Highlight on Alaska: FTC, DOJ back Alaska Senate’s move to eliminate certificates of need

Citing “considerable competitive concerns” raised by certificate of need (CON) laws, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued a joint statement in support of Alaska Senate Bill 62 (SB 62), which would repeal Alaska’s CON program effective July 1, 2019. CON programs generally require firms to demonstrate an unmet need for services to the state before being permitted to enter the health care market, for example, by building a new hospital. Sen. David Wilson (R-Wasilla), who submitted the bill, applauded the statement, noting, “As government officials, we should not lose sight of a basic truth that competition improves the quality and lowers the costs of services; it’s what drives innovation and ultimately leads to the delivery of better healthcare.”

CON laws were enacted to reduce costs and improve access to care, based on the assumption that the existence of too many health care facilities in the same area could lead to inflated pricing for services. However, the FTC and DOJ opined that the laws create barriers to entry and expansion, allow entities to abuse the process to delay or halt competitors’ entry or expansion, and deny consumers effective remedies from anticompetitive mergers.

Alaska’s program requires parties wishing to spend at least $1.5 million on health care facility construction, alter an existing facility’s bed capacity, or add a category of health services provided to an existing facility to secure a CON after demonstrating that the quality, availability, or accessibility of existing health care resources is less than necessary “to maintain the good health of citizens of [the] state.” Specifically, it requires parties to submit an application with a fee ranging from $2,500 to $75,000.  The Department of Health and Social Services holds a public meeting and solicits comments and then submits a recommendation to the Commissioner of Health and Social Services, who makes the ultimate decision. Members of the public substantially impacted by the CON may initiate administrative proceedings and eventually seek judicial review.

The agencies stated that the existing state law raises both the monetary and time-based costs of entry and expansion, eliminates or reduces competitive pressure that normally incentivizes firms “to innovate, improve existing services, introduce new ones, or moderate prices,” and, in the event of denials, prohibits entry or expansion.  Furthermore, the law allows incumbent firms to drag out the CON application process by filing challenges or comments in order to delay competitors’ entry into the market. It also provides a platform that allows firms to form anticompetitive agreements–for example, two firms could agree to file CON applications for separate services to avoid a lengthy application process and potential challenges from one another. Finally, the existing law could impede antitrust remedies. As an example, the joint statement cited to the case of FTC v. Phoebe Putney.  Although the Supreme Court eventually ruled that an anticompetitive merger was subject to antitrust scrutiny, the entities involved had already merged and the applicable state’s CON laws made divestiture “virtually impossible.”

 

East Coast firms add experienced attorneys and specialists

Three East Coast law firms have added experienced attorneys and specialists to their existing health care and life sciences practice groups, with two welcoming partners to their offices and one adding a former government official to its team.

W. Andrew Gantt III has returned to Venable LLP, the firm where he began his legal career, as a partner and co-chair of the firm’s Healthcare practice. He draws on more than 20 years of legal experience to represent health care and life sciences companies, health plans, providers, and suppliers, along with manufacturers and health care information technology, information services, and digital health companies in corporate and regulatory matters. He also advises investors and other financial groups with respect to regulatory issues related to mergers and acquisitions and other matters. Gantt has received national recognition for providing advice regarding Health Insurance Portability and Accountability Act (HIPAA) (P.L. 104-191) compliance and other data, security, and digital health regulatory issues. Gantt looks forward to his work, noting, “Early on, Venable ignited the passion I have today for my law practice, and whether the Affordable Care Act continues in its current form or sees a dramatic overhaul, change is on the horizon for the healthcare industry.” Gant is based in the Baltimore and Washington D.C. offices, but will spend time in San Francisco.

Goodwin Procter LLP welcomes Catherine McCarty as a partner in the firm’s Technology and Life Sciences Group. An intellectual property (IP) specialist, McCarty focuses on IP relating to pharmaceuticals and general chemistry matters, including small molecule drugs, salt forms, solid forms and chemical processes. McCarty aids life sciences companies in protecting their property and advises organizations that invest in pharmaceutical and life sciences and technologies. She works on a variety of projects, including designing and managing worldwide patent estates on drug candidates. She practices in the firm’s Boston office.

Arent Fox LLP has added former Deputy Under Secretary of Food Safety at the U.S. Department of Agriculture (USDA) Brian Ronholm to its Food, Drug, Medical Device & Agriculture Practice as Senior Director of Regulatory Policy. FDA practice leader James R. Ravitz lauded Ronholm’s addition, noting, “As a former senior agency official, he is in a unique position to advise food industry clients and he solidifies our ability to provide comprehensive counseling on food safety matters before the FDA and USDA.” Concentrating on food safety regulation and policy, Ronholm provides clients with strategic advice on navigating regulatory challenges. Ronholm works in the firm’s D.C. office.

HHS Inspector General testifies about management challenges

HHS Inspector General Daniel R. Levinson discussed management challenges relating to data and technology use, administration of grants and contracts, and safety and quality of care before Congress at a March 9, 2017, hearing.  Levinson testified before the House Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies about the need to both leverage and protect data, address vulnerabilities in grant program oversight, and improve quality of care and safety in various HHS programs. The Inspectors General of the Departments of Labor and Education and the Social Security Administration also testified at the hearing.

Levinson discussed the need to use data to enhance decision-making, despite issues arising from technical barriers, complex privacy and security laws, financial considerations, and other issues. He noted that neither HHS nor state agencies have complete or accurate data required to ensure that only trustworthy Medicaid providers enter the system, and noted that systems must allow HHS to identify problems before issuing inappropriate payments and engaging in “pay and chase” activities.  The OIG ranked Medicaid program oversight, including that related to improper payments and program integrity, as the second greatest management challenge facing HHS at the end of 2016.

The Inspector General also noted that grant- and contract-awarding agencies within HHS lack efficient methods for sharing information about “problematic grantees,” and consequently reduce HHS’ overall ability to assess applicant risks. Levinson also encouraged HHS to work with states to investigate program integrity activities for programs receiving federal funds to ensure that they are complying with all requirements. He noted that Child Care and Development Fund (CCDF) block grant recipients, for example, do not always meet background screening requirements for caregivers and that states do not always perform necessary program integrity activities with respect to grant recipients.

Finally, Levinson discussed the need to improve quality of care and safety.  He identified areas in which the Indian Health Service (IHS) must improve quality care in IHS hospitals, encouraged HHS to work with states to ensure that children covered by Medicaid receive required medical and dental services, and highlighted opportunities to reduce patient harm in institutional settings and with respect to hospice care. He also noted the challenges of combatting the opioid epidemic.

Levinson concluded by encouraging HHS to “redouble its efforts to implement pending OIG recommendations,” and referred representatives to the OIG’s Compendium of Unimplemented Recommendations, most recently updated in April 2016.

Did CMS just sound the death knell for Medicaid expansion?

In their first joint action, HHS Secretary Price and newly confirmed CMS Administrator Verma issued a letter to state governors discussing potential improvements to the Medicaid program. The letter underscored the need to develop cost-effective, state-specific ways to serve vulnerable populations but made clear the administration’s anti-expansion stance, noting that the Patient Protection and Affordable Care Act’s (ACA’s) (P.L. 111-148) expansion of Medicaid “to non-disabled, working-age adults without dependent children was a clear departure from the core, historical mission of the program.”

Overall, Price and Verma emphasized their desire to grant states more freedom to design their own programs, but committed to retaining mechanisms to ensure state accountability, including budget neutrality in waivers and demonstration projects. To this end, the letter suggested fast-tracking waiver and demonstration project extensions and developing consistent guidelines for evaluating requests to waivers and demonstration projects that have already been approved in other states. Price and Verma plan to use “Section 1115 demonstration authority to review and approve meritorious innovations that build on the human dignity that comes with training, employment and independence.” Prior to serving as CMS Administrator, Verma was involved in crafting Indiana’s Healthy Indiana 2.0 expansion program. The program initially sought to impose a work activity requirement. CMS declined to approve the requirement linked directly to Medicaid eligibility, but allowed the state to encourage enrollees to participate in other voluntary state programs (see Amendment of Healthy Indiana Plan implements Medicaid expansion, Health Law Daily, February 11, 2015).

Price and Verma also noted the importance of maintaining public input processes and transparency guidelines, with respect to State Plan Amendments (SPAs) and other actions, expressed a desire to make the SPA process less burdensome. They discussed allowing states more time to comply with a 2014 Final rule regulating expanded access to home- and community-based services (see Final rule sets requirements for expanded home and community based services, Health Law Daily, January 16, 2014). They made suggestions for aligning Medicaid policies for non-disabled adults with commercial health insurance features to help them “prepare for private coverage,” including alternative benefit designs with aspects similar to health savings accounts (HSAs), designing emergency room copayments to encourage the use of primary and other providers for non-emergency care, and facilitating enrollment in employer-sponsored health plans. They also plan to work with states to combat the opioid epidemic, through state plans, the Medicaid Innovator Accelerator Program, and other methods.