This podcast is actually a teaser for AHLA’s upcoming "Tax Issues for Health Care Organizations" program in Washington, DC on October 23-24. The program and faculty all look great.
Disclaimer: AHLA didn't ask me to post this plug for the program.
Wednesday, September 27, 2023
AHLA Podcast on Tax-Exempt Joint Ventures
Tuesday, September 26, 2023
Fourth Circuit Reinstates ERISA Claim Against Administrator (and Contractors) of Self-Insured Plan
The Employee Retirement Income Security Act's § 502(a)(1)(B) allows a beneficiary to “recover benefits due to him under the terms of his plan.” And ERISA's § 502(a)(3) allows a beneficiary to sue for “other appropriate equitable relief.” This case requires us to answer when—and under what conditions—a plaintiff may seek monetary relief under one of those provisions.
Jody Rose's son had a rare heart condition. He died at the age of twenty-seven, awaiting a heart transplant, which Rose says that Defendants—who administered her son's employer-based health benefits program—wrongfully denied. So she sued on behalf of his estate, seeking monetary relief under both § 502(a)(1)(B) and § 502(a)(3). The district court dismissed both claims. As to Rose's (a)(1)(B) claim, the court held that money was not one of the “benefits” that her son was owed “under the terms of his plan.” And, as to her (a)(3) claim, the court held that her requested monetary relief was too similar to money damages and was thus not “equitable.”
We now affirm in part and vacate in part. The district court correctly held that money was not one of the “benefits” that Rose's son was “due” “under the terms of his plan.” So it was right to dismiss her (a)(1)(B) claim. But we must vacate its complete dismissal of Rose's (a)(3) claim. While the district court correctly noted that compensatory, “make-whole” monetary relief is unavailable under § 502(a)(3), it did not consider whether Rose plausibly alleged facts that would support relief “typically” available in equity. Montanile v. Bd. of Trs., 577 U.S. 136, 142, 136 S.Ct. 651, 193 L.Ed.2d 556 (2016). We thus remand for the district court to decide in the first instance whether Rose can properly allege such a theory based on a Defendant's unjust enrichment, including whether an unjust gain can be followed to “specifically identified funds that remain in the defendant's possession” or to “traceable items that the defendant purchased with the funds.” Id. at 144–45, 136 S.Ct. 651.
So the district court will now decide whether unjust-enrichment damages are available under § 502(a)(3). And unless the case settles, there will be the inevitable appeal to the Fourth Circuit no matter which way the lower court rules. And then cert.?
This case is worth watching. The Supreme Court ruled 30 years ago that § 502(a)(3) does not authorize damage actions, at least under the narrow facts of that case. See Mertens v. Hewitt Assocs., 508 U.S. 248 (1993). Yale law professor John Langbein has written that the Court got it wrong in Mertens. The Court has repeated its no-damages refrain in later cases over the decades. Is an unjust-enrichment claim the way to crack open that ruling?
Monday, September 25, 2023
Texas Attorney Convicted for Role In Kickback Scheme
If there's ever an opinion in this case, it would provide a cautionary tale for my health law students . . .
Sunday, September 24, 2023
How Many Separate Fraud Schemes Can You Spot in This Picture?
[T]he United States has filed and settled a civil fraud lawsuit against KLAUS PETER RENTROP and his medical practice GRAMERCY CARDIAC DIAGNOSTIC SERVICES P.C. (“GRAMERCY CARDIAC”) for paying millions of dollars in kickbacks to physicians and their practices for patient referrals.
RENTROP and GRAMERCY CARDIAC offered and paid physicians and their practices millions of dollars in kickbacks in the form of inflated “rental payments” and referral fees to induce them to refer patients to Gramercy-contracted cardiologists and to Gramercy Cardiac for diagnostic tests and procedures, in violation of the Anti-Kickback Statute and the Stark Law.
RENTROP and GRAMERCY CARDIAC’s scheme worked as follows. RENTROP and GRAMERCY CARDIAC entered into office space rental agreements, often in excess of fair market value, with primary care and other physicians or their medical practices (the “Rental Practices”). These agreements typically provided for the use of an exam room once or twice a month, as well as for the use of basic equipment (e.g., a telephone and a computer) and front desk staff to assist with scheduling. The defendants often agreed to pay thousands of dollars each month in rent. RENTROP and GRAMERCY CARDIAC also entered into independent contractor agreements with dozens of cardiologists (the “Gramercy-Contracted Cardiologists”) who were sent to see patients at the Rental Practices. In exchange for the purported “rental payments,” the Rental Practices referred patients to the Gramercy-Contracted Cardiologists, who in turn referred many of these patients to a GRAMERCY CARDIAC office to undergo cardiac diagnostic tests and procedures. RENTROP and GRAMERCY CARDIAC paid the Gramercy-Contracted Cardiologists a flat fee for each test or procedure performed on referred patients at a Gramercy Cardiac location, with larger fees paid for tests and procedures for which GRAMERCY CARDIAC received a greater reimbursement. These per-procedure fees were the only compensation paid to some Gramercy-Contracted Cardiologists.
To ensure the kickbacks paid to the Rental Practices were working, RENTROP directed his staff to calculate GRAMERCY CARDIAC’s return on investment from the “rental payments” paid to each Rental Practice. RENTROP insisted on a minimum return on investment of at least 300% from the kickbacks.
These Rental Practices referred tens of thousands of patients to the Gramercy-Contracted Cardiologists, who in turn referred more than 23,000 patients for PET and SPECT scans at GRAMERCY CARDIAC. A significant proportion of these patients were Medicare or Medicaid beneficiaries: GRAMERCY CARDIAC billed Medicare or Medicaid for tests or procedures provided to tens of thousands of Medicare or Medicaid beneficiaries who were referred by the Rental Practices, including for PET and SPECT scans for many thousands of these beneficiaries. As a result, the claims submitted for payment for these tests and procedures were false and violated the federal False Claims Act.
As part of the settlement, RENTROP and GRAMERCY CARDIAC each admits, acknowledges, and accepts responsibility for the following conduct:
From 2010 through 2021, GRAMERCY CARDIAC, at RENTROP’s direction, entered into rental agreements (the “Rental Agreements”) with more than 130 physicians and medical practices (the “Rental Practices”) under which GRAMERCY CARDIAC leased a portion of the practice’s office space, usually one or two exam rooms for certain days or hours each month. RENTROP took part in the negotiation of the Rental Agreements and signed them on behalf of GRAMERCY CARDIAC. GRAMERCY CARDIAC paid a total of more than $11 million to the Rental Practices pursuant to the Rental Agreements.
From 2010 through 2021, GRAMERCY CARDIAC, at RENTROP’s direction, entered into independent contractor agreements (the “Independent Contractor Agreements”) with more than 50 cardiologists (the “Gramercy-Contracted Cardiologists”) or their medical practices. RENTROP took part in the negotiation of the Independent Contractor Agreements and signed them on behalf of GRAMERCY CARDIAC.
GRAMERCY CARDIAC sent the Gramercy-Contracted Cardiologists to the rented office space one or more times each month to see patients who were referred for an assessment by the healthcare providers at the Rental Practice. The Gramercy-Contracted Cardiologists in turn referred these patients to GRAMERCY CARDIAC to undergo diagnostic tests and procedures, such as PET and SPECT scans.
GRAMERCY CARDIAC paid many of the Gramercy-Contracted Cardiologists a flat fee for each diagnostic test or procedure which the cardiologist referred to GRAMERCY CARDIAC provided that the patient received the test or procedure at a GRAMERCY CARDIAC location. These “per procedure” fees were the only compensation GRAMERCY CARDIAC provided to the Gramercy-Contracted Cardiologists.
Certain versions of Independent Contractor Agreements stated that the Gramercy-Contracted Cardiologist was to be paid not for the referrals to GRAMERCY CARDIAC, but rather for the “[a]dministration and supervision” of the PET and SPECT scans to be performed at GRAMERCY CARDIAC. However, in many cases, the Gramercy-Contracted Cardiologists did not, in fact, administer and supervise the PET and SPECT scans and were nonetheless paid by GRAMERCY CARDIAC based solely on the number of tests and procedures referred.
At the time the Rental Agreements were executed, it was understood that the Rental Practices would refer their patients to the Gramercy-Contracted Cardiologists. Indeed, GRAMERCY CARDIAC calculated the number of hours per month that GRAMERCY CARDIAC leased the office space based on the volume of expected patient referrals.
GRAMERCY CARDIAC calculated its return on investment from its Rental Agreements — which it internally referred to as the “efficiency” of the Rental Agreements — by comparing the revenue GRAMERCY CARDIAC generated from the patient referrals to the payments it made to the Rental Practice.
When a Rental Agreement’s return on investment fell below the minimum threshold, GRAMERCY CARDIAC, at RENTROP’s direction, would often refuse to pay the Rental Practice the amounts due under the Rental Agreement. In addition, at RENTROP’s direction, GRAMERCY CARDIAC Physician Liaisons advised Rental Practice physicians that if the volume of referrals to Gramercy-Contracted Cardiologists did not increase, rent would be decreased, or the Rental Agreement would be terminated. GRAMERCY CARDIAC terminated a number of Rental Agreements because the return on investment through patient referrals was too low.
When negotiating or re-negotiating the monthly rental payment to be made under a Rental Agreement, GRAMERCY CARDIAC took into account the expected or historic return on investment based on the volume of patient referrals generated from the Rental Practice.
The rental fees paid by GRAMERCY CARDIAC under the Rental Agreements were in excess of fair market value for at least some Rental Agreements.
That's a whole lotta kickback-payin' goin' on! How much fraud are we talking about? The defendant physician and his practice are paying $6.5 million to settle the charges, but if they fail to pay, there is "a Consent Judgment in the amount of $64,416,515, which may be enforced if Defendants do not make the payments required under the settlement agreement."
Saturday, September 23, 2023
Health Care Fraud Case of the Week
According to court documents and evidence presented at trial, [the defendant] signed thousands of orders for medically unnecessary orthotic braces and genetic tests, resulting in fraudulent Medicare billings in excess of $200 million. As part of the scheme, telemarketing companies would contact Medicare beneficiaries to convince them to request orthotic braces and genetic tests, and then send pre-filled orders for these products to Hernandez, who signed them, attesting that she had examined or treated the patients. In reality, she had never spoken with many of the patients.
There's more:
In 2020, Hernandez ordered more cancer genetic tests for Medicare beneficiaries than any other provider in the nation, including oncologists and geneticists. She then billed Medicare as though she were conducting complex office visits with these patients, and routinely billed more than 24 hours of “office visits” in a single day. Hernandez personally pocketed approximately $1.6 million in the scheme, which she used to purchase expensive cars, jewelry, home renovations, and travel.
The truly astonishing thing about this is the defendant's apparent confidence that the CMS computers wouldn't pick up on the fact that she ordered more cancer genetic tests than any other Medicare provider in the entire country.
Love is blind, and so is greed.
Friday, September 22, 2023
Nonconsensual Pelvic Exams
That's certainly not the story by way of NBC News (courtesy of the Hastings Center):
NBC TV Nightly News featured a Hastings Center Report study estimating that more than 3.5 million patients in the U.S. may have been given pelvic exams without consent, often while sedated for surgery. Doctors interviewed by NBC called the practice a “violation of medical ethics” and of “patient autonomy.” Watch the NBC segment.
Sunday, September 03, 2023
Labor Day Weekend Post #2: Hospital Cancels Bargaining Session After Nurse 'Walk-in'
The Ascension hospitals in Austin and Kansas have been stuck in place for months in contract negotiations with the National Nurses Union. "Ascension Seton Medical Center in Austin, Texas, said it canceled a recent bargaining session after members of the National Nurses Organizing Committee, an affiliate of National Nurses United, held a "walk-in" [on Aug. 31] to hand deliver their staffing proposal to leaders." (Becker's Hospital Review (9/1/2023)).
The nurses claim that current conditions in their hospital -- including a 1:6 nursing ratio in critical-care settings -- are unsafe for patients. There is a nationwide nursing shortage -- partly, but only partly, the result of COVID -- that has driven up salaries to retain nurses and attract new ones. Seton's reason for cancelling the bargaining pales somewhat in comparison: "Ascension Seton condemned the union's actions Aug. 31 as 'unprofessional, disrespectful and in blatant violation of the decorum by which negotiations are managed' and said they canceled the day's bargaining session to protect the well-being of the bargaining team." Right. I guess they'd have preferred a walk-out?
Labor Day Weekend Post #1: Hospitals Need to Do More to Protect Workers from Rudeness
Mass General Brigham exemplifies the way back and the problem, in that order. They have enacted an explicit code of conduct for patients (and visitors?) to protect employees from rude and discriminatory behavior. Good. But: "On rare occasions, patients who violate this code may be asked to seek care elsewhere, the Somerville, Mass.-based health system said." On rare occasions . . . may be asked. Presumably only the worst behaviors will provoke the administrators to use the policies on their books to address unacceptable conduct.
The problem is a messy one. Hospitals tend to be places that can, and often do, bring out the worst in people. Pain, uncertainty, anxiety, loss of control . . . some folks deal with these stressors by lashing out. Health care professionals typical try to counsel patients and families unless there's a credible threat of violence. And safety-net hospitals are often loathe to evict patients because these institutions are the only option the patients have.
On the other hand, a marked increase in rude and threatening and violent behaviors can't be treated in a business-as-usual manner. COVID-related stress and isolation is everywhere. We all need to have effective coping mechanisms. Hospitals are no different.
Friday, August 18, 2023
Maternal Mortality: New JAMA Article and Video
- The first is that they're high. The US rate for 2021 was 32.9 maternal deaths per a hundred thousand live births. This is a number more than 10 times the estimated rates for other high income countries. Countries like Australia, Austria, Israel, Japan, and Spain, all hover between two to three deaths per a hundred thousand live births.
- The second important point is that the numbers are strikingly high in particular populations in the US, most notably Black women whose mortality rates are more than two and a half times that of white women. Hispanic women's mortality rates are at an all time high and surpassing those of white women. For other populations without appropriate data collection, we can't quantify the disparities accurately, and this is needed if we are to design interventions and allocate resources across all communities and populations. For example, data regarding American Indian women are rarely highlighted even though they have a high prevalence of poor outcomes. And in Asian populations, data disaggregation is needed to understand and interpret the true trends.
- The third important point, the one that really got to me in this new report, is that the trends are getting worse. More than 1200 people died of maternal causes in the US in 2021, a 40% increase from the previous year. And in every group examined in this new report across all races and ethnicities, across all ages of pregnant people, the trends are getting worse over time.
The Q&A that follows brings together three women who are practicing physicians, researchers, or both. It's an incredibly insightful colloquy.
This is prelude to the article cited above by Eli Y. Adashi, MD, MS; Daniel P. O’Mahony, MSLS; I. Glenn Cohen, JD. The point I want to emphasize is the connection between the mortality crisis and the law, specifically Medicaid.
The video panelists all seem to agree that the post-partum period is the most lethal yet the one where our healthcare "system" fails women:
One in 3 pregnancy-associated deaths occur within 1 year of childbirth. Thus the extension of Medicaid postpartum coverage from 60 days (the duration required by federal law) to 12 months has emerged as a key strategy to address the US maternal mortality crisis.2 This Viewpoint assesses the maternal mortality crisis in the US, calls for an extension of Medicaid postpartum coverage, and discusses the residual challenges across the US related to maternal health.
States are currently free to extend post-partum coverage of their Medicaid programs, but not many have done so. Of particular interest to Texans and others who live in states whose legislatures and governors have not expanded Medicaid eligibility pursuant to Obamacare's generous federal match, the situation is even worse:
Although some individuals may qualify for extended postpartum Medicaid coverage because of their economic circumstances (ie, those with incomes ≤138% of the federal poverty level), many others are likely to no longer be eligible for Medicaid coverage, especially in the states that have not expanded Medicaid coverage.3 Postpartum individuals who reside in nonexpansion states can only qualify for Medicaid as parents.3 However, Medicaid income eligibility levels for parents are much lower than those for pregnant people.3 It follows that many individuals living in nonexpansion states become uninsured after their pregnancy-related coverage ends at 60 days’ postpartum.
How on earth can this continue?
Thursday, August 17, 2023
5th Circuit Affirms District Court's Decision re: Mifepristone
1. In April, U.S. District Judge Matthew J. Kacsmaryk ruled that the FDA failed to consider important safety issues when it (in 2023) approved a rule change that permanently lifted a restriction requiring in-person dispensing of the abortion pill and permitted pharmacies to fill mifepristone prescriptions for customers directly, as well as various FDA approvals of mifepristone dating back to the agency's initial decision to greenlight the drug in 2000. The district judge granted an injunction against sales under the FDA's new rule pending an appeal to the Fifth Circuit.
2. On August 16 the Fifth Circuit Court of Appeals disagreed with a few of the trial court's conclusions and orders, but unsuprisingly affirmed others. Here's their summary:
After extensive briefing and oral argument, we hold that the district court’s stay order should be VACATED in part and AFFIRMED in part. We conclude that the Medical Organizations and Doctors’ claim as to the 2000 Approval is likely barred by the statute of limitations. Accordingly, that component of the district court’s order must be VACATED. This means that, until final judgment, Mifeprex will remain available to the public under the conditions for use that existed in 2016.
We also VACATE the portion of the order relating to the 2019 Generic Approval because the Medical Organizations and Doctors have not shown that they are injured by that particular action. The generic version of mifepristone will also be available under the same conditions as Mifeprex.
We AFFIRM the components of the stay order that concern the 2016 Amendments and the 2021 Non-Enforcement Decision. Those agency actions—which generally loosen the protections and regulations relating to the use of mifepristone—will be stayed during the pendency of this litigation.
Finally, we note that our holding is subject to the prior order of the Supreme Court, which stayed the district court’s order pending resolution of this appeal and disposition of any petition for writ of certiorari. Danco Lab’ys, LLC v. All. for Hippocratic Med., 143 S. Ct. 1075 (2023) (mem.).
3. Bottom line, mifepristone will remain available without restrictions imposed by the trial judge and affirmed by the appellate court.
Expect intense motion practice in the Supreme Court to modify or rescind their stay earlier this year. And on the merits of the case, this will go to the same conservative Supreme Court that wiped out Roe v. Wade last year. This is also a case with a serious administrative law overlay, and this is a Court that has been skeptical of agencies' expertise and increasingly skeptical of tradition doctrines (like Chevron) that call for judicial deference to many if not most agency determinations.
Tuesday, August 15, 2023
Health Insurers' Tactic Resurfaces With a Vengeance: Deny, Deny, Deny
A lot has changed in health care in the intervening two decades, byt "deny, deny, deny" is still with us. It's frustrating for policy holders (a/k/a patients and human beings), and it's aggravating for the providers. It's also a form of Russian roulette that results in dangerous delays in providing needed health care goods and services.
A recent article in Becker's CFO Report (Aug. 14, 2023) highlights the problem. As described by a hospital CEO with 37 years of experience in health care, bare-knuckle negotiations over reimbursement rates get all the media attention when providers and a payor appear to be at impasse and termination of the contract is a looming reality for thousands of patients whose providers are about to be "out of network." Reimbursement rates are the "above the surface" story in these negotiations, but eventually both sides compromise and crisis is averted.
The "below the surface" issues, though, have an outsized effect on providers. These issues stem from denials of payment for any of the myriad reasons insurers can cite: service or medication not covered, no pre-authorization or referral from a gatekeeper, DRG down-coding, difference in clinical judgment about medical necessity . . . . The list goes on. Here's the eye-popping heart of the article:
Data and numbers on denial rates are not easy to find, but some examination paints a picture rich with variation. An analysis of 2021 plans on Healthcare.gov conducted by KFF found nearly 17 percent of in-network claims were denied, with rates varying from 2 percent to 49 percent. The reasons for the bulk of denials are unclear. About 14 percent were attributed to an excluded service, 8 percent to lack of pre-authorization or referral and 2 percent to questions of medical necessity. A whopping 77 percent were classified as "all other reasons."
Adding to the inconsistency is the fact that health plan denial rates fluctuate year over year. In 2020, a gold-level health plan offered by Oscar Insurance in Florida denied 66 percent of payment requests; in 2021 it denied 7 percent.
And here's a refrain I hear from physician friends from all over:
"Nobody becomes a physician because they hope to feel like a cog in a factory," Michael Ivy, MD, deputy chief medical officer of Yale New Haven (Conn.) Health, told Becker's. "However, between meeting the demands of payers for referrals, denials of payment and increased documentation requirements in order to assure proper reimbursement and risk adjustment, as well as an increasing number of production metrics, it can be difficult not to feel like a cog."
As for the government's role in policing the conduct of these insurers:
Authors of the 2010 Affordable Care Act worried that provisions to expand health insurance access — such as barring health insurers' refusal to cover patients with preexisting conditions — could cause them to ratchet up other tactics to make up for the change. With this in mind, the law charged HHS with monitoring health plan denial rates, but oversight has been unfulfilled, leaving denials widespread.
When you consider insurance company profits and their executive salaries, it's apparent that the "middle men" in these transactions are getting rich at the expense of providers and patients alike. Where's a good, old-fashioned congressional or FTC hearing when you need one?
Monday, August 14, 2023
RFK, Jr., Public Health Law & Policy
In a past life, he was an environmental activist (although Dan Farber, whose work I admire, is a skeptic on that count, as well). But RFK, Jr. is also a prominent spreader of misinformation about Covid, vaccines, and Covid vaccines in particular. If his dangerous positions on these public health basics had been the official government policy, countless more people in this country would have died than the 1,137,057 who have died so far. Period. (Interestingly, there isn't a whisper about these issues on his official campaign website. Perhaps because media coverage has been dominated by questions about these issues to exclusion of much else on his issues list, and because just about the entire Kennedy family seems to be opposed to his positions. NYT, Aug. 6, 2023; Politico, April 19, 2023.)
FactCheck.org's SciCheck team has a three-part series on Kennedy's Covid and vaccine errors:
In our first article, Jessie addresses several of Kennedy's key talking points about vaccines in general. (See "FactChecking Robert F. Kennedy Jr.")
In a second article, Staff Writer Kate Yandell goes deep into some of his go-to arguments about vaccines and autism. (See "What RFK Jr. Gets Wrong About Autism.")
[In] the third and final article, Staff Writer Catalina Jaramillo and Kate tackle Kennedy's numerous claims about the COVID-19 pandemic, many of which we’ve written about before and may be familiar to you already.
All three articles can be found on this page.
Sunday, August 13, 2023
Physician Discipline: Covid Denier's License Suspended, but Not For Lying
At the time of the renewal, the Board said that renewal was an automatic process and did not foreclose a future investigation. After receiving approximately 350 complaints, the Board did start an investigation. Dr. Tenpenny, however, unwisely blew off the Board's discovery requests and a subpoena to testify, and for that she got her license suspended until she starts to cooperate with the Board's investigation. (Becker's Hospital Review, Aug. 9, 2023).
This case offers two teaching points: (1) many licensing boards are slow to react to quackery, and (2) turning your back on a board’s investigation never pays off
Meanwhile, Dr. Tenpenny's anti-vaccine and conspiracy-spewing firm rakes in an estimated $4.04 million in annual sales. There's gold in them thar lies!
Saturday, August 12, 2023
Health Care M&A Activity Hits 3-year Low . . . Or Not
I don't know how this compares to M&A activity in other parts of the economy, but the reasons cited by KPMG sound pretty generically applicable throughout the economy:
"Ongoing pressures could keep second-half M&A near first-half levels," Kristin Pothier, leader of healthcare and life sciences for KPMG and principal of deal advisory, said. "Additional interest-rate hikes even amid an economic downturn, political divisions in advance of a presidential election year, and uncertainty about the valuations of potential acquisition targets may combine to postpone a rebound in deal making. But we expect at least some of those headwinds to moderate toward the end of the year, and that could begin to release long-pent-up demand."
To this list I would add recent M&A policy revisions from the FTC & DOJ, making Hart-Scott-Rodino review more of a toss-up than the market is used to. (See posts here and here.)
Friday, August 11, 2023
Texas Case Highlights the Human Cost of Texas's Abortion Ban
The article should be required reading for members of the legislature and Governor Abbott, but I'm not holding my breath.
Thursday, August 10, 2023
SCOTUS Agrees to Review Proposed Opioid Settlement
The US Supreme Court agreed to consider scuttling Purdue Pharma LP’s $6 billion opioid settlement, taking up a Biden administration appeal that contends the accord improperly shields the Sackler family members who own the company.
High court review threatens Purdue Pharma’s bankruptcy reorganization plan, which includes the opioid settlement as well as an agreement by the Sacklers to give up ownership of the company.
The plan would end a mountain of litigation against the OxyContin maker and funnel billions of dollars toward efforts to abate the opioid crisis. Family members have agreed to pay as much as $6 billion to those suing.
The high court also halted implementation of the settlement while the justices consider the case. The court said it will hear arguments in December.
See also CNN.
The Justice Department had multiple objections to the proposed settlement, the central one of which was included in the Supreme Court's order granting certiorari today:
Application (23A87) granted by the Court. The application for stay presented to Justice Sotomayor and by her referred to the Court is granted. The mandate of the United States Court of Appeals for the Second Circuit in case No. 22-110 and the consolidated cases is recalled and stayed. Applicant suggested this Court treat the application as a petition for a writ of certiorari; doing so, the petition is granted. The parties are directed to brief and argue the following question: Whether the Bankruptcy Code authorizes a court to approve, as part of a plan of reorganization under Chapter 11 of the Bankruptcy Code, a release that extinguishes claims held by nondebtors against nondebtor third parties, without the claimants’ consent. The Clerk is directed to establish a briefing schedule that will allow the case to be argued in the December 2023 argument session. The stay shall terminate upon the sending down of the judgment of this Court. (emphasis added)
As the Justice Department put it in their request to the Court for a stay of enforcement of the settlement:
Until recently, Purdue was controlled by members of the Raymond and Mortimer Sackler families. Members of those families, who withdrew approximately $11 billion from Purdue in the eleven years before the company filed for bankruptcy, App., infra, 19a, have now agreed to contribute up to $6 billion to fund Purdue’s reorganization plan, id. at 40a, but only on the condition that the Sacklers and a host of other individuals and entities -- who have not themselves sought bankruptcy protection -- receive a release from liability that is of exceptional and unprecedented breadth. The plan’s release “absolutely, unconditionally, irrevocably, fully, finally, forever[,] and permanently release[s]” the Sacklers from every conceivable type of opioid-related civil claim -- even claims based on fraud and other forms of willful misconduct that could not be discharged if the Sacklers filed for bankruptcy in their individual capacities. Id. at 25a (quoting C.A. SPA 920).
The Sackler release extinguishes the claims of all opioid claimants except the United States, and therefore applies to an untold number of claimants who did not specifically consent to the release’s terms. The Sackler release is not authorized by the Bankruptcy Code, constitutes an abuse of the bankruptcy system, and raises serious constitutional questions by extinguishing without consent the property rights of nondebtors against individuals or entities not themselves debtors in bankruptcy. The Bankruptcy Code grants courts unusual powers specifically authorized by the Constitution for addressing true financial distress. Allowing the court of appeals’ decision to stand would leave in place a roadmap for wealthy corporations and individuals to misuse the bankruptcy system to avoid mass tort liability. That is not what Congress enacted the Bankruptcy Code to accomplish. And if such abuses are permitted, the gamesmanship that is sure to follow will only amplify the harms to victims by redistributing bargaining power to tortfeasors.
Considering the vast stakes involved in this case, every sentence of that last paragraph will be hotly contested between now and December.
Noncompete Clauses, the FTC, and the Health Care Industry
State law may become irrelevant in light of a rule proposed by the Federal Trade Commission this year, that would prohibit many firms from including noncompetes in their contracts with employees and independent contractors (press release, FTC (Jan. 5, 2023).
There are some limits to the scope of the proposed rule:
- As written, it does not apply to noncompetes that are written into contracts for the sale of a business.
- The FTC generally doesn't regulate nonprofits, unless they are "organized to carry out business for its own profit or that of its members.” Under most states' laws and § 501(c)(3) of the Internal Revenue Code, nonprofits (and tax-exempts) must be organized primarily for public as opposed to private benefit. It is a sketchy distinction in some cases, but it endures.
- There's no private cause of action under § 5 of the FTC Act, so enforcement of the prohibition (if it is adopted as a final rule) will be up to the FTC and DOJ.
I say "if it is adopted" because over 21,000 comments have been filed for and against the proposed rule. Former FTC Commissioner Christine Wilson dissented from the Notice of Proposed Rulemaking, noting that the proposed rule would prohibit conduct that is permitted in 47 states. If the rule is adopted, expect (1) lots of work for lawyers revising work contracts and (2) a court challenge. It's likely that any case would wind up in the Supreme Court. And if that happens, expect a tug of war among the justices over the recently discovered "major questions doctrine."
Wednesday, August 09, 2023
The Hidden Harms of CPR
The thing is, CPR is ineffective at treating the underlying condition that is bringing about the patient's death. And even as a stop-gap to allow treatments to take effect, it mostly works in a small cohort of patients:
CPR can save lives when patients are relatively healthy, and when the cause of their death is reversible or unclear. Damar Hamlin, the Buffalo Bills player whose heart stopped during a nationally televised game in January, typifies the person for whom CPR was invented: young and fit, and the victim of a sudden, treatable injury rather than a progressive disease. Still, less than ten percent of people who receive CPR outside a hospital survive. Inside hospitals, where CPR begins quickly, the odds are slightly better, but only for those who aren’t in the last stages of life. A mere two per cent of adults over sixty-seven with severe chronic disease, including cancer, are alive six months after CPR, and they often deal with pain, physical debility, and post-traumatic stress disorder. Reversing a death is not the same as restoring a life.
And yet doctors, including a younger version of the author, often give families the choice of performing CPR or not without offering the grim statistical chance of failure, giving the impression that they are choosing between life or death. Families and physicians alike are traumatized in these situations because the truth is not easy to discuss.
Texas is one of the few states in the country that offers legal protection for physicians who resist requests for medically inappropriate treatment (Ch. 166, Tx. Health & Safety Code). It was amended in 2017 to add Subchapter E, which may fairly be characterized as hostile to do-not-resuscitate (DNR) orders. The unfortunate result has been to sow confusion and doubt about when a hospital DNR order may be written and, once written, when it may or may not be followed. The need for such a law was dubious at the time, and although amendments have provided some clarity, Subchapter E stands as a prime example of the unwisdom of legislatures prescribing standards of care.
Tuesday, August 08, 2023
SEC's Final Cybersecurity Rule and the Health Care Industry
In March 2023, we wrote the article, Why ALL Health Care Organizations Must Care About SEC Proposed Cybersecurity Rule Changes, which highlighted the U.S. Securities and Exchange Commission’s (SEC’s) March 9, 2022 announcement of its proposed rules related to cybersecurity requirements (i.e., risk management, corporate governance, and incident disclosures).
While testifying in front of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, SEC Chairman Gary Gensler stated, “[t]he proposed amendments are intended to better inform investors about a registrant’s risk management, strategy, and governance and to provide timely notification of material cybersecurity incidents.” The wait is over. On July 26, 2023, the SEC released its final rule related to cybersecurity. Specifically, the final rule requires registrants and foreign issuers alike “to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance.”
This article highlights some of the key areas that health care sector participants—public, private, and not-for-profit—should consider in relation to enterprise risk management and policies and procedures.
Before those of you who don't represent clients whose shares are registered with the SEC conclude this article doesn't apply to those companies, NOT SO FAST. One of the major takeaways of this article -- which is brief and to the point -- is that there is enough potential liability to go around.
The article is available to AHLA members only, which is reason enough to join if you haven't already!
Monday, August 07, 2023
Mental Health and the Criminal Justice System
PBS's "Frontline" (with its local affiliate, KFAE, in Charlotte, NC) took a look at this situation through the lens of one prisoner who cycled between jail and the mental health system, such as it is, for five years while waiting for his trial. Text and audio are here.
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