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The largely unexpected election of Donald Trump as the nation's 45th president, and the myriad changes his administration and a Republican-controlled Congress are expected to implement, led the editorial advisory board of Bloomberg BNA's Health Law Reporter to select health-care policy as the top health law issue for 2017.
The advisory board's ranking includes most of the usual suspects, but Trump's promise to repeal the Affordable Care Act, now expected to be accomplished through a repeal-and-replace or delayed replace scenario, will affect the health-care industry—still adjusting to ACA initiatives—in a wide array of areas, they said.
Many board members said “uncertainty” is the year's buzzword, but Katherine Benesch, with Benesch & Associates LLC in Princeton, N.J., perhaps captured the board's mood best in saying 2017 is sure to be a “bumpy roller coaster ride,” with payers, providers and patients all trying to figure out how whatever happens with the ACA will affect them.
Fraud and abuse came in as the number two concern for board members in 2017. It's an area that is a perennial litigation and compliance focal point and one they said they don't believe a change in administration will affect. “Fraud enforcement may be the only truly nonpartisan issue in health-care law,” Howard T. Wall III, executive vice president and chief administrative officer of RegionalCare Hospital Partners Inc. in Brentwood, Tenn., told Bloomberg BNA.
Medicaid, one of the biggest question marks for 2017, came in third because Health and Human Services Secretary-designate Tom Price and Seema Verma, Trump's pick to head the Centers for Medicare & Medicaid Services, have supported major program overhauls. Most board members said they believe the administration will try to turn Medicaid into a block grant program, but Jennifer Ecklund, with Thompson & Knight LLP in Dallas, predicted that will “likely be met with lawsuits by the affected states.”
Consolidation in the health-care industry ranked fourth. It increased dramatically in 2016 and board members said it is expected to remain hot as the evolution away from community and regional health-care systems to larger multi-state and national providers continues.
On the payment front, they said the threat of Medicare privatization, and the future of alternative payment model implementation, made this issue fifth.
Along with a push for health-care industry consolidations comes the potential for a great deal of antitrust activity, making this sixth on this year's Top 10 list. Provider regulation—despite uncertainty concerning how much regulatory rollback will be accomplished—ranked seventh, followed by telemedicine, health information and corporate governance.
All in all, board members said predicting the landscape at the end of 2017 would be impossible but that prognostications concerning the extent and speed of changes coming to the health-care industry are likely exaggerated.
|Health Law Reporter 's Top 10 for 2017|
|1. An unpredictable Trump administration and Republican Congress make health-care policy the top issue.|
|2. Fraud and abuse compliance and enforcement pressures will remain a bipartisan issue.|
|3. Concerns over the program's future under new CMS leadership make Medicaid a top issue.|
|4. Consolidation in response to payment and provider practice pressures will continue.|
|5. Attempts to privatize Medicare will meet considerable resistance.|
|6. Antitrust concerns will intensify as consolidation pressure continues.|
|7. Provider regulation is in flux as the extent of regulatory rollbacks is unclear.|
|8. Adoption of telemedicine increases, though licensing and cost-effectiveness concerns remain.|
|9. Health information management challenges providers and their business associates.|
|10. Renewed focus on corporate governance as dramatic changes in federal health policy impact directors.|
Health-care policy seems an odd choice for the premier spot in Health “Law” Reporter's 2017 outlook, but it was the overwhelming choice of advisory board members trying to interpret tea leaves amidst a wealth of post-election uncertainties.
Health lawyers have focused on operational topics for the past several years because they mostly were concerned about how various health-care initiatives would be implemented, Robert L. Roth, with Hooper, Lundy & Bookman PC, Washington, told Bloomberg BNA. That will shift in 2017, with health-care policy becoming the most important concern, he said.
Trump's election “will keep health lawyers and their clients guessing” until his policies become clearer, Howard Wall told Bloomberg BNA. The “entire health-care arena is likely to be impacted in some fashion” by the new administration's policies, Kim H. Roeder, of King & Spalding LLP, Atlanta, said.
Health lawyers will be challenged to provide clients with “informed but not overconfident advice about the direction of health-care policy in the Trump administration,” Richard D. Raskin, with Sidley Austin LLP in Chicago, told Bloomberg BNA. J. Mark Waxman, with Foley & Lardner, Boston, advised taking it slowly and suggested adopting a “wait and see” attitude. Nothing will happen quickly, he said.
That means preparing hospitals, health plans, doctors and other providers for the coming changes will be a challenge for lawyers in the next year, Katherine Benesch said.
Everyone wants to know if Trump will follow through on a campaign promise to dismantle the ACA, President Barack Obama's signature health-care reform law. His nomination of strident Obamacare critic Tom Price to be HHS secretary indicates an intention to do so.
But Trump softened his rhetoric after the election, suggesting a less-than-total repeal, a delayed repeal, or a repeal-and-replace might be more appropriate. Republican lawmakers already have floated replacement plans, some of which go farther than Trump is believed to be leaning.
“The uncertainty surrounding ‘repeal and replace' will leave many providers dazed and confused,” Mark A. Kadzielski, of Pepper Hamilton LLP in Los Angeles, said. He thinks the agencies will be pressed to rollback regulations.
A repeal without any consideration of reasonable alternatives would be a disaster, the advisory board members said. It would devastate the health-care and health-insurance industries, according to D. Brian Hufford, of Zuckerman Spaeder LLP, in New York.
One reason is that over 20 million people who gained health insurance under the ACA stand to lose coverage if there is a flat-out repeal. These individuals either wouldn't get the care they need or health-care providers would be left paying the bills for their treatment, advisory board members said. Hospitals also would suffer as demand for uncompensated care increased, Hufford said.
Kirk Nahra, of Wiley Rein LLP, in Washington, warned about an ACA repeal's “material human impact.” This is the “first place where the impact of a new administration that has hard-line political positions without sufficient or appropriate policy back-up” will be felt, Nahra told Bloomberg BNA.
A “repeal of Obamacare could leave insurance companies with an even greater actuarial nightmare than the one they currently face,” Howard Wall said. Still, insurers “seem cautiously optimistic,” due mainly to the prospect for favorable legislative and regulatory treatment of Medicare Advantage plans and market reforms, such as cross-state sales, that have been discussed, he said.
GOP wins in the states raised hopes for less state-level regulation, he added.
In any event, neither full repeal nor replacement will happen on “day one,” Jack A. Rovner, of The Health Law Consultancy in Chicago, said. The Republican party doesn't have a strategy, timeline or credible replacement proposal, and neither does the incoming administration, he said.
Repeal and replacement, moreover, will face many of the same policy and political challenges as Obamacare regardless of the form it takes, Elisabeth Belmont, corporate counsel for MaineHealth in Portland, Me., said.
So what will “Trumpcare” or “Ryancare,” as Gerald M. Griffith, with Jones Day in Chicago, dubbed it, look like?
“The ACA repeal process will be like a game of Jenga,” Lowell C. Brown, with Arent Fox LLP, Los Angeles, told Bloomberg BNA. “Republicans will try to remove individual pieces of the law without causing the structure to fall apart completely.” But, they “have too many ideas, making it difficult to reach consensus on what to choose.”
Some Obamacare provisions are extremely popular, advisory board members said. They would be surprised to see a replacement plan that doesn't prohibit insurers from denying coverage based on pre-existing conditions or allow people to keep adult children on their employer-sponsored plans until age 26. Doing away with those sections could be dangerous politically, they said.
The cost-sharing mechanisms, like insurer subsidies and tax credits, could be on the chopping block, however. These provisions could be dumped fairly easily during the budget reconciliation process, board members said, although that could lead to the “death spiral” that prompted the adoption of the individual and employer mandates to begin with, Rovner warned.
Belmont noted that possible replacement features could include giving tax-favorable treatment to individual-market health insurance programs, expanding health savings accounts and consumer-directed health plans, creating high-risk pools for costly patients, providing Medicaid block grants or per capita payments and permitting sales of health insurance across state lines.
Several board members brought up the cross-state insurance sales proposal. Brown, for example, warned that it would need to address the temptation for insurers to choose home states, like Delaware, with lax insurance regulations. “Chaos would ensue if that occurs,” he said.
Rovner called the cross-state sales proposal “a false promise of insurer competition.” Proponents haven't explained how health insurers can sell competitively attractive products across state lines, he said.
The cross-state sales initiative presents an opportunity for a few national commercial health insurers, Rovner said. However, what would a provider licensed and domiciled in Vermont, for example, have to offer purchasers in Hawaii? Can out-of-state insurers really offer products that can compete with in-state insurers on price, access and value? And why would state regulators allow insurers not licensed in their states—and hence not regulated there—to sell health insurance to state residents? Answers to those questions are not readily apparent, he said.
The sheer magnitude of health law issues affected by the ACA also must be kept in mind when speculating about a replacement, Anne Murphy, former vice president and general counsel at Rush University Medical Center, Chicago, Ill., told Bloomberg BNA. The ACA-required or precipitated changes to payer reimbursement programs, False Claims Act (FCA) litigation, Stark law compliance, antitrust policy and prescription drug regulation, to name just a few.
“Unwinding everything that has been rolled out over the past six years would be a nightmare,” Thomas Wm. Mayo, the Altshuler University Distinguished Teaching Professor at the SMU Dedman School of Law in Dallas, told Bloomberg BNA.
Moreover, there is no “logical reason” to reverse positive industry-wide trends, like value-based payments, that have shown signs of accomplishing the goal of providing cost-efficient high quality health care, Gary W. Herschman, of Epstein, Becker & Green in Newark, N.J., told Bloomberg BNA. Herschman predicted commercial health plans will “piggy-back on the early success of government value-based purchasing programs.” Thus, they increasingly will be calculating provider payments based on shared savings, care management fees, quality bonuses and bundled payments.
One of three things will happen in 2017, Mayo said. “Everything changes, nothing changes, or some things change while others will be left alone.” In any event, “it will take at least a few years for the dust to settle,” he said.
Roth agreed, saying that, because it typically takes months for political appointees to be nominated, vetted and confirmed, and hiring for other senior posts takes time as well, the administration's policy changes should occur slowly.
“Of the initial executive policy changes likely to occur in 2017, many relate to the absence of action: abandoning affirmative litigation, refusing to defend other actions, and choosing not to enforce certain discretionary rules,” Roth said.
Advisory board members don't see the pace of fraud enforcement and litigation slowing down in the coming year, in spite of the change in administration.
“Fraud and abuse continues to provide the core of any health law practice,” Richard Raskin said.
Howard Wall agreed. Fraud enforcement is a bipartisan issue and, “beyond some philosophical differences over physician ownership in facilities banned by the ACA, it is hard to find many partisan differences,” he said.
The substantial penalties recovered through government investigations ensures that fraud enforcement will remain robust, board members said.
“Prosecutions under the FCA, the anti-kickback statute and the Stark law continue to be a prolific source of funding for the federal government,” Katherine Benesch said. “As such, they will not be disappearing soon.”
One of the main issues facing providers and health lawyers in the coming year involves how courts will apply the U.S. Supreme Court's decision in Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2016 BL 192168 (U.S. 2016).
In that case, the high court said a provider could violate the FCA by failing to comply with material payment regulations but submitting claims for reimbursement as though it had been compliant. This is known as the implied false certification theory of liability, and the Supreme Court in Escobar said the FCA requires the alleged misrepresentation be material to the government's decision to pay the claim.
“In 2017, the courts and the government will be determining which requirements are material for purposes of the FCA using the Escobar standard,” Michael Schaff, with Wilentz, Goldman & Spitzer P.A. in Woodbridge, N.J., said. “As a result, the application of the implied certification theory of liability and the new materiality standard established under Escobar will shape how future cases are litigated under the FCA.”
Sanford V. Teplitzky, with Baker Donelson in Baltimore, agreed. “Going forward, the only real important issue is whether noncompliance with a regulatory requirement is material to the government’s decision to make payment for the services provided to beneficiaries of the federal health-care programs,” he said.
According to Teplitzky, lower courts have already begun to take conflicting positions as to whether a particular requirement is, in fact, material. Such a conflict could bubble back up to the federal appeals courts and possibly the Supreme Court.
The past year saw some movement in the Senate Finance Committee toward limiting the scope and force of the Stark law. Advisory board members said those efforts are likely to continue in 2017.
“In light of reported statements from the Trump campaign regarding government regulation, it is possible that the new administration and Congress may actually take action to significantly change and cut back the coverage of this law,” Teplitzky said.
Benesch pointed to the administrative front and recent guidance from the CMS as evidence of a more restricted view of Stark law enforcement in 2017 “CMS has included revisions as part of the 2016 Physician Fee Schedule to reduce some of the technical requirements for strict compliance under current exceptions to the Stark law,” she noted.
Restrictions on financial arrangements between hospitals and physicians have been eased for accountable care organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP), she continued.
“Thus, while enforcement of the FCA and anti-kickback statute generally is as vigorous as ever, the regulators have waived application of the Stark law and anti-kickback statute for physicians and ACOs participating in the MSSP,” she said.
Another issue that health-care fraud attorneys are watching is the effect that increased civil penalties will have on new enforcement actions and settlement of pending cases.
The Bipartisan Balanced Budget Act of 2015 required all federal agencies to make civil penalty inflation adjustments. That resulted in the first increases in civil monetary penalties by the HHS's Office of the Inspector General (OIG) in approximately 20 years. Additionally, the Department of Justice (DOJ) increased civil penalties under the FCA for the first time since 1999.
FCA penalties increased from a minimum of $5,500 to a minimum of $10,781 and from a maximum of $11,000 to a maximum of $21,563. Meanwhile, penalties for violation of the anti-kickback statute increased from $50,000 to $73,588 and Stark law civil monetary penalties increased from $15,000 to $23,863.
According to Teplitzky, “the pure mathematical calculation of penalties will no doubt serve to restrict even further the realistic ability of health-care providers to get their day in court.”
He said that this is particularly true under the FCA because courts are required upon confirmed proof of the submission of false claims to impose at least the minimum penalty amount per claim.
Teplitzky said the increased penalties “might further embolden the relator bar to push the DOJ for larger settlements reflecting the larger potential recoveries under the FCA.” Others added that the high “return on investment” for the federal government could lead to an increase in investigations and recovery efforts by both agencies.
Medicaid concerns were front and center for advisory board members who predicted ACA repeal in 2017.
“If the ACA is repealed, many states will face major stresses on their Medicaid programs,” Mark Kadzielski said. As an example, he pointed to the Medicaid expansion in his home state of California.
“Under the ACA, California expanded its Medicaid program by adding 3.5 million members and if Medicaid expansion is repealed, California will face losing $15 billion annually in Medicaid funding,” he said.
Kirk Nahra agreed. “We will see a material impact on overall Medicaid populations, and continued and expanded stress on the providers who treat these populations,” he said.
The only question that remains for Medicaid reform is what it will look like. Some board members looked to the lead officials named by Trump for clues.
“President-elect Trump’s choice of Seema Verma to head the CMS indicates that an overhaul of Medicaid is on the way,” said W. Reece Hirsch, of Morgan Lewis & Bockius in San Francisco. “As the architect of the Healthy Indiana Plan, that state's Medicaid program, Verma knows how to use the Medicaid waiver process to make changes to Medicaid programs without the need for federal legislation, particularly when working in collaboration with Republican governors.”
Elisabeth Belmont pointed to Tom Price's record as providing a glimpse into Medicaid's future. “Price has endorsed transforming Medicaid into a block grant in which the federal government would provide states with a certain sum of money with which to run the program and then reduce the federal government’s Medicaid spending,” she said.
Lowell Brown agreed. “Medicaid expansion, as it now exists, will likely be curtailed and replaced with block grants, giving states more latitude,” he said. “Republicans will do this in order not to be perceived as cutting benefits, but Democrats will dispute that claim,” he added.
The introduction of block grants into the Medicaid program will probably hit expansion states, like California, hardest, Brown said. “States that did not adopt expansion—for example Texas and Florida—stand to benefit since they have nowhere to go but up,” he added.
Some board members predicted that efforts to pull back on Medicaid expansion will be met by resistance from all sides.
“The introduction of block grants to states to pay for Medicaid is sure to throw the existing system into chaos,” Katherine Benesch said.
Such changes will not, however, come without a fight in Congress. “Hearings could last for months, as armies of lobbyists for doctors, hospitals, consumers, pharmaceutical companies and insurance carriers descend upon Washington,” Benesch said.
Jennifer Ecklund agreed. Many states will resist efforts to roll back Medicaid expansion, which “will adversely affect health-care providers—particularly hospitals—by increasing the number of uninsured patients that they see.”
Howard Wall said the pressure from Medicaid expansion states could be enough to save the expansion.
“For states that have already expanded Medicaid, especially states led by Republicans, an outright repeal of Medicaid expansion would be a political disaster,” he said.
Wall said that he expected an ACA replacement bill to continue Medicaid expansion, possibly in the form of block grants, and “for the rest of the GOP states to expand, especially if it can be packaged as a politically acceptable market focused Medicaid ‘reform' program.”
Some board members wondered what effect Medicaid reform efforts would have on charity care and health-care safety net providers. “Even if the ACA is left unchanged in 2017, will any of the 19 states that haven’t expanded decide that the burden on providers, especially cash-strapped public hospitals, and on individuals is unwise and inhumane?” Tom Mayo asked.
“The threatened contraction of Medicaid funding, and the introduction of block grants to reduce spending for Medicaid could spell disaster for state governments and hospitals,” Benesch agreed. “Many localities could be forced to choose between Medicaid coverage for the uninsured and municipal services, such as police and garbage collection.”
Benesch estimated that between 9 million and 11 million people were offered coverage through the public insurance exchanges in 2016, and many of those individuals would be left without any health insurance coverage in the aftermath of ACA repeal.
She warned that rolling back Medicaid expansion in conjunction with the elimination of the health insurance marketplaces could have disastrous consequences for providers. “Hospitals would be required to care for increasing numbers of patients in the emergency room and elsewhere, without reimbursement at significant cost to the institution,” she said. “This could drive many facilities to be subsumed by larger institutions, if possible, or to close their doors.”
Health-care provider consolidation, including mergers and acquisitions, physician/hospital alignment initiatives and clinical integration efforts, have been a trend for the last several years. That trend isn't expected to slow down, advisory board members said.
They expect health-care attorneys to be counseling clients on the varied consolidation forms and how to pick the right one to meet the client's needs.
Hospital and health system mergers, hospital/health system physician practice acquisitions, joint ventures between physicians and other providers, the development of large multi-specialty practice groups, and corporate expansions in post-acute care, long-term care, home health care and hospice care are just some of the ways providers will consolidate in 2017. Others will clinically integrate to form ACOs.
These consolidations look like “cats and dogs lying down together,” as Lowell Brown put it.
Trump's election introduced uncertainty in this area, but so far, the post-election market is showing no slow-down in health-industry investment. Daily prices for health-care industry stocks, for example, have been closing at record highs.
Advisory board members said they expect transactional activity to continue to be robust because providers' reasons for consolidating aren't going to go away. Even if the ACA is repealed and replaced, the revamped reimbursement models and quality of care initiatives it inspired will continue, board members said.
Providers' desire to supply high-quality health-care services in the most cost-efficient way is the consolidation trend's key driver, Gary Herschman told Bloomberg BNA. To accomplish their goal, providers will need to spend tens of millions of dollars improving their infrastructure by, for example, adopting electronic medical records systems and updating facilities. Add in the costs of staff training, re-engineering of clinical integration systems and developing evidence-based protocols to be shared among multiple specialty groups, and smaller providers just can't weather the expense, he said. This makes them ripe for a merger or integration with a larger system or practice group.
This dynamic gives health-care systems unprecedented opportunities to acquire physician practices and stand-alone hospitals. The systems, in turn, are joining mega-systems to gain access to needed capital, Herschman said. Health system networks also are targeting specialty physician practices to gain better alignment, so they can widen the range of health-care services they offer and take advantage of efficiencies and savings gained by providing the full spectrum of acute and post-acute care.
Physician practice/hospital alignments are a leading form of consolidation, but many of the earliest alignments are reaching their expiration date, Michael Schaff told Bloomberg BNA. Some arrangements weren't as profitable as anticipated, so hospitals are renegotiating deals. Physician compensation, for example, is almost always based on productivity now, leaving physicians at a difficult crossroads, Schaff said.
Health-care attorneys should consider whether the physicians are open to starting over or joining a new practice when counseling a physician practice on whether to continue the relationship, Schaff suggested. “Some physicians are too late in their careers to start over,” he said. They “may be forced to accept much lower compensation” than the hospital initially offered.
Younger, more entrepreneurial physicians might be more willing to venture back out on their own or join “supergroups,” Schaff said.
“In 2017, it will be important to follow the evolution of physician/hospital alignments to see whether they continue or circle back to more independent practices.” Schaff recommended attorneys carefully review affiliation agreements' unwinding provisions before advising physicians on how to end their alignments.
Consolidation, however, will continue as providers seek the “integrated delivery system holy grail,” Brown said. “Lines between payers and providers will continue to blur, and pressure on states to repeal corporate practice of medicine laws will intensify as providers integrate,” he added.
“The reality is that everything that is being contemplated by health reform and health system transformation is completely dependent upon physician and health system alignment,” Howard Wall told Bloomberg BNA.
While much of the pre-election debate and discussion surrounded the fate of the ACA, in the weeks since the election Medicare reform proposals have begun to pop up. It is unclear, however, exactly what shape these reforms will take and what elements of the program could be on the chopping block, board members said.
“Reform of Medicare financing has been a gleam in the eye of Republicans in Congress for years,” Katherine Benesch said. Examples of potential reforms include combining Medicare Parts A and B, raising the eligibility age or creating a voucher system for privately purchased insurance. But, she added, “it is unlikely Medicare fee for service rates will be decreased much in the next year or two, as these rates are so low that there is not a lot left to cut.”
The ACA's cuts in Medicare payments to hospitals were a “fair trade” for the mitigation of uncompensated care costs that resulted from broader insurance coverage, Bob Roth said. Eliminating the trade-off's benefits, however, “will further pressure hospital margins, which are already negative nationally,” he said. Interestingly, millions who obtained insurance coverage through the marketplaces are in “red states” that voted for Trump, he added.
The possible privatization of Medicare was on the minds of most board members. “Regardless of how post-ACA policy is cast, Medicare cost containment remains a focal point of federal health policy, and the Paul Ryan voucher idea will once again be in the mix,” said John D. Blum, the John J. Waldron Research Professor at the Loyola University Chicago Institute for Health Law.
T.J. Sullivan, of Drinker Biddle & Reath LLP in Washington, agreed. “It appears that a fight may be brewing with the Speaker and House leadership hoping to take a test drive of their newfound political majorities in an effort to reform Medicare by moving to a premium support model,” he said. “While Democrats will surely oppose such a move, President-elect Trump has so far remained silent.”
Brian Hufford said Trump's pick to head HHS says a lot about where he would come down in that conflict. “Tom Price is not only a leading opponent of Obamacare, but he also has advocated privatizing Medicare, supporting prior efforts by Speaker Ryan to accomplish that goal,” Hufford said. “While Trump opposed that effort during the campaign, his selection of Price could indicate that he is willing to let privatization proceed.”
Jack Rovner said that such a reform might not be warmly received by Medicare recipients. “Increased privatization of Medicare is an opportunity for private health insurers beyond Medicare Advantage, but is it a change that will not be tolerated by seniors, who overwhelmingly like Medicare as it is,” he said.
“If that movement gains traction it would represent an unprecedented, tectonic shift in the Medicare program,” Reece Hirsch said.
The Medicare Shared Savings Program (MSSP), which was created as part of the ACA, could be on the chopping block depending on what the efforts to repeal the law look like. That could mean a short life for any ACO formed as a part of that program.
However, some board members said ACOs could survive in spite of an ACA repeal. “Regardless of whether MSSP ACOs survive, as commercial ACOs and clinically integrated networks mature and associated providers expand their affiliations, we should begin to see an increase in combinations, joint ventures, affiliation and expansion of ACOs, including the advent of multi-state ACOs to match up with an anticipated increase in health insurance offerings across state lines,” Gerry Griffith said.
“Evolving innovative reimbursement models and CMS demonstration projects, such as bundled payment programs and the new Comprehensive Primary Care Plus (CPC+) model, are placing compliance pressures on participating providers as they struggle to reconcile program activities with other payment relationships with referring physicians and others,” John R. Washlick, of Buchanan Ingersoll & Rooney in Philadelphia, said.
Washlick pointed out that some ACOs have left the MSSP but have decided to participate in the CPC+ model, a public-private insurance program that creates incentives for physicians to engage in alternatives to traditional office visits. It has incentives for long-term care management, giving patients 24-hour access to health information and adding services to doctors' practices that might have previously required a referral.
“These same ACOs would like to continue to extend many of the benefits that were conferring on ACO participating physicians, but realize once they have withdrawn from the MSSP the waiver protection they previously enjoyed to protect many of these financial arrangement is no longer available,” he said.
Board members also said they anticipate that the alternative payment programs created as part of the Medicare Access and CHIP Reauthorization Act (MACRA) will survive the new administration's efforts to reform Medicare. “While the House Republican ‘Better Way' calls for eliminating the Center for Medicare and Medicaid Innovation, population health management and value-based health care pre-dated the ACA and are broadly viewed as ways to bend the cost curve,” Elisabeth Belmont said.
Howard Wall agreed. “The implementation of MACRA and the move toward alternative payment models will continue unless Congress intervenes.”
Antitrust laws are bumping up against the consolidation trend, putting the issue front and center for many health lawyers, board members said. Antitrust issues will be a concern in 2017 for providers looking to increase efficiencies through consolidations, they said.
Restrictive antitrust laws are keeping many health-care alliances from progressing quickly, John Washlick told Bloomberg BNA, because it “takes years and millions of dollars to actually be considered ‘clinically integrated' for antitrust purposes,” he said.
He said he expects to see heightened scrutiny in 2017 but added that Trump's election promises to usher in an era of deregulation. Many people believe antitrust laws and regulations need to be “reined in to foster collaboration among providers and rate transparency so patients can make better, more informed choices,” Washlick said.
Like everything else, the incoming Trump administration is a wild card. Trump's views on antitrust enforcement “will have a significant impact” on the health-care system, Mark Waxman said.
Federal antitrust enforcers in 2016 famously challenged two major payer mergers involving Anthem and Cigna and Aetna and Humana, as well as hospital mergers in Chicago and Pennsylvania. The Pennsylvania deal fell through after a federal appeals court sided with the Federal Trade Commission, which said the merger likely would lead to lower quality care and higher health-care costs in the Harrisburg, Pa., area ( FTC v. Penn State Hershey Med. Ctr., 838 F.3d 327, 2016 BL 317602 (3d Cir. 2016)).
The appeals court ruled in favor of the FTC in the Chicago case ( FTC v. Advocate Health Care Network, 841 F.3d 460, 2016 BL 362072 (7th Cir. 2016)). Although the case involving the Chicago hospitals continues, the results could chill mergers in 2017 and beyond, Michael Schaff said.
There are, however, questions about whether the Trump FTC will view the transactions differently, Waxman said.
A relaxation of antitrust enforcement by the Trump administration “could have a profound effect on all segments of the health-care industry,” Katherine Benesch said.
Major payer mergers, if allowed to go through, “could have a material impact on competition with respect to both providers and patients,” Brian Hufford said. Fewer insurers means providers would have less bargaining power when negotiating in-network contracts. “Insurers, who already have a major advantage, will be able to continue pressuring providers to take reduced payments for medical services,” he said.
This might reduce the level of services providers can offer, Hufford said. Patients also will find it more difficult to buy insurance at a reasonable cost as the number of insurers declines.
The outcome of two challenges brought by the FTC to the Anthem/Cigna and Aetna/Humana mergers will indicate whether competition in the health insurer market “will continue or crater,” Douglas Ross, with Davis Wright Tremaine, Seattle, told Bloomberg BNA. If the mergers are approved, the country will have gone from five insurers to three. “The next stop: a single payer—although not the one many people envisioned when they campaigned for the federal government to take over health care,” he said.
States may take on greater roles in enforcing antitrust laws to stop insurer mergers and major hospital deals if the Trump administration backs down on enforcement, John Blum and Gerry Griffith said.
On the other hand, Doug Ross and Jennifer Ecklund said mergers that run into initial federal opposition may find the states a more favorable environment. Certificate of public advantage laws, for example, have been used in places like West Virginia to allow struggling health systems to merge. These laws cloak the deals with state-action immunity, so providers frustrated with FTC interference may go that route, they said.
Another possibility could be “an upswing in private antitrust actions as consolidation among health-care entities expands,” Mark Kadzielski said.
In the provider regulation arena, board members said tax reform, provider billing regulation and the general antagonism to federal regulation, in addition to substantial fallout from ACA repeal, are likely to affect the health-care regulation landscape and challenge providers and their counsel in 2017.
“Health-care providers are among the most regulated business entities in the country,” Tom Mayo said. “That was true before the ACA, and it will remain true if the ACA is repealed root and branch, which seems terribly unlikely.”
Most board members said the incoming administration's stated distaste for federal regulation will create major headaches for providers in the coming year.
“The CMS and other regulatory agencies will be watched closely to see if there will be a movement to repeal and replace Obama-era regulations,” Mark Kadzielski said. “Career regulators will have to answer to new bosses and work under new policy initiatives, which is certain to cause confusion among the ranks of both the regulators and the regulated.”
According to Gerry Griffith, the impact of any deregulation will depend on where the administration focuses its efforts. Assuming deregulation happens, “the impact will be more or less significant depending on which regulations are targeted.”
Griffith pointed to regulations under the Stark law, the anti-kickback statute and Medicare as possible focal points. Deregulation efforts “may end up as part of a package of legislative reforms to revamp or replace Obamacare,” he added.
There are elements of the health-care industry that board members could see as inviting new regulations in the coming year. These could address questions surrounding provider billing and insurance reimbursement.
“Surprise billing legislation will be a hot topic in many states in 2017,” Michael Schaff said.
He noted that, in 2016, surprise billing legislation was introduced in California and New Jersey. “We expect continued regulation of provider out-of-network billing and surprise bills on the state level,” he said. “In 2017, it is likely that more states will consider similar legislation regulating out-of-network providers.”
Jennifer Ecklund agreed. “States will continue to be responsive to concerns about provider prices, particularly the prices charged by out-of-network providers on staff at in-network facilities,” she said.
Brian Hufford said that the question of how providers will be reimbursed and the role of insurance companies in setting those rates will be a topic for the new administration. “Allowing providers free reign to charge what they want, with no incentives to keep costs under control, is, of course, an unacceptable model; at the same time, a system must be put in place that rewards quality health care and encourages a high quality of service.”
Hufford warned, however, that turning the regulation of prices over to the free market based on competition between health insurance companies could lead to worse outcomes for patients.
Because the patients who consume health care are insulated from its costs by only seeing their monthly insurance premiums and occasional copayments “a profit-oriented health insurance system, without aggressive governmental oversight and a strong plaintiffs’ bar that can challenge improprieties, is not properly regulated by the free market.”
One other provider regulation element that board members are tracking is medical malpractice reform.
There has been some movement on that front in Republican-controlled state houses, and there could be a push to enact some sort of medical malpractice limitations as a part of the expected replacement for the ACA.
“The push at the state level to enact arbitrary caps on damages in medical malpractice cases and infringe on an individual’s common law right to a trial by jury will continue, despite little data to support any correlation between caps and lower medical malpractice insurance premiums,” Howard Wall said.
“Federal tort reform could be tucked away in an ACA repeal bill but at least some GOP members of the House expressed federalism objections to such a law last year when an attempt was made to bring a bill out of committee,” he added.
Wall also expressed surprise that Republicans, who generally believe in small government and deregulation, could support a federal law that restricts the rights of injured patients to bring lawsuits to obtain redress for those injuries.
It also appears that tax reform, with potential implications for all health-care organizations, will be a big issue with the incoming administration. “With Republicans holding both houses of Congress and the White House, the conclusion that at least corporate tax reform will be enacted soon seems inescapable,” T.J. Sullivan said.
But Sullivan said that he thought Section 501(r) of the tax code, which imposes compliance requirements on tax-exempt hospitals, is likely to remain in the code, regardless of any tax reform or ACA repeal efforts. “Sen. Chuck Grassley (R.-Iowa) authored the provision and has championed and monitored its implementation,” he said.
Griffith said the Internal Revenue Service is likely to rely on more sophisticated methods to audit providers. He said they could see “a rise of data-driven case selection for IRS audits as it looks for the next best case based on tax and information return reporting and referrals.”
As with last year, providers also should watch out for increased activity by states and localities that are looking to find a way to collect property taxes from nonprofit health-care organizations. According to Griffith, as local municipalities see their budgets squeezed, nonprofit hospitals should expect to see more property tax exemption challenges.
Sullivan said that state taxing authorities could see decisions by courts in New Jersey and Illinois as creating an opening for increased imposition of property taxes against nonprofit hospitals and their related facilities located in their states.
Telemedicine has been a major force in health care in recent years, and as more telemedicine providers have begun to offer their services, more states have been forced to re-examine their regulations and laws governing licensure and scope of practice.
“Telemedicine has been raising new legal questions for years,” Phil Zarone, with Horty, Springer & Mattern PC in Pittsburgh, said. “However, it now could be poised to play a role in the day-to-day work of all health-care providers, not just those in rural areas.”
Zarone pointed to a recent study that suggested telemedicine services delivered via a robot in a pediatric ICU were generally as effective as care provided by physicians who were physically present.
“If health-care professionals start using telemedicine for rounding on patients and other routine activities, it could significantly affect the relationships of physicians, hospitals, patients and others in the health-care system,” he said.
Katherine Benesch said pressure to reduce costs could drive providers more and more to use telemedicine as part of their primary service offerings.
“As hospitals cut back on all types of services and providers they can no longer afford to have on the premises, telemedicine providers and services are moving into the breach,” she said. “As health plans work to move care out of expensive settings, more patients are being visited at home via electronic means.”
Benesch cited the example of Kaiser Permanente, which reported that last year one half of its 100 million doctor visits were virtual visits made through services like videoconferencing and smartphones.
“As facilities and institutions consolidate, a smaller proportion of total care will be provided by face-to-face doctor-patient visits,” she said.
Benesch predicted that telemedicine will be “one segment of the health-care space that can expect to see continued growth in the coming years, especially in light of a predicted doctor shortage.”
Gary Herschman agreed. “Telemedicine continues to expand in many regions because it provides immediate access to care and triaging and, in certain situations, can be the most cost-effective mode of providing high quality care.”
The main telemedicine constraint that states have struggled with involves licensing regulations. That constraint is expected to be addressed by more states in 2017 as they embrace telemedicine's promise, at least with respect to certain care regimes.
“It is likely that telemedicine will continue to shape the licensure and scope of practice rules during 2017 as states struggle to adapt to this emerging trend,” Michael Schaff said.
Schaff added that, as of November 2016, 18 states had enacted legislation adopting the Federation of State Medical Boards’ (FSMB) Interstate Medical Licensure Compact and one additional state has active legislation that would enact the compact.
The compact provides for an expedited licensure process for eligible physicians. There also are pending interstate licensure compacts for nurses and other midlevel providers. “The compacts are meant to improve license portability and increase patient access to care,” Schaff said. “In the future, the implementation of the compacts may increase the practice of telemedicine across state lines.”
John Blum said that action by state licensing boards could push federal authorities to eventually expand coverage for telemedicine. “While the ascendency of state health policy and the growth of a state telehealth compacts will frustrate a move toward national telemedicine licensing, state regulation of this area will expand as greater utilization of these technologies will be driven by cost and consumer demand pressures,” he said.
“States will continue to expand Medicaid reimbursement in this area, and pressure will continue to build for Medicare telehealth reimbursement outside rural areas,” he added.
Another key battleground between telehealth providers and state regulators lies within the antitrust realm, board members said. Telehealth providers have begun to challenge licensing board decisions in federal courts claiming the boards are controlled by practicing physicians who are allegedly trying to squash competition by preventing entry for telehealth providers.
Several board members pointed to a case, which is in settlement negotiations in a federal court in Texas, as illustrating the problem that can arise when state licensing boards try to regulate the practice of telemedicine.
The lawsuit, brought by Teladoc Inc., challenged whether the Texas Medical Board violated federal antitrust laws when it established regulations that required a physician to have an in-person consultation with a patient before prescribing certain drugs.
The court recently placed the case on hold to allow both sides to work out the details of a possible settlement ( Teladoc, Inc. v. Tex. Med. Bd., W.D. Tex., No. 1:15-cv-343, stay granted 11/4/16).
The settlement effort came on the heels of the court's ruling that the medical board wasn't an arm of the state government entitled to immunity from federal antitrust laws.
The competition to represent telemedicine providers can be fierce as well. “Health-care practices appear to be scrambling to position themselves as the legal adviser of choice on telemedicine,” Tom Mayo said.
“The federal rules are pretty restrictive and the states that have addressed the issue seem to be all over the place,” Mayo added. “This should be a growing area of health law that combines elements of licensure, cost-containment, and quality.”
The myriad issues that arise as providers implement new computer systems, strive to protect private health information and demonstrate compliance with federal regulations put health information and health information technology (HIT) on most board members' Top 10 lists.
Digital technology in health care is a “major area of innovation and expansion,” Richard Raskin told Bloomberg BNA. He predicted continued development and introduction of new health-care technologies that could change how providers do business and deliver care.
Without this expansion, especially in the area of electronic health records, the industry can't obtain the benefits of value-based purchasing and true integration, Gary Herschman said. The “lofty goals of widespread and consistent high quality and cost-effective health care” can't be achieved without advanced HIT, he added.
But buying and utilizing HIT systems don't come without consequences, because they are highly regulated aspects of a highly regulated industry.
The Health Insurance Portability and Accountability Act (HIPAA) applies industry-wide and encompasses business associates that don't provide health-care related services. Those entities will come under greater scrutiny in 2017 as HIPAA Phase 2 audits are completed, Reece Hirsch told Bloomberg BNA. “It will be interesting to see how the HHS's Office for Civil Rights (OCR) assesses the state of business associates' HIPAA compliance,” he said.
The business associate rules have been in effect for a little over three years, “so it's likely that many business associates have much work to do,” Hirsch said.
The OCR “has been a zealous enforcer” of HIPAA's Privacy Rule, Howard Wall said, but it isn't the only one. The OCR and the FTC in 2016 said they have overlapping enforcement jurisdiction. Hirsch predicted the two agencies will act in concert more frequently, especially as providers expand digital health offerings by providing patients with access to mobile applications, personal health records, activity trackers and consumer-generated health information trackers.
Kirk Nahra told Bloomberg BNA he is not sure if the new administration will continue these enforcement efforts. The Trump administration may not dedicate a lot of resources to HIPAA enforcement, but there probably won't be any weakening of the Privacy and Security rules under Trump either, he said.
Anyone “who says something specific” about the administration's position regarding HIPAA “is just making broad generalizations from big picture themes,” Nahra said. Still, the administration could reduce the impact of meaningful use requirements and put through fewer electronic health records regulations, he said.
Nahra said cybersecurity also looms large as an issue for health-care providers. He said he believes there will be more, not less, emphasis on preventing unauthorized intrusions into providers' computer systems.
New cybersecurity threats emerged in 2016, Elisabeth Belmont added, noting allegations of foreign government hacking during the presidential election. Hackers have hijacked millions of Internet-connected devices, and several hospital hacks were reported during the year. John Washlick told Bloomberg BNA “any and all cyber systems are vulnerable to hacking.”
“The health-care industry is now a target for some of the most sophisticated and pernicious cyber threats, so health-care organizations are going to have to take these new risks into account as part of their HIPAA security risk assessment efforts,” Hirsch said.
“A by-the-numbers approach to HIPAA Security Rule compliance is no longer adequate,” he added.
OCR is trying to address the issue. In October it released a guidance for providers on using cloud services that offer access to shared resources, Michael Schaff noted.
The move toward interoperability may complicate the picture, Wall said. Interoperability, or the ability of providers to access electronic health records created by other providers, “is essential to make the truly integrated/accountable delivery model a reality,” he said.
Cybersecurity may be the biggest risk area, but smaller breaches may become a more popular enforcement area, Belmont said. The OCR traditionally investigates breaches affecting 500 or more people, but it recently said it will more closely scrutinize smaller breaches and look for systemic noncompliance.
Misuse of electronic health records presents a lesser-known but just as dangerous risk from a patient care perspective, Mark Kadzielski told Bloomberg BNA. Inaccurate or misleading information entered into an electronic record may be copied into other records by careless or overwhelmed staff, “creating enormous potential for patient care problems.” Chart audits catch some issues, but better staff training and “careful and thoughtful documentation is the long-term solution,” he said.
Belmont advised providers to take steps to ensure their “culture of patient safety includes shared involvement and responsibility of all stakeholders” when it comes to addressing potential HIT risks. This requires a periodic reexamination of all stakeholders' roles, including the organization, clinicians and HIT vendors and developers, she said.
Advisory board members included corporate governance on their Top 10 lists because directors must be made aware of, and closely monitor corporate policies to address, the numerous health law challenges that will confront health-care organizations in 2017.
“The anticipated dramatic changes in federal health policy proposed by the change in administration present an enormous education challenge for health-care organization boards,” Michael W. Peregrine, with McDermott Will & Emery LLP, Chicago, told Bloomberg BNA. For boards to “capably exercise their decisionmaking and oversight duties, and to be effective partners with management in the transition period, they will require a crash course in the policy changes and their basic implications.”
Tom Mayo predicted the level of regulatory uncertainty following the election will make 2017 “a tougher year than most for health-care organization board members.”
Health-care delivery systems are expanding throughout the country, Anne Murphy said. An organization's legal counsel, therefore, must ensure that all organizations within its system are in compliance with state and federal laws and regulations.
“This requires close collaboration with the senior management teams, compliance officers and governing boards for the system and the affiliated entities,” Murphy said.
Complex and big data-driven boards must adapt in a manner that allows for meaningful oversight as the health-care industry grows more diversified and complex, Murphy added. This might involve creating a robust committee structure or enhancing the board's enterprise risk management oversight function, she said.
The DOJ announced in December that it collected $4.7 billion as a result of FCA lawsuits in fiscal year 2016, John Washlick noted. A substantial amount of that total was attributable to stepped-up payouts from corporate executives, demonstrating the increased scrutiny health-care executives are facing, he said.
Attorneys counseling boards must advise them on strategies for meeting these ever-expanding fiduciary challenges and the consequences of failing to do so, Murphy said. Individual officers and board members risk financial and criminal exposure if they don't meet those challenges.
Peregrine echoed that sentiment, noting the substantial penalties leveled against individual officers and directors in recent FCA settlements and at least one individual debarment. Washlick said he expects the trend to continue in 2017.
Fraud compliance comes within the board's duties on a macro level as boards are responsible for the “tone at the top and for ensuring the organization has a comprehensive and credible compliance program,” Sandy Teplitzky told Bloomberg BNA.
Day-to-day fraud compliance efforts, however, aren't the board's responsibility. Still, the board should be setting the tone on such issues as the relationship between an organization's audit, compliance and legal departments; the organization's reporting process; the organization's approach to identifying regulatory risks; and methods for encouraging corporate-wide accountability, Teplitzky said.
Jennifer Ecklund told Bloomberg BNA it isn't clear the Trump administration will continue targeting corporate boards or owners in its fraud compliance initiatives, given Trump's business background and “his assumed sympathies with corporate executives.”
Other specific issues boards need to think about, and attorneys need to counsel them on, include mounting cybersecurity and antitrust issues.
Boards must oversee the organization's privacy and security compliance efforts, Reece Hirsch said, adding that boards can't ignore cybersecurity risks, as they “pose significant threats to a health-care organization's reputation and assets.”
Transactional activity also is a board concern because “many health systems are struggling with the challenge of divesting ‘losing' facilities in order to protect the bottom line,” Mark Kadzielski said. Physician leaders, who have divided loyalties in the health-care marketplace, also will cause more conflicts at the board level, he said.
Peregrine agreed. The decision of when to pursue a merger presents a challenge for board members, who must be made aware that antitrust barriers to potential mergers may increase after the FTC's win in a case involving the merger of two Pennsylvania hospitals and its ongoing challenge of a Chicago-area hospital merger.
“The costs of evaluating and then defending a concentrated market merger in such circumstances requires a much more refined exercise of board business judgment,” Peregrine said.
To contact the editor responsible for this story: Peyton M. Sturges at email@example.com
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