Health Update

Liberating Data to Enable Healthcare Market Transparency: A Guide for Regulators and Policymakers

Authors: Joel Ario, Managing Director | Chiquita Brooks-LaSure, Managing Director | Jon Glaudemans, Managing Director

Editor's Note: We are on the cusp of a transparency revolution in which consumers will have the data and tools to make informed choices among their health insurance options in ways that will transform the Marketplace. In a new white paper prepared for Novo Nordisk, summarized below, Manatt Health describes a four-year Roadmap to Transparency that will allow consumers to make informed decisions that address their unique healthcare needs and reflect their unique preferences across the dimensions of cost, quality and access. To download a free copy of the full white paper, click here.

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The federal and state Marketplaces established by the Affordable Care Act (ACA) have made it easier for consumers to compare their health insurance options. Data are still not fully available, however, for consumers to understand how their plan options compare on cost-sharing, provider networks and drug access, as well as how much each option might cost them in premiums and out-of-pocket spending. The challenges are more daunting for consumers who purchase coverage outside the Marketplace, where comparative data are harder to find and consumer tools are more limited.

Despite these limitations, the road ahead is clear. We are on the verge of a transparency revolution that will ensure consumers have the right information at the right time to make informed decisions on their choice of plan design; formulary; network; provider; and cost of treatment, ideally including comparative costs when consumers are asked to choose among competing treatments.

Eventually, a vibrant health insurance Marketplace should also enable consumers to incorporate personal preferences on physician and hospital choices, to examine the estimated costs of a particular treatment or service across competing providers and/or health plans, and include these estimates—and the associated out-of-pocket liabilities—in their decision support calculations.

By 2020, consumers should be able to use a decision-making tool or multiple tools, as envisioned in the following scenarios:

  • A person with diabetes uploads his electronic medical records and biometrics from his wristband to a consumer tool that matches this individualized data against all available health plans and within minutes provides detailed plan rankings based on expected cost (premium and predicted cost-sharing), provider and drug access, patient satisfaction ratings, or other factors of the person's choosing.
  • A millennial in a hurry enters her age and zip code into a mobile app and within seconds can view the three cheapest plans by premium in her area. The app encourages her to enter income to see whether she is eligible for a subsidy and health data to estimate her out-of-pocket expenses.

Realizing the Vision: A Four-Year Roadmap to Transparency

The Roadmap to Transparency is a four-year plan that describes the steps that public officials and private stakeholders can take to realize the full benefits of a Marketplace in which consumers have ready access to online decision-support tools that:

  • Allow electronically searchable plan comparisons by plan characteristics, including benefit design, cost-sharing, network and formulary.
  • Allow—but do not require—consumers to input personal data into the tool, including health conditions, prescriptions and provider preferences.
  • Allow—but do not require—consumers to elect auto-uploads from medical records/claims, as well as wearable devices, such as heart rate monitors, to auto-enable recommendations for the best plan, based on the consumer's unique preferences.

Eventually, consumers should also have access to tools that allow them to:

  • Assess and screen for the reported quality of providers and determine which plan's network is best for their needs.
  • Compare the cost of different treatment options (i.e., how much knee surgery will cost vs. alternative treatments).

The Roadmap focuses primarily on the foundational step of making health plan information available in a standardized and timely manner, so the designers of consumer tools have full access to the data necessary to develop robust decision-support tools. These data are already being collected by state and federal regulators, some of it in machine-readable formats that are readily usable for app development. The rest could be made equally accessible, though it will take effort to ensure the data meet six key criteria for data quality:

  • Accurate—verified information that reflects actual plan offerings.
  • Complete—available on all plan offerings in all relevant product categories.
  • Consistent—available in standard formats that allow for apples-to-apples comparisons.
  • Accessible—publicly available so that tool designers compete on a level playing field to use the data to fashion consumer tools.
  • Processable—available in machine-readable formats that can be easily manipulated, so that tool designers can turn an overwhelming amount of data into consumer-friendly decision-making tools.
  • Timely—available in advance of open enrollment.

The Roadmap's Three-Pronged Approach

The Roadmap outlines a three-pronged strategic approach to achieving the requisite data quality and ensuring that consumers are able to benefit from the results:

  • Take concrete action to make key data on plan design, provider networks and formularies available to app developers;
  • Continue to focus on developing a regulatory environment that promotes innovation in app development, safeguards consumers' privacy rights, and ensures fair competition; and
  • Develop consumer literacy campaigns that promote consumer use of health-related apps and other decision-support tools so consumers can understand their options and make choices that most find bewildering today.

Four Key Recommendations

The Roadmap includes four key recommendations designed to establish the data foundation for a transparent and consumer-oriented Marketplace by 2020:

  • Federal and state regulators should work together to make full data on all Marketplace plans publicly available in machine-readable standardized formats at least 60 days prior to open enrollment each year.
  • State insurance regulators, with the assistance of the National Association of Insurance Commissioners (NAIC), should ensure that the same plan data that are made available for public Marketplaces are made available in the same machine-readable standardized formats for the rest of the individual and small group markets.
  • The Department of Health and Human Services (HHS) and state officials should jointly convene an advisory group of public and private experts to establish best practices and, potentially, regulatory standards for the use of data by choice-enabling applications.
  • State and federal officials should collaborate with private payers to expand access to large claims databases and to pricing and quality data on medical services.

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Advancing Healthcare Transformation: A New Era for Academic Nursing

Authors: Tom Enders, Senior Managing Director | Alex Morin, Manager | Brenda Pawlak, Managing Director

Editor's Note: Transforming healthcare is a formidable challenge that can only be met through a coordinated response from academic and practice leaders across the health professions. Nursing plays an important role in steering this critical work.

In a new white paper prepared for the American Association of Colleges of Nursing (AACN), Manatt Health examines the potential for an enhanced partnership between academic nursing and academic health centers around the imperative to advance integrated systems of healthcare, achieve improved health outcomes and foster new models for innovation. Based on research with a variety of stakeholders in academic health center (AHC) and non-AHC-affiliated institutions, the final report identifies best practices and effective models for fully integrating nursing schools into the operation of AHCs. In the first in a series of articles based on the white paper, we summarize below key findings and recommendations. To download the full white paper, click here.

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Academic health centers have long been at the apex of American healthcare. Health reform imperatives are compelling AHCs to broaden their focus to community settings and deliver care across the continuum of patient needs. Along with changing economics, market consolidation, generational changes in the healthcare workforce, and an increasing focus on chronic disease prevention and management, these market dynamics are requiring AHCs to transform their operating models and evolve into more integrated and efficient systems of care.

In addition to providing the largest professional workforce in the health system, nurses play a central role in the management of AHCs' patients and their families. Nurses are often the primary interface point and advocate for patients. Patients want to get well—and nurses play a central role in making healthcare better.

As academic health systems develop and increasingly implement value-based reimbursement programs, as well as assume responsibilities for patient populations, health system leaders should look to nurses to lead and support prevention and wellness programs, new models of care delivery, continuity across transitions in care settings, and integration with home- and community-based services. At the same time, academic nursing is advancing higher levels of preparation and developing pathways for deeper specialization, which can help AHCs expand access to care and address the primary care shortages in many communities.

Summary of Findings

To date, the potential for academic nursing to be a driving force in the transformation of AHCs into health systems has not been realized. Manatt Health's findings regarding the current state of alignment between academic nursing and AHCs are sobering.

  • Finding 1: Academic nursing is not positioned as a partner in transformation.

    Significant organizational limitations prevent academic nursing from functioning as a true partner in AHC transformation. These include minimal meaningful participation in health system governance, lack of integration of nursing faculty into health system leadership roles, marginal integration of nursing faculty into clinical services, and siloed nurse-scientist research.
  • Finding 2: Institutional leaders recognize the missed opportunity from lack of alignment with academic nursing and are seeking a new approach.

    Preparation of Manatt Health's report involved numerous interviews and surveys with deans of nursing and university presidents, as well as a summit that brought together institutional leaders for candid dialogue. A theme that ran consistently throughout these discussions was one of missed opportunity for partnership and a strong desire to reset relationships around a dynamic vision for academic nursing.
  • Finding 3: Insufficient resources are a barrier to supporting a significantly enhanced role for academic nursing.

    The tuition-dependent funding structure of academic nursing severely limits the ability of schools of nursing to participate in healthcare transformation initiatives and to provide the institutional leadership of which they are capable. Most schools of nursing do not have faculty practices. Therefore, they have no clinical income, nor do they generally receive funding from their affiliated health systems. Despite unique research capacity (particularly related to patient-oriented research), schools of nursing received just 1% ($133 million) in National Institutes of Health (NIH) funding from a total budget of approximately $30 billion.

Summary of Recommendations

An enhanced partnership between AHCs and academic nursing will enhance the ability of academic health systems to transform healthcare. Achieving a new partnership requires that nursing faculty have a deeper involvement in clinical practice and greater opportunity to engage in clinical innovation. Stronger partnerships also entail fostering enhanced nurse-scientist-based patient- and community-oriented research. There are six recommended actions for institutional leaders:

1. Embrace a new vision for academic nursing.

The recommended vision for institutions is the following: Academic nursing is a full partner in healthcare delivery, education and research that is integrated and funded across all professions and missions in the academic health system. The elements of the vision include:

  • Nursing participation in health system governance.
  • Expanded academic nursing leadership in clinical practice and care delivery.
  • Growth and evolution of academic nursing research programs in partnership with the medical school, health system and other professional schools.
  • Collaborative workforce plans and training programs in partnership with the health system.
  • Integration of academic nursing into population health initiatives.
  • Systemwide commitment to leadership development to prepare and support future nurse leaders.

2. Enhance the clinical practice of academic nursing.

Initiatives should be implemented that more fully bring nursing faculty into the clinical practice of the health system and connect the clinical service more closely to the academic mission of the school of nursing.

3. Partner in preparing the nurses of the future.

Build a pipeline of nurses at all levels—from undergraduate to post-graduate—to meet the clinical requirements of the extended AHC system. Create nursing leadership development programs for faculty and practicing nurses that are jointly managed by the school of nursing and clinical practice.

4. Partner in the implementation of accountable care.

Strategies include joint clinical planning, leadership from academic nursing in developing linkages between acute and post-acute care, home-based and long-term care services, and expansion of nurse-led community programs under the leadership of academic nursing faculty in partnership with health system leaders and clinicians.

5. Invest in nursing research programs and better integrate research into clinical practice.

A research-grounded and evidence-based nursing service will enrich the AHC and benefit the community. Strategies for achieving this goal include:

  • Creating mechanisms to coordinate research projects and activities across academic nursing and AHCs,
  • Developing joint research programs between academic nursing and health system nurse-scientists,
  • Integrating nurse researchers into developing informatics programs,
  • Strengthening the training programs for nurse clinical trial coordinators and clinical research nurses,
  • Providing leadership in establishing linkages to other professional schools, and
  • Expanding nursing faculty development and recruitment to include PhD investigators across multiple disciplines in targeted research areas.

6. Implement an advocacy agenda in support of a new era for academic nursing.

Planks of the recommended agenda include:

  • Seeking growth in the NIH budget to support nursing-led research, especially at the National Institute of Nursing Research (NINR);
  • Increasing funding support for the training of nurse-scientists;
  • Advancing a national nursing agenda that links to the Triple Aim, including expansion of the Graduate Nurse Education (GNE) Demonstration;
  • Heightening advocacy for scope of practice changes to enable nurses to take on the clinical roles that they are trained to perform; and
  • Supporting academic nursing leadership in clinical care delivery.

Conclusion

Achieving the potential for academic nursing requires a change in culture that can only be accomplished through the collaborative leadership of university presidents, deans of nursing and medicine, and health system chief executives. All parties must embrace a new vision for academic nursing and challenge the status quo, seeking to unharness the potential of their nursing colleagues.

Participatory governance structures that cross-populate, as appropriate, leaders of the academic and clinical practices will help ensure mission integration and diverse insights across a range of constituencies. Participatory governance will be enhanced by collaborative strategic and financial decision making around academic, clinical and research programs, as well as workforce development. Further alignment of medicine, nursing and health system organizations may also prove beneficial for some institutions.

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Regulators Continue to Look Closely at Medical Device Cybersecurity (and Maybe Congress, Too)

Authors: Kimo S. Peluso, Partner, Litigation | Helen R. Pfister, Partner, Healthcare

On February 5, 2016, U.S. Senator Barbara Boxer of California sent a letter to five of the country's largest medical device manufacturers, expressing "serious concerns that the cybersecurity vulnerabilities in medical devices are putting the health and safety of patients in California and across the country at risk." In the open letter, Senator Boxer asked the CEOs of these manufacturers, in light of their significant share of the medical device market, to describe "the steps your companies are taking, or plan to take, to address the growing threat of medical device cybersecurity vulnerabilities."

Senator Boxer's February 2016 letter is only the latest instance of increased government scrutiny on this subject. Medical device companies are innovating their products into the Internet-of-Things at a time of increasing public worry over cybersecurity. Both the Food and Drug Administration (FDA) and the Department of Homeland Security have studied the issue, although neither agency has reported any instances of patient injury or death due to a medical device being hacked.

The Potential for Cyber Attacks and Privacy Issues

Whether the threat is imminent or far-fetched, the idea of a cyber attack inflicting bodily injury or death proves to be a captivating thought. Such an attack was manifested in popular culture in a 2012 episode of the Showtime television program Homeland, in which terrorists assassinate the Vice President by hacking into his pacemaker and causing a heart attack. (A real-life Vice President, former VP Dick Cheney, later commented on the episode and acknowledged that his doctors had disabled the wireless capabilities in his own pacemaker in 2007, as a security precaution.)

Networked medical devices also present potential privacy issues under the Health Insurance Portability and Accountability Act (HIPAA). For example, when networked medical devices are disposed of, they need to be wiped or destroyed, so there's no risk of improper disclosure of protected health information (PHI).

Many hospitals and other healthcare providers focus primarily on their information technology networks and the computers that connect to them when thinking about the security of patient information. Networked medical devices, because they are nontraditional and FDA-regulated, may not be included in the HIPAA risk assessments and security measures implemented by healthcare providers. Further, not all networked medical devices collect PHI. Devices that collect information about a patient but don't include any means by which the information can be attributed to a specific patient likely aren't covered by HIPAA. Similarly, medical devices that store only information entered by patients, such as some mobile medical apps, may fall outside of HIPAA as well. Accordingly, healthcare providers must determine which of their medical devices are subject to HIPAA, and which are not.

Recent Regulatory Actions

Regulators are looking closely at medical device cybersecurity, and Senator Boxer's letter suggests that Congress may be taking an interest as well. On the regulatory front, recent actions include the following:

  • In October 2014, the FDA issued final guidance on Content of Premarket Submissions for Management of Cybersecurity in Medical Devices, nonbinding recommendations that encourage certain controls in the premarket design and development of medical devices that connect electronically to provider networks, to the Internet, or to each other.
  • Around the same time, press reports revealed that the Department of Homeland Security's Industrial Control Systems Cyber Emergency Response Team (ICS-CERT) was investigating potential cyber vulnerabilities in various medical devices, including implantable cardiac monitors, pacemakers, infusion pumps, medical imaging systems and hospital networks.
  • In July 2015, following warnings from ICS-CERT, the FDA issued an alert to providers recommending that they discontinue the use of a particular computerized infusion pump due to cybersecurity vulnerabilities. The FDA concluded that unauthorized users with access to a hospital's network could control the device and change the pump's dosage delivery. Neither ICS-CERT nor the FDA reported any such attacks having occurred.
  • In October 2015, the Office of the Inspector General (OIG) of the Department of Health and Human Services released its 2016 Work Plan, which, among other things, stated that the OIG would examine whether the FDA's oversight of hospitals' networked medical devices is sufficient to protect electronic protected health information (ePHI). The OIG made specific mention of the risks of computerized medical devices, such as dialysis machines, radiology systems and medication dispensing systems that are integrated into a hospital's electronic health records.

As of today, the FDA is actively developing additional positions on cybersecurity. In January of this year, the FDA issued draft guidance for public comment on Postmarket Management of Cybersecurity in Medical Devices, a nonbinding set of proposals for steps manufacturers can take to monitor and improve cybersecurity of medical devices after they have been released to the market. In general terms, the draft guidance includes the following recommendations, among others:

  • Recommended processes for assessing the exploitability of a cybersecurity vulnerability.
  • Processes for assessing the severity of potential health impacts, if the cybersecurity vulnerability were to be exploited.
  • Systems and standards for determining whether the risk to essential clinical performance of a device is controlled (acceptable) or uncontrolled (unacceptable).
  • Recommendations for remediation efforts, that is, changes and control actions to address or mitigate vulnerabilities.
  • Regular reporting to the FDA, including of newly acquired information concerning cybersecurity vulnerabilities and device changes made as part of cybersecurity routine updates and patches.

Senator Boxer praised the draft guidance in her February 2016 letter. Written comments to the FDA on the draft guidance are due April 21, 2016.

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Court Allows Suit Challenging Changes Due to ACA to Move Forward

Editor's Note: Reducing an employee's hours simply to avoid the requirements set by the Affordable Care Act (ACA) may constitute a violation of the Employee Retirement Income Security Act (ERISA), a New York federal court judge has ruled, refusing to dismiss a class action suit against Dave & Buster's. In an article first published in Manatt's "Employment Law" newsletter, we take an in-depth look at the case and why it matters. To read the order in Marin v. Dave and Buster's, Inc., click here. For more information, contact Rebecca Torrey, Partner, Employment and Labor.

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Case Summary: Why It Matters

Maria De Lourdes Parra Marin sued the national chain alleging that store managers informed workers that due to the $2 million the ACA would cost the company, the New York location she worked at was cutting its full-time employees from over 100 to about 40 before the new law took effect last January. Marin told the court her previously full-time position was cut to about 17 hours per week, resulting in a loss of hundreds of dollars of income each week as well as health benefits. The employer countered that employees are not entitled to benefits or hours that had yet to be accrued and that Marin had only demonstrated a lost opportunity insufficient to bring suit. But the judge disagreed, writing that the plaintiff alleged the loss of both current and future rights, as "the complaint states a plausible and legally sufficient claim for relief, including, at this stage, plaintiff's claim for lost wages and salary incidental to the restatement of benefits."

Detailed Discussion

Maria De Lourdes Parra Marin was a full-time employee at a Dave & Buster's (D&B) location in New York's Times Square, working between 40 and 45 hours each week beginning in 2006. As a full-time employee, she received health insurance under the D&B health insurance plan, which was an "employee welfare benefit plan" under the Employee Retirement Income Security Act (ERISA).

According to Marin, the D&B store managers held a meeting in June 2013 to inform employees that things would be changing due to the requirements of the Affordable Care Act (ACA). The managers told workers that compliance with the ACA would cost the company as much as $2 million, and to avoid this expense, D&B intended to reduce the number of full-time employees at the Times Square location from more than 100 to about 40.

After the meeting, Marin's hours were reduced to an average of 17.43 hours per week, ranging between 10 and 20 hours. She also received a letter from D&B informing her that because she now had part-time status, her full-time health insurance coverage would be terminated. All told, she claimed, she suffered a loss of full-time status, a reduction of hundreds of dollars in pay each week (from $450-$600 to $150-$375), and the termination of her medical and vision benefits.

She sued. D&B violated Section 510 of ERISA, Marin alleged, which provides that it is "unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan … or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan."

Filed as a putative class action, Marin's complaint estimated the class consists of roughly 10,000 current and former D&B employees, requesting reinstatement to full-time status and restoration of benefit entitlements along with payment of lost wages and benefits, including reimbursement for insurance or out-of-pocket healthcare costs.

Dave & Buster's moved to dismiss the suit, telling the court that the plaintiff failed to state a legally sufficient claim for relief because Marin had no entitlement in benefits that had yet to accrue.

U.S. District Court Judge Alvin K. Hellerstein disagreed.

Read fairly, the complaint alleged that the employer intentionally interfered with Marin's current healthcare coverage, the court said, motivated by a concern about future costs. The plaintiff also put forward factual support for her claims, referencing multiple meetings held by the store managers and the $2 million figure cited.

"The complaint describes a nation-wide effort to lower the number of full-time and part-time employees, and that similar meetings were held at other locations," the judge wrote, including an employee from another location posting on Facebook about a similar June 2013 meeting where "[t]hey called store meetings and told everyone they were losing hours (pay) and health insurance due to Obamacare."

In addition, Marin noted that a senior human resources official with the company was quoted in a newspaper article about reduced workforce saying, "D&B is in the process of adapting to upcoming changes associated with healthcare reform." A September 2014 Securities and Exchange Commission filing further stated: "Providing health insurance benefits to employees that are more extensive than the health insurance benefits we currently provide and to a potentially larger proportion of our employees, or the payment of penalties if the specified level of coverage is not provided at an affordable cost to employees, will increase our expenses."

The reduction in Marin's hours affected her employment status, her pay, and the benefits she had and to which she would be entitled, the court said. Her claims were more than just a lost opportunity, as argued by the defendant, as she alleged D&B's discrimination affected her current benefits in addition to interfering with her ability to attain future benefit rights.

"The critical element is intent of the employer—proving that the employer specifically intended to interfere with benefits," Judge Hellerstein wrote, and the plaintiff satisfied that requirement. "Plaintiff's claim arises from the employer's unlawful motivation, acting to interfere with either the exercise or the accrual of benefits to which Plaintiff 'may become entitled,' " the court said. "Plaintiff has sufficiently and plausibly alleged this element of intent."

Accepting Marin's factual allegations as true, "the complaint states a plausible and legally sufficient claim for relief, including, at this stage, Plaintiff's claim for lost wages and salary incidental to the reinstatement of benefits," the court wrote, denying the employer's motion to dismiss.

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New Webinar: "ACA-Driven Litigation: Cases to Watch (and What's Next)"

Join Us on March 30 from 1:00 to 2:30 p.m. ET to Discover What's Fueling ACA Litigation—And Which Cases Could Be Game Changers. Register Free—And Earn CLE.

On March 23, 2010, President Obama signed the Affordable Care Act (ACA) into law. Since its inception, scores of cases have been filed challenging various aspects of the law. Which areas of the ACA are fueling the surge in litigation? What are the implications of decisions already handed down—and what are the potentially game-changing cases to watch in 2016? Learn the answers in a new Manatt webinar for Bloomberg BNA, "ACA-Driven Litigation: Cases to Watch (and What's Next)."

The webinar takes a detailed look at ACA implementation and the lawsuits that it's driving. You will:

  • Get an update on the ACA today, with a progress report on key facets of the law.
  • Identify the issues arising out of ACA implementation that are driving litigation.
  • Gain insights into rulings, cases and implications in four ACA-related litigation areas:

    1. Exchanges, including cases related to network adequacy and access, rate and quality transparency, premium costs, mental health parity, False Claims Act (FCA) exposure, regulatory compliance, and risk corridors and adjustments.

    2. Employer/employee challenges, including actions against employers for dropping coverage in favor of exchanges, shifting employees from full- to part-time status, and pre-ACA reductions in force (RIF) planning.

    3. Medicaid, including reimbursement and expansion-related issues, as well as compliance with essential health benefits, access to care and network adequacy.

    4. Privacy and security, examining the increased vulnerability to large-scale theft and data loss, as providers and plans depend increasingly on electronic data.

Click here to register free—and earn CLE. Even if you can't make the original airing on March 30 at 1:00 p.m. ET, register now and receive a link to view the session on demand.

Presenters:

Joel Ario, Managing Director, Manatt Health

Andrew Struve, Partner, Co-Chair, Healthcare Litigation, Manatt, Phelps & Phillips, LLP

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State Bill Seeks to Shield Hospital Mergers From Antitrust Challenge

Authors: Lisl Dunlop, Partner, Litigation | Ashley Antler, Associate, Healthcare | Shoshana Speiser, Associate, Litigation

On March 12, the West Virginia legislature passed a bill that would exempt state healthcare providers from federal antitrust scrutiny when acting under the jurisdiction of the West Virginia Health Care Authority (Authority). Notably, the bill would potentially shield the proposed purchase of St. Mary's Medical Center by teaching hospital Cabell Huntington—a merger that is currently under challenge by the Federal Trade Commission (FTC) as anticompetitive. These events continue a trend of state governments acting to exclude or limit the role of federal antitrust authorities in state healthcare markets, and demonstrate the tension that can arise between state law and policy and federal antitrust enforcement.

FTC Challenge to Cabell Huntington-St. Mary's Merger

In November 2014, Cabell Huntington Hospital announced an agreement to acquire St. Mary's after the Pallottine Missionary Sisters, the Catholic-affiliated organization that had operated the hospital for 90 years, decided to end their sponsorship of the medical center. In publicizing the transaction, the parties described their aim to create an integrated delivery system and improve quality and efficiency of care.1

In July 2015, the presidents of both hospitals signed an agreement with the state's Attorney General (AG), which imposed a series of conditions on the merging hospitals for a seven-year period. These conditions included:

  • Maintaining St. Mary's as a free-standing, general acute care, faith-based organization;
  • Maintaining service rates at benchmarks established by the Authority;
  • Reducing rates in the event that operating margins exceed an average of 4% during any three-year period;
  • Maintaining open staffs and granting privileges to all qualified physicians; and
  • Not opposing the award of a certificate of need to any potential competing healthcare provider.

The agreement also included multiple conditions to improve access and enhance the quality of healthcare, particularly in medically underserved areas.2 In announcing the agreement, the AG asserted that the conditions negotiated protected the best interests of West Virginia citizens. The AG also communicated his support for the merger to the FTC.

After conducting its own investigation and determining that the conditions in the agreement with the West Virginia AG would not preserve the benefits of competition that would be lost as a result of the transaction, the FTC filed an administrative complaint in November 2015 opposing the proposed merger. According to the FTC, the two hospitals are each other's closest competitors, and elimination of this competition would lead to increased prices and reduced quality of healthcare services in Huntington, West Virginia, and its surrounding communities. The FTC alleges that the merged hospital would have a "near monopoly" over general acute care inpatient hospital services (with a market share of over 75%) and outpatient surgical services.3 An administrative trial is scheduled to commence on April 5.

On March 12, 2016, Senate Bill 597 passed the West Virginia Legislature. The bill would permit "cooperative agreements" between a teaching hospital and one or more hospitals (located, at most, 20 miles apart). The bill would allow, among other transactions, consolidation by merger or other combinations of assets, subject to approval by the AG and the Authority. The bill would not give West Virginia hospitals and providers free rein to act anticompetitively; rather, West Virginia's AG and the Authority would be required to weigh the potential loss of competition from a merger or other cooperation against its asserted efficiencies and public benefits in considering whether to grant approval.

The bill would arguably serve to shield the Cabell Huntington-St. Mary's merger from the FTC's challenge, since that merger has been reviewed and approved by the Authority and the AG. The Cabell representative on the Judiciary Committee has said that it will be "up to the federal court" to determine whether West Virginia's framework for antitrust immunity is effective in displacing federal antitrust law,4 anticipating a possible FTC challenge to the grant of state action protection.

FTC Opposition to West Virginia Legislation

On March 10, 2016, in response to a request from a West Virginia House member, the FTC issued written comments, opposing the West Virginia legislation and raising concerns about its potential anticompetitive effects. The FTC stated that federal antitrust law permits cooperative arrangements that benefit consumers, and that the West Virginia bill "incorrectly assumes that the antitrust laws prohibit efficient healthcare mergers, acquisitions and collaborations."5 As a result, the FTC argued this bill could serve to advance anticompetitive activity that is inconsistent with federal antitrust law and policy and has the potential to seriously harm consumers. Given that the bill was passed only very recently, it remains to be seen whether the FTC will either be successful in forestalling its introduction or challenging it in court.

Takeaways: Tension Between State Law and Federal Antitrust Enforcement

The current debate between West Virginia and the FTC is another example of the tension that can arise between state healthcare industry regulation and federal antitrust enforcement. Although the FTC consistently advocates that healthcare policy and antitrust need not be at odds, several states have enacted rules and legislation protecting certain state healthcare actors from federal antitrust enforcement with the goal of promoting broader public health policies. On numerous occasions, the FTC has expressed its opposition to such laws through issuance of formal advocacy letters and comments to state legislators and regulators, including, for example:

  • In October 2015, opposing regulations proposed by the Virginia and Tennessee Departments of Health regarding hospital cooperation agreements in each agency's respective state.6
  • In June 2015, opposing proposed legislation in New York that would grant federal and state antitrust immunity to certain healthcare corporations and entities with which they negotiate in order to engage in collaborative activities, including information sharing and joint contracting.7
  • In May 2015, opposing a proposed Oregon bill that included language intended to provide federal antitrust immunity for certain information exchanges and agreements among the state's healthcare market participants.8
  • In April 2015, opposing Certificate of Public Advantage (COPA) applications submitted to New York State by three newly formed performing provider systems under the Delivery System Reform Incentive Payment (DSRIP) program to obtain federal antitrust immunity for certain collaborative activities among providers, including joint price negotiations.9 (See our March 2015 "Health Update" newsletter for additional discussion of the FTC's concerns in this matter.)
  • In June 2011, expressing opposition to a proposed Connecticut bill that would immunize healthcare provider-members of certified "cooperative arrangements" from state and federal antitrust laws when negotiating with managed care organizations and engaging in certain other activities.10

In all of these cases, the FTC opposed proposed state legislation and regulation on the basis that the federal antitrust laws permit procompetitive joint activity; therefore, each state's proposed laws establishing certain antitrust immunities would effectively shield anticompetitive behavior that would not otherwise pass muster under federal antitrust law. As a result, the FTC contends that the proposed state laws each posed substantial risk of consumer harm, and such antitrust exemptions are to be disfavored.

But is this necessarily true? Although the various state legislation discussed above displaces the FTC as enforcer in certain state healthcare matters, most legislative schemes retain oversight by state attorneys general, which often have their own antitrust experts, and frequently require other state bodies (such as Departments of Health) to pay attention to competition principles in exercising such oversight. Further, the FTC's criticisms ignore the state's broader policy interests in managing healthcare competition within its own borders—such as access to healthcare for underserved communities—which may supersede antitrust concerns. This concern has been recognized by Commissioner Julie Brill, who issued a dissenting opinion on the FTC and Department of Justice's (DOJ's) joint statement in relation to South Carolina's Certificate-of-Need laws, noting:

"Healthcare policy makers at the state level are faced with difficult issues separate and apart from the strong benefits competition brings to healthcare markets. These include the critically important issue of preserving access to care for the needy, and doing so in a complex market, involving informational asymmetries among patients, providers, and payors. In this context, it is important to understand that competition will not move resources from those that can afford healthcare to those that cannot."11

1Press Release, Cabell Huntington Hospital, Definitive Agreement Signed by CHH & St. Mary's (Nov. 11, 2014).

2Press Release, AG Patrick Morrisey Announces Antitrust Agreement in Cabell Huntington Hospital, St. Mary's Medical Center Acquisition (July 31, 2015), available at http://www.ago.wv.gov/pressroom/2015/Pages/AG-Patrick-Morrisey-Announces-Antitrust-Agreement-in-Cabell-Huntington-Hospital,-St.-Mary's-Medical-Center-Aquisition.aspx

3In the Matter of Cabell Huntington Hosp., Inc., Docket No. 9366 (Nov. 6, 2015), available at https://www.ftc.gov/system/files/documents/cases/151106cabellpart3cmpt.pdf.

4"Hospital merger bill advances in West Virginia House," March 8, 2016, The Herald Dispatch, available at http://www.wvha.org/Media/NewsScan/2016/March/3-8-2016-Hospital-merger-bill-advances-in-West-Vir.aspx.

5Press Release, FTC Staff: Proposed Health Care Legislation in West Virginia Would Likely Be Anticompetitive and Harm Consumers (Mar. 10, 2016), available at: https://www.ftc.gov/news-events/press-releases/2016/03/ftc-staff-proposed-health-care-legislation-west-virginia-would.

6Press Release, In Comments Submitted to Virginia and Tennessee Health Departments FTC Staff Offers Assistance in Evaluating Proposed Hospital Cooperation Agreements (Oct. 15, 2015), available at https://www.ftc.gov/news-events/press-releases/2015/10/comments-submitted-virginia-tennessee-health-departments-ftc.

7FTC, FTC Staff Comment to New York State Senator Ranzenhofer and New York State Assemblyman Abinanti Concerning SB 2647 and AB 2888 Authorizing Certain Agreements for the Creation and Operation of a Health Care Delivery System Network (Jun. 2015), available at https://www.ftc.gov/policy/policy-actions/advocacy-filings/2015/06/ftc-staff-comment-new-york-state-senator-ranzenhofer.

8FTC, FTC Staff Comment Regarding Oregon Senate Bill 231A, Which Includes Language Intended To Provide Federal Antitrust Immunity To Conversations, Information Exchanges, and Agreements Among Participants (Including Competitors) In Oregon's Health Care Markets (May 2015), available at https://www.ftc.gov/system/files/documents/advocacy_documents/ftc-staff-comment-regarding-oregon-senate-bill-231a-which-includes-language-intended-provide-federal/150519oregonstaffletter.pdf.

9FTC, FTC Staff Comment to the N.Y.S. Dep't of Health Regarding the Potential Competitive Impact of COPA Applications Filed by Adirondack Health Institute PPS, Advocate Community Partners PPS, and Staten Island PPS (Apr. 2015), available at https://www.ftc.gov/system/files/documents/advocacy_documents/ftc-staff-comment-center-health-care-policy-resource-development-office-primary-care-health-systems/150422newyorkhealth.pdf.

10FTC, FTC Staff Comment to Senators Coleman and Kissel and Representatives Fox and Hetherington Concerning Connecticut H.B. 6343, Intended To Exempt Members of Certified Cooperative Arrangements From the Antitrust Laws (June 2011), available at https://www.ftc.gov/sites/default/files/documents/advocacy_documents/ftc-staff-comment-senatorscoleman-andkissel-and-representativesfox-and-hetherington-concerning.b.6343intended-toexempt-members-certified-cooperative-arrangements-antitrust-laws/110608chc.pdf.

11Dissenting Statement of Commissioner Julie Brill on the Joint Statement of the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice on Certificate-of-Need Laws and South Carolina House Bill 3250 (Jan. 8, 2016), available at https://www.ftc.gov/system/files/documents/public_statements/905323/160111ftc-doj-sclaw-statement.pdf.

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Now You Have a Second Chance to Benefit From "Healthcare Without Borders: The Opportunities and Challenges of Medical Tourism"

Click Here to View the Webinar Free On Demand—and Here to Download the Presentation.

At a recent webinar for Bloomberg BNA, Manatt provided an in-depth look at the benefits and risks of medical tourism for employers, payers, providers and patients. The program shared developments in U.S. healthcare that are driving the growing trend to seek foreign alternatives… explained how medical tourism works…and explored the legal issues to consider.

If you or anyone on your team missed the original airing—or want to view the session again—click here to access it free on demand. To download a free copy of the presentation to keep for your continued reference, click here.

According to the Centers for Disease Control, up to 750,000 Americans a year travel abroad for healthcare—and projections for the next decade call for U.S. residents to spend more than $300 billion on foreign care. "Healthcare Without Borders" explores medical tourism from four critical perspectives—financial, clinical, regulatory and consumer readiness. The webinar gives you the chance to:

  • Gain insights into the trends in the United States that are making medical tourism an appealing alternative for payers, employers and patients seeking to lower healthcare costs.
  • Hear the results of new research on consumer attitudes toward medical tourism—and find out how ready Americans are to receive care beyond their own borders.
  • Understand the facts around medical tourism growth, capacity, savings and quality. Discover why Mexico is an increasingly attractive destination for patients and insurers.
  • Examine the legal challenges around medical tourism on a full range of issues—from marketing restrictions to HIPAA to liability—and learn how to mitigate risks in structuring and executing programs.

We hope you will take advantage of this second chance to benefit from "Healthcare Without Borders: The Opportunities and Challenges of Medical Tourism." 

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New Manatt Webinar: The Legal Challenges of Multi-Provider APMs: Minimizing the Risks of the Volume-to-Value Transition

Join Us on April 19 from 1:00 to 2:30 p.m. ET and Discover How to Mitigate the Risks of Multi-Provider Alternative Payment Models. Click Here to Register Free—And Earn CLE.

Since the passage of the Affordable Care Act (ACA), both federal and state policies have promoted the adoption of alternative payment models (APMs), providing financial incentives for groups of providers to improve care quality while containing costs. All U.S. payers—both public and private—are moving to value-based contracting with providers. Hospitals and physicians must establish integrated networks to engage in APMs. These hospital-physician integration efforts, however, raise unique regulatory compliance challenges.

How are government and private payers implementing APMs? What are the fraud and abuse, antitrust and other legal implications around value-based contracting arrangements between hospitals and physicians? Find out at a new webinar, "The Legal Challenges of Multi-Provider APMs: Minimizing the Risks of the Volume-to-Value Transition." During the session, you will:

  • Understand the types of payment models and their growth across Medicare, state Medicaid programs and the private sector.
  • Find out how states are building APMs into Medicaid payment methodologies and how private payers are adopting APMs.
  • Learn how the Medicare and CHIP Reauthorization Act (MACRA) of 2015 will increase incentives for provider participation in APMs.
  • Examine how the Stark Law, Anti-Kickback Statute (AKS) and Gainsharing Civil Monetary Penalty Law are implicated by value-based contracting arrangements between hospitals and physicians.
  • Discover which exceptions, safe harbors and waivers can potentially protect these arrangements.
  • Explore how collaborations between hospitals and physicians implicate antitrust laws.
  • Discuss structuring and compliance strategies for mitigating legal risks.

Click here to register free—and earn CLE. Even if you can't make the original airing on April 19, sign up now, and you'll receive a link to view the program on demand.

Presenters:

Robert Belfort, Partner, Healthcare, Manatt, Phelps & Phillips, LLP

Lisl Dunlop, Partner, Litigation, Manatt, Phelps & Phillips, LLP

Jocelyn Guyer, Managing Director, Manatt Health

Edith Coakley Stowe, Senior Manager, Manatt Health

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