticipated to be less expensive that the original biologic, the BPCIA is being tested in various courts.

  • Amgen, Inc. v. Hospira, Inc., Fed. Cir., No. 16-2179, appeal filed 6/7/16 : Amgen appealed the U.S. District Court for the District of Delaware's decision denying its request to compel Hsospira Inc. to produce to Amgen certain manufacturing information related to Hospira's biosimilar of Amgen's anemia drug Epogen under the BPCIA. The court Aug. 12 denied Hospira's motion to dismiss the appeal for lack of jurisdiction.
  • Amgen, Inc. v. Hospira, Inc., D. Del., 15-cv-839, filed 9/18/16 : In the underlying case, Amgen alleged Hospira infringed its patents by giving Amgen notice of commercial marketing of its Epogen biosimilar prematurely. A joint claim construction brief was filed Sept. 7.
  • Sandoz, Inc. v. Amgen, Inc., U.S., No. 15-1195, solicitor's views requested 6/20/16 : In interpreting the BPCIA, a divided Federal Circuit panel held that notice of a biosimilar must be given to the biologic reference product sponsor (RPS) not later than 180 days after the Food and Drug Administration approves the biosimilar, which effectively delays the commercial release of the biosimilar for six months after FDA approval. The court also said that the BPCIA's exchange of information between the biosimilar applicant and the RPS is optional. Amgen and Sandoz received half of what they wanted from the Federal Circuit—Sandoz wanted to give Amgen as little competitive information as possible. An additional delay to a biosimilar competitor would benefit Amgen. Both parties are seeking Supreme Court review. The court asked the U.S. Solicitor General to weigh in on whether review should be granted.

Drugs and Devices

A few cases to watch in this area:

  • Mylan Pharms., Inc. v. Warner Chilcott Pub. P.L.C., 3d Cir., No. 15-cv-2236, oral argument 7/14/16 : Mylan, a generic drugmaker, challenged a holding that product hopping by brand-name drugmakers didn't violate federal antitrust laws. Product hopping occurs when a drugmaker makes changes to a product that apparently provide no significant improvements, but prevent pharmacists from automatically filling prescriptions with generic equivalents. This is the second appeals court case to consider the issue in the pharmaceuticals area.
  • Robinson v. Pfizer, Inc., 8th Cir., No. 16-cv-2524, filed 6/2/16 : Pfizer appealed from a federal court order sending a product liability case back to a state court, even though some of the plaintiffs lived in different states and had no connection to the forum state. Jurisdictional questions are big in drug and device cases because plaintiffs want to file in plaintiff-friendly courts. Similar jurisdictional issues play out in cases brought under the Hatch-Waxman Act, which sets the rules for competition between brand-name and genic drugmakers.


Evidentiary questions, whistle-blower suits and off-label marketing complaints are just some of the fraud-related issues facing courts in the latter part of 2016.

  • United States ex rel. Michaels v. Agape Senior Cmty., Inc., 4th Cir., No. 15-2147, argument scheduled 10/26/16 : The Fourth Circuit Oct. 26 will hear long-anticipated arguments on the issue of whether statistical sampling and extrapolation evidence can be used to prove liability under the False Claims Act. The U.S. District Court for the District of South Carolina rejected the statistical sampling evidence. Other federal district courts have split on the issue, with several rulings over the past two years allowing such evidence to prove falsity across thousands of Medicare and Medicaid claims from a much smaller reviewed sampling. Other district courts have held that whistle-blowers and the government must prove the falsity of each claim alleged to be fraudulent.
  • United States ex rel. Brown v. Celgene Corp., C.D. Cal., No. 10-cv-3165, complaint unsealed 2/5/14 : Drugmaker Celgene Corp. is hoping for a victory, after being sued by a former sales representative alleging the company paid physicians kickbacks to induce off-label prescription of two cancer drugs. Celgene Aug. 29 moved for summary judgment against the whistle-blower. While the government didn't intervene in the case, it filed a statement of interest opposing Celgene’s motion. Celgene responded Sept. 6.
  • United States ex rel. Brown v. Pfizer, Inc., E.D. Pa., No. 2:05-cv-6795, motion to dismiss 5/6/16 : Pfizer is trying to escape allegations that it illegally marketed its antifungal medicine, Vfend, for off-label purposes. Two former Pfizer employees alleged the drugmaker presented physicians with a misleading medical study on Vfend, then doled out kickbacks to induce off-label prescriptions of the drug for Medicare and Medicaid beneficiaries. Pfizer May 6 moved to dismiss the allegations.

Life Sciences

In life sciences patent litigation, Athena Diagnotics, Inc. v. Mayo Collaborative Servs., D. Mass., 15-cv-40075, filed 6/2/15 , is generating buzz because it bucked the trend of federal district and appeals courts in considering the validity of diagnostic method patent clams.

Rather than dismiss Athena's infringement suit in light of the Supreme Court's decision in Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 2012 BL 66018 (U.S. 2012), which held invalid claims similar to Athena's because they were derived from laws of nature, the district court allowed the case to go forward. The case also is interesting because of Mayo's challenge to the patent invalidated in the landmark Mayo decision.


Medicaid-eligible patients are asking whether the way states are operating the federally funded health care program for needy patients violates portions of the Social Security Act.

The Seventh Circuit Sept. 7 heard oral argument on whether Illinois's Medicaid agency must continue to provide in-home shift nursing services to Medicaid-eligible children while a federal trial court entertains a challenge by representatives for those children to the manner in which the state has administered its program ( O.B. v. Norwood, 7th Cir., No. 16-2049, scheduling order 7/11/16 ).


Calculating disproportionate share hospital payments and reimbursement under the now-rescinded two-midnight rule are two of the hottest issues in litigation involving Medicare.

  • Allina Health Sys. v. Burwell, D.D.C., No. 16-cv-150, filed 1/29/16 : A long-running dispute between hospitals and the HHS regarding how Medicare managed care days should be treated when calculating disproportionate share hospital payments remains pending in the U.S. District Court for the District of Columbia. The HHS remains steadfast in its position that a Medicare managed care beneficiary should be deemed “entitled to” Part A benefits for purposes of the DSH payment, and is defending an administrative ruling in the case. The hospital plaintiffs won an appeals court victory in 2014, and the court sent the 2004 DSH rule back to the CMS administrator for additional review. The administrator, though, reached the same conclusion as the agency in the treatment of managed care days. The HHS April 4 moved to dismiss the appeal. It received a boost in an Aug. 17 ruling on a similar issue from the district court. However, the case was reassigned to a new district judge on Aug. 26, which could delay the court’s ruling on the HHS’s motion.
  • Shands Jacksonville Med. Ctr. v. Burwell, D.D.C., No. 14-cv-263, stay granted 5/19/16 : Hospitals also will be watching what happens in litigation over the now-rescinded two-midnight rule and the reimbursement cuts it contained. The hospital plaintiffs sued specifically over the 0.2 percent Medicare inpatient reimbursement rate reduction contained in the rule, though the litigation was stayed in May while the HHS formulated the final rule released Aug. 2. The final rule implemented a 0.6 percent Medicare rate increase for fiscal year 2017 to compensate for three prior year cuts of 0.2 percent. The parties are scheduled to file a joint status report on Sept. 22.

Peer Review

The Pennsylvania Supreme Court will consider whether a third-party medical provider that contracts with a hospital waives peer review protection for documents when it shares them with the hospital ( Reginelli v. Boggs, Pa., No. 20 WAP 2016, review granted 7/7/16 ).

The issue is of national importance because hospitals are employing more independent contractors, often through affiliated groups. The two want to be able to share information, but most state peer review laws don't address waiver in this context, a health-care attorney told Bloomberg BNA.

Provider Regulation

A full panel of judges of the U.S. Court of Appeals for the Eleventh Circuit June 21 heard oral argument on whether Florida's Firearm Owners Privacy Act violates the First Amendment rights of doctors by prohibiting them from asking patients about firearm ownership ( Wollschlaeger v. Governor of Fla., 11th Cir., No. 12-14009, oral arguments 6/21/16 ).

The U.S. District Court for the Southern District of Florida in 2011 held the law unconstitutional, but a three-judge panel of the Eleventh Circuit thrice said it passed constitutional scrutiny. The Eleventh Circuit finally granted en banc review. A decision is expected before the end of the year.

A question about whether hospital employee pension plans are exempt from regulation under the Employee Retirement Income Security Act's church-plan exemption is headed to the Supreme Court. The issue is whether the exemption applies to pension plans maintained by qualified church-affiliated organizations, like hospitals, or whether the exemption applies only if a church initially established the plan ( Advocate Health Care Network v. Stapleton, U.S., No. 16-74, petition for review filed 7/15/16 ); Saint Peter's Healthcare Sys. v. Kaplan, U.S., No. 16-86, petition for review filed 7/18/16 ; Dignity Health v. Rollins, U.S., No. 16-258, petition for review filed 8/29/16 )

About three dozen lawsuits filed throughout the U.S. accuse large hospitals and health systems of using ERISA's church plan exemption to underfund their pension plans by hundreds of millions of dollars. The challengers are now 3-0 in the federal appellate courts. The response petition was due Sept. 14.

Reproductive Rights

Funding for Planned Parenthood is the target of the moment, both in Congress and in the state legislatures.

So far, federal courts have blocked three states—Florida, Ohio and Utah—from enforcing laws that withhold funding used by Planned Parenthood affiliates to pay for non-abortion related programs ( Planned Parenthood of Sw. & Cent. Fla. v. Philip, 2016 BL 272830 (N.D. Fla. 2016); Planned Parenthood of Greater Ohio v. Hodges, 2016 BL 262243, S.D. Ohio, No. 1:16-cv-539, 8/12/16 ; and Planned Parenthood Ass'n of Utah v. Herbert, 2016 BL 222779, 10th Cir., No. 15-cv-4189, 7/12/16 ).

The Tenth Circuit case could be headed to the Supreme Court, but there's no word on that yet. Florida hasn't yet appealed the district court's decision, while Ohio Sept. 6 filed a notice of appeal to the U.S. Court of Appeals for the Sixth Circuit.

Bloomberg Philanthropies provides financial support for Planned Parenthood.


Hospitals that rely on a charitable purposes exemption from property taxes have been closely watching recent cases that are testing whether cash-strapped state and local governments can strip away those exemptions and start taxing the hospitals.

In particular, the Illinois Supreme Court is considering whether a state law that allows nonprofit hospitals to accumulate charity care credits to use in qualifying for the exemption violates the state constitution's restrictions on exemptions from property tax ( Carle Found. v. Cunningham Twp., Ill., No. 120427, leave to appeal granted 5/25/16 ).


A federal appeals court is considering an antitrust case brought by one of the largest telemedicine providers in the country against the Texas Medical Board.

Teledoc Inc. alleged that the board violated the federal antitrust laws when implementing a rule requiring in-person consultation before a doctor can prescribe certain drugs. A federal trial judge denied the board's claim that it was exempt from such a suit under the state-action doctrine. The board appealed to the U.S. Court of Appeals for the Fifth Circuit ( Teladoc v. Texas Med. Bd., 5th Cir., No. 16-50017, notice of appeal 1/8/16 ).

The federal appeals court is currently accepting briefs on the matter, although at least one friend of the court brief has questioned whether the Fifth Circuit has jurisdiction to hear the case, since the trial court's denial of the board's motion to dismiss wasn't a final, dispositive order.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at mpazanowski@bna.com

To contact the editor responsible for this story: Peyton M. Sturges at psturges@bna.com

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