JULY REGULATORY UPDATE SUMMARY
This issue of McDermott's Healthcare Regulatory Check-Up highlights regulatory activity for July 2024. We discuss several US Department of Health and Human Services (HHS) agency actions, including a final rule on provider information blocking disincentives, a telehealth policy proposal from the Centers for Medicare & Medicaid Services (CMS), new CMS guidance for the Medicare Drug Payment Program, and the US Food and Drug Administration's (FDA's) new draft guidance on combating medical product misinformation. We also discuss two similar Office of Inspector General (OIG) advisory opinions and several enforcement actions pertaining to healthcare fraud, including alleged violations under the False Claims Act (FCA) and federal Anti-Kickback Statute (AKS).
NOTABLE ENFORCEMENT RESOLUTIONS AND ACTIVITY
HOME HEALTH PROVIDERS TO PAY $4.5M TO SETTLE KICKBACK-BASED FCA ALLEGATIONS
Three home health agencies and their owner agreed to pay almost $4.5 million to settle claims that they paid kickbacks to assisted living facilities and physicians in exchange for Medicare referrals. The agencies allegedly gave benefits such as lease payments, wellness services, and sports tickets to facilities and physicians that referred patients to the agencies from 2013 to 2022, then billed Medicare for the home services they provided to the referred patients in violation of the FCA and AKS. The settlement takes into consideration the agencies' efforts to disclose the conduct, identify the individuals involved, assist in the determination of losses caused to Medicare, and generally cooperate with the US Department of Justice (DOJ).
CLINICAL LABORATORIES TO PAY $2.45M TO SETTLE FCA ALLEGATIONS OF ALTERING DIAGNOSIS CODES
Three clinical laboratories agreed to pay $2.45 million to settle alleged FCA violations arising out of Medicare and Medicaid billing practices. The settlement resolves allegations that the labs used manipulated diagnosis codes generated by a macro, rather than those provided by beneficiaries' physicians, in claims submitted from 2017 to 2021. The qui tam suit was initially brought by a relator who was a former employee of one of the labs, and the government intervened. One of the labs filed for Chapter 11 bankruptcy, necessitating US bankruptcy court approval of the settlement, which was granted on July 9, 2024. Concurrent with the settlement, the labs entered a five-year corporate integrity agreement with OIG.
MEDICARE PART D PLAN SPONSOR SETTLES FCA ALLEGATIONS RELATED TO DRUG REBATE REPORTING FOR $101M
A Medicare Part D Plan Sponsor and its subsidiaries agreed to pay $101 million to resolve claims under the FCA that they failed to accurately report drug rebates to the Medicare program between 2014 and 2020. The government alleged that during this period, the company and its subsidiaries improperly reported to CMS portions of rebates received from manufacturers as bona fide service fees, even though manufacturers did not negotiate with the companies to pay such fees. The government further alleged that one of the subsidiaries knew the retained rebates did not meet the regulatory definition of bona fide services fees under Part D. The lawsuit was originally brought by a relator who was previously employed by one of the subsidiary companies, and the government intervened. The settlement is based on the companies' ability to pay and was approved by a bankruptcy court as part of the company's reorganization plan.
DOJ FILES COMPLAINT AGAINST HEALTH SYSTEM ALLEGING STARK LAW VIOLATIONS
On July 26, 2024, the DOJ announced that it had filed a complaint against a health system in the US District Court for the Western District of North Carolina alleging that the health system violated the Stark Law through improper employment relationships with its physicians. The DOJ alleged that such relationships were not covered by the Stark Law's employment exception because the compensation paid to the physicians was well above fair market value. The case was originally filed as a qui tam lawsuit. OIG's special agent on the case noted that "this complaint serves as a warning to health care entities that attempt to increase profits through improper financial arrangements with referring physicians." The filing represents further focus on Stark Law enforcement, which we discuss in more detail here.
OIG UPDATES
OIG ISSUES AO NO. 24-05 ON ASSISTANCE PROGRAMS FOR GENE THERAPY PATIENTS
On July 22, 2024, OIG issued Advisory Opinion (AO) No. 24-05 in response to a request by a publicly traded biotechnology company that offers FDA-approved gene therapies for patients with severe genetic diseases. The AO discusses the requestor's proposed assistance program for patients receiving one of two gene therapy treatments. Drug A is a gene therapy that aims to achieve transfusion independence in patients who require regular blood transfusions. Drug B is a gene therapy that works to stabilize the patient's disease, with the goal of achieving major functional disability-free survival. Both drugs are one-time treatments administered by infusion. Under the proposed arrangement, the assistance program includes two forms of support: travel support and fertility support.
The travel support program is designed to cover travel, lodging, meals, and other related expenses for patients undergoing gene therapy treatments whose household income is at or below 600% of the federal poverty level (FPL) and meets certain other requirements. The travel support, potentially including round-trip airfare (limited to coach/economy), would be available for patients or caregivers living more than 300 miles away from the nearest treatment center that accepts the patient's insurance. Ground transportation would be available for patients and caregivers living between 100 and 300 miles away from the nearest treatment center that accepts the patient's insurance. During different phases of treatment, requestor would also cover lodging costs at a "modest" hotel for patients and caregivers living more than 100 miles or two hours driving distance from the nearest treatment center. The travel support also would include a $50 per person per day allowance to cover actually incurred costs for meals, parking, and local transportation during the patient's gene therapy treatment, for patients living more than 100 miles or two hours driving distance from the nearest treatment center that accepts the patient's insurance. Requestor would not advertise the availability of such travel support beyond providing treatment centers, potential referring physicians, and patients with a general overview of the patient support resources that would be available. The travel support would be implemented and administered by requestor and a travel agency.
OIG evaluated whether this support would constitute prohibited remuneration under the AKS and the beneficiary inducements CMP. OIG concluded that although the travel support could be seen as remuneration if an intent to induce referrals was present, OIG would not impose administrative sanctions on the requestor for such travel support. In analyzing implications of the AKS, OIG stated that the risk of fraud and abuse presented by the travel support was sufficiently low for several reasons:
- The travel support would remove a barrier to accessing medically necessary care that is furnished by treatment centers.
- The travel support would facilitate compliance with the drug label's instructions for the patient to remain at a treatment center for weeks or months following infusion.
- The drugs are one-time treatments such that the travel support likely would not lead to additional referrals.
- The travel support includes additional safeguards that mitigate the risk of fraud and abuse, including the requirement that the requestor not authorize travel support for any expenses for which insurance or third-party assistance is available.
Regarding the beneficiary inducements CMP, OIG determined that the travel support would satisfy the promotes access to care exception. OIG emphasized that its decision was based on the specific facts and assurances provided by the requestor.
The fertility support program would offer up to $22,500 per patient to cover fertility preservation procedures and storage. The fertility support is intended to assist patients who may otherwise forego treatment with one of requestor's drugs because of the risk of infertility associated with the required conditioning treatment prior to infusion, as well as patients' inability to afford fertility preservation services. Like the travel support, this fertility support is aimed at patients with household incomes at or below 600% of the FPL and meeting certain other requirements, including exhausting other insurance or fertility support options. Requestor would not advertise the availability of this fertility support or use it as a marketing tool, but would provide treatment centers, potential referring physicians, and patients with a general overview of the support.
OIG expressed concerns about the fertility support, indicating that it could lead to improper remuneration under the AKS and the beneficiary inducements CMP. OIG concluded that it lacked sufficient data showing that the fertility support would improve patient access to the gene therapies, especially because cell and gene therapies are novel and payors still are adapting to their proliferation in the marketplace. Consequently, OIG could not conclude that the fertility support would enhance patients' ability to obtain federally reimbursable items or services. However, OIG expects additional data to become available regarding the ability of federal healthcare program enrollees to access these important treatments. For example, OIG noted that data related to fertility services provided by a pharmaceutical manufacturer at no cost to Medicaid enrollees who receive gene therapy treatments from the Cell and Gene Therapy Access Model developed by CMS could be helpful to this assessment. As more data become available, OIG may consider it in future risk assessments regarding arrangements similar to the fertility support.
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