CMS Rule Reducing Medicare Payments for Off-Campus Hospital Based Clinics Vacated

In November 2018, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule (the “Rule”) reducing payments for evaluation and management services provided at off-campus hospital based clinics, to the same rates as when provided in a physician’s office.  The Rule, which CMS described as a method to control what it viewed as unnecessary increases in the volume of outpatient services at off-campus hospital based clinics, became effective on January 1, 2019.

Prior to adoption, the Rule went through the formal notice-and-comment rulemaking process during which CMS received nearly 3,000 comments. Many of the comments suggested that CMS lacked statutory authority to implement the Rule.  CMS considered and rejected those arguments.

Almost immediately following the publishing of the Rule, the American Hospital Association, the Association of American Medical Colleges and various hospital systems from across the country filed suit seeking to vacate the Rule.  The suit was filed in the United States District Court for the District of Columbia and was captioned The American Hospital Association, et al. v. Azar, Case No. 1:18-CV-2841.

The plaintiffs in the case argued that, pursuant to 42 U.S.C. § 1396l(t)(9)(A)-(B), if CMS wanted to reduce payment rates for a particular outpatient service, it should have changed the relative payment weights and adjustments through the annual review process in a budget neutral manner. The Rule did not take budget neutrality into account.

Conversely, CMS argued that it has authority to develop a “method” for controlling unnecessary increases in volume under 42 U.S.C. § 1396l(t)(2)(F), without regard for budget neutrality. CMS further argued that the term “method” is not explicitly defined in the statute, that its approach satisfied the generic definitions of the term and deference should be given to that approach.

The plaintiffs moved for summary judgment, and the Court addressed these issues in its September 17, 2019 opinion.  Therein, the Court reviewed the context of the statutory reference to “method” and found “[t]hat context does not make clear what a ‘method’ is, but it does make clear what a ‘method’ is not:  it is not a price setting tool, and the government’s effort to wield it in such a manner is manifestly inconsistent with the statutory scheme.”  Thus, the Court found the Rule was ultra vires, vacated the applicable portions of the Rule and remanded the matter for further proceedings consistent with its opinion.

While the decision certainly benefits hospital systems across the country, this battle appears to be far from over.  Since the issuing of the Court’s opinion, CMS has filed a motion to modify the order to a remand without vacatur, or in the alternative, for the Court to stay the portion of its order vacating the Rule for sixty days to allow the Solicitor General time to determine whether to authorize an appeal.  That appeal is likely to be filed and the battle will wage on.


After the New Jersey Legislature was unable to come to an agreement on the terms of a bill to legalize recreational marijuana, they have refocused their efforts to greatly expand New Jersey’s current medical marijuana program.

On May 23, 2019, the New Jersey Assembly overwhelmingly passed the “Jake Honig Compassionate Use Medical Cannabis Act” by a vote of 65-5.  The bill, if ultimately adopted by the New Jersey Senate and Governor, would greatly increase patient access to medical marijuana.  Key elements of the bill include expanding the number of permits for medical marijuana businesses, increasing the limits on the amount of medical marijuana a patient can purchase, limiting the number of appointments a patient must have with a physician before a formal recommendation for medical marijuana treatment and expanding the methods by which patients can obtain medical marijuana.

Under the bill, the number of permits for medical marijuana businesses would be increased from twelve to twenty-three. Additionally, it would break up the permitting system to allow businesses to seek permits for only one aspect of the medical marijuana business such as retail sales, growing or manufacturing.  Under the current system, businesses are required to engage in all aspects of the market including growing, packaging, processing and sales.

The amount of medical marijuana patients are permitted to purchase would also be increased from two to three ounces per month.  The bill would also eliminate the requirement that the patient have at least a year long history of regular visits with the prescribing physician, prior to a recommendation for medical marijuana treatment. Patients and advocates had previously criticized these limitations arguing they prevented or delayed certain patients from obtaining access to needed medication.

The bill also increases access for patients who may be unable to travel to a dispensary to pick up their medication by permitting deliveries and increases the number of designated caregivers who can pick up a patient’s medication from one to two.

Under the new bill, a five-member Cannabis Regulatory Commission (the “Commission”) in the New Jersey Department of Treasury would be set up to assume the oversight and regulatory powers previously designated to the New Jersey Department of Health (the “DOH”).  The Commission would include at least one “social justice” member representative from a national organization with a “stated mission of studying, advocating, or adjudicating against minority historical oppression, past and present discrimination, unemployment, poverty and income inequality, and other forms of social injustice or inequality.”

Other aspects of the proposed bill include a sales tax of 6.625% to be phased out on January 1, 2025, authorizing municipalities with a dispensary within their borders to impose a 2% transfer tax, permitting municipalities to enact ordinances creating consumption areas for patients, authorizing physician assistants and some advanced-practice nurses to recommend medical marijuana treatment, and permitting patients who have received medical marijuana cards in other states to receive their medication in New Jersey for a period of up to six months.

The bill passed the Senate on May 29, 2019 by a vote of 33-4.  However, the Senate’s bill included a last minute amendment which would allow cannabis industry employees to unionize.  Accordingly, the Assembly must re-vote on the amended bill before it is presented to the Governor for final approval.  That vote may come as soon as June 10, 2019.

The Governor has not indicated whether he would sign the bill in its current form.  However, the DOH, on June 3, 2019, announced plans to begin accepting applications for 108 new medical marijuana businesses.  That number contradicts, and is significantly higher, than that in the proposed legislation.  Under the DOH’s plan, the new licenses would be split by regions with thirty-eight licenses each in the North and Central Regions and thirty-two in the Southern Region.  The DOH indicated it wishes to see these licenses result in twenty-four new growers, thirty new processors and fifty-four new retailers.

It is clear New Jersey is ready to expand its medical marijuana program.  However, given the separate, and somewhat conflicting, efforts to do so, it remains unclear exactly what the final terms of that expansion will be.


On January 10, 2010, the Centers for Medicare and Medicaid Services (“CMS”) posted answers to frequently asked questions (“FAQ”) regarding disproportionate share hospital (“DSH”) audit reporting requirements on its website. In those FAQs, CMS indicated that revenues received from private insurance companies (FAQ 33) and Medicare (FAQ 34) for Medicaid eligible patients must be deducted from costs when determining “uncompensated care costs.”

As a result of the policies enunciated in these FAQs, a deluge of litigation was commenced. Numerous hospitals asserted challenges, in various courts across the nation, asserting that FAQs 33 and 34 were unlawful amendments to the existing regulations which made no reference to the inclusion of Medicare and private insurance payments in the calculation of uncompensated care costs.  Each court that has addressed the issue has found the FAQs invalid, and issued either preliminary or permanent injunctions prohibiting their enforcement, on the basis that CMS violated the Administrative Procedure Act (“APA”) by failing to properly adopt the policies embodied therein in accordance with the notice and comment provisions of the APA. See Texas Children’s Hospital v. Burwell, 76 F. Supp.3d 224 (D.D.C. 2014); New Hampshire Hospital Ass’n v. Burwell, 2017 WL 822094 (D.N.H. Mar. 2, 2017); Children’s Hosp. of the King’s Daughters, Inc. v. Price, 258 F.Supp.3d 672 (E.D. Va. 2017); Tennessee Hosp. Ass’n v. Price, 2017 WL 2703540 (M.D. Tenn. June 21, 2017); Children’s Health Care v. Centers for Medicare & Medicaid Servs., 2017 WL 366758 (D. Minn. June 26, 2017).

Thereafter, on June 2, 2017, following a notice and comment period, CMS issued a final rule which incorporated the policies enunciated in the previously issued FAQs (the “Final Rule”). The Final Rule provides that uncompensated care costs “[a]re defined as costs net of third-party payments including, but not limited to payments by Medicare and private insurance.” 42 C.F.R § 447.299(c)(10)(i).

The adoption of the Final Rule, however, has not stopped the challenges to CMS’ policy. Since the Final Rule’s adoption, two additional courts have addressed the calculation of uncompensated care costs. These courts not only found that CMS’ failure to follow the notice and comment provisions of the APA made the policies in FAQs 33 and 34 unenforceable, they also held the Final Rule invalid because it contradicts the plain language of the Medicaid statute. See Missouri Hospital Ass’n v. Hargan, 2018 WL 814589 (W.D. Mo. Feb. 9, 2018); Children’s Hosp. Ass’n of Texas v. Azar, 300 F. Supp.3d 190 (D. D.C 2018).  

Both courts looked to the Medicaid statute, which states that DSH payments cannot exceed:

[t]he costs incurred during the year of furnishing hospital services (as determined by the Secretary and net of payments under this subchapter, other than under this section, and by uninsured patients) by the hospital to individuals who either are eligible for medical assistance under the State plan or have no health insurance (or other source of third party coverage) for services provided during the year. 42 U.S.C. § 1396f-5(g)(1)(A).

The courts found that the Medicaid statute’s reference to “payments under this subchapter” was a specific reference to payments made by Medicaid. Because the Medicaid statute makes no reference to subtracting any other payments made on behalf of Medicaid eligible patients (other than payments by uninsured patients) from the total costs incurred, the courts concluded that CMS exceeded its authority in adopting the Final Rule.  Accordingly, the Missouri Hospital Ass’n court enjoined the enforcement of the Final Rule, and the Children’s Hosp. Ass’n of Texas court vacated the Final Rule in its entirety. Missouri Hospital Ass’n, 2018 WL at *10-13; Children’s Hosp. Ass’n of Texas, 300 F. Supp.3d at 205-211. 

In light of these court decisions, as of December 30, 2018, CMS has withdrawn FAQs 33 and 34 and will accept revised DSH audits that cover hospital services furnished before June 2, 2017, when the Final Rule was adopted.  Moreover, CMS has indicated it will not enforce the Final Rule as long as the decision in Children’s Hospital Ass’n of Texas remains in effect.  That decision is currently pending appeal before the United States Court of Appeals for the D.C. Circuit. We will be keeping a close eye on the Children’s Hospital Ass’n of Texas case and will provide an update once a decision is issued.

Bipartisan Legislation Aims to Limit Surprise Medical Bills

On September 18, 2018, a bipartisan group of Senators unveiled a draft measure to limit patients’ exposure to surprise medical bills. The draft bill is sponsored by Senator Bill Cassidy (R-LA) and has received support from Senators Tom Carper (D-DE), Todd Young (R-IN), Claire McCaskill (D-MO), Chuck Grassley (R-IA) and Michael Bennett (D-CO).

The bill is intended to limit balance billing to patients in the following three circumstances:

  1. Emergency services provided by an out-of-network provider in an out-of-network facility: The draft bill would limit a patient’s financial exposure when receiving emergency services at an out-of-network facility to the cost sharing amount provided by their health insurance plan for the same services provided by an in-network provider at an in-network facility. Providers would be prohibited from billing the patient any additional amount. Rather, amounts in excess of the cost sharing amounts would be paid by the insurer in accordance with state law. If state law does not establish the applicable amount, the health insurer would pay the greater of: (a) the median in-network amount for services charged by a provider in the same specialty and area; or (b) 125% of the average amount allowed by insurers for the service for a provider in the same specialty and area.
  2. Non-Emergency services following an emergency service at an out-of-network facility: When a patient has received emergency services from an out-of-network provider and requires additional non-emergency services after being stabilized, the draft bill requires the facility to notify the patient in writing that they may be required to pay higher cost-sharing than if they received services at an in-network facility and provide the patient with the option to transfer to an in-network facility. The patient must sign an acknowledgement that they received such notification. If the patient elects to remain in the out-of-network facility, the draft bill does not limit the amount the facility can charge for the additional services provided.
  3. Non-Emergency services performed by an out-of-network provider at an in-network facility: The draft bill would also prohibit an out-of-network provider, who provides non-emergency services at an in-network facility, from billing the patient beyond the amount of their in-network cost sharing. Rather the excess amount would be paid by the insurer at an amount determined in the same manner as for emergency services provided by an out-of-network provider.


The bill remains a draft and is not scheduled for vote. However, the bipartisan support for the bill suggests it may gain significant traction or at least jumpstart additional discussions in Congress about how to limit the use of balance billing.

Department of Health Announces Delay In Distribution of Medicaid DSH Subsidies

On Tuesday, June 6, 2018, the Commissioner of the New Jersey Department of Health, Shereef Elnahal, conducted a conference call with the Chief Executive Officers of New Jersey’s 70 acute care hospitals alerting them of delays in the distribution of their Disproportionate Share Hospital (DSH) subsidies which would ordinarily be received in mid-June.

The delayed payments include $21 million in charity care subsidies, which are intended to offset the costs incurred by New Jersey hospitals in treating uninsured, low income patients.   $18.2 million in general medical education (GME) subsidies due to 43 New Jersey hospitals which are used to support teaching programs will also be delayed.

The Commissioner indicated the delay was ordered by the Treasurer and the Office of Management and Budget.  No specific reason for the delay was provided; however, it appears to be related to the ongoing budget dispute in the Legislature.  The Commissioner stated that he hoped the payments would be made in a timely manner.  However, there was no guaranty on when, or even if, the payments would be made.

The delay in these DSH payments could have a meaningful impact on New Jersey’s hospitals, who are already dealing with significant cuts to their Medicaid DSH funding over the past several years.  Indeed, the charity care subsidy has been cut from a total state wide distribution of $675 million in the 2014 SFY to $252 million in the current fiscal year. While the GME subsidy has increased from $100 million to $218 million in the same timeframe, the overall amount of these DSH subsidies has decreased by more than $300 million in only four years.

There is no doubt that New Jersey hospitals rely on these subsidies to ensure treatment to the State’s residence.  Indeed, Gary S. Horan, President and CEO of Trinitas Regional Medical Center was quoted in a article describing the subsidies as the hospital’s “lifeblood.”

For now, New Jersey hospitals can only hope that this will be just a short delay in receiving payment, and not a precursor to additional cuts in the Medicaid DSH subsidies they rely upon. In the time since the Commissioner’s conference call, there has been no further word from the State regarding how this matter will resolve or when it is anticipated to resolve.

New Jersey Expands Its Medical Marijuana Program

Almost immediately upon taking office Governor Murphy issued Executive Order No. 6 directing the New Jersey Department of Health (the “DOH”) to undertake a review of all aspects of New Jersey’s Medical Marijuana Program (“MPP”) with a focus on ways to expand access to marijuana for medical purposes.  On March 23, 2018, the DOH issued its report with various recommendations for expanding the program. These recommendations fall into three categories: (1) Department Action Items; (2) Regulatory Action Items; and (3) Statutory Recommendations.

Department Action Items

Department Action Items will be implemented directly by the DOH without the need for formal rulemaking or any legislative action and will go into effect immediately.  These items include:

  • The addition of five new categories of debilitating medical conditions for which medical marijuana can be prescribed, including: (1) chronic pain related to musculoskeletal disorders; (2) migraines; (3) anxiety; (4) chronic pain of visceral origin; and (5) Tourette’s Syndrome; and
  • The development of a Mobile Access Portal for patients’ caregivers and physicians which will include the ability to securely upload documents and submit payments via smartphone or tablet.  The DOH is targeting spring 2019 for the portal’s implementation but, as an interim measure, has developed a program to provide mobile access to the current registry and payment processing system.  This access will go live in spring 2018.

Regulatory Action Items

Regulatory Action Items will require the DOH to go through the formal rulemaking process including a notice and comment period.  However, the DOH is taking steps to implement some of these items in advance of the formal rulemaking process.  These items include:

  • Reducing the biannual registration fee from $200 to $100 and expanding access to reduced registration fees of $20 to senior citizens and military veterans. The DOH will immediately begin charging these reduced fees in advance of the formal rulemaking process;
  • Permitting Alternative Treatment Centers (“ATC”) to dispense at satellite locations and have more than one cultivation site in order to increase supply and access. In advance of the formal rulemaking process, the DOH will consider requests from ATC’s for waivers of the one location restriction on a case-by-case basis;
  • Elimination of the physician registry which requires physicians interested in providing care to patients in the MPP to register with the DOH and have their names listed on the DOH’s website.  This will permit any New Jersey physician in good standing and in the possession of a CDS registration issued by the State Division of Consumer Affairs to authorize medical marijuana for their qualifying patients.  The DOH will continue to publish a list of physicians interested in providing care to qualifying MMP patients.  However, inclusion on the list will now be optional.  In advance of formal rulemaking, the DOH will begin transition in spring 2018 to eliminate the current physician registry procedure;
  • Streamlining the process for the addition of debilitating medical conditions for which medical marijuana can be prescribed. The DOH intends to remove the requirement that petitions for the addition of debilitating medical conditions be referred to the Medical Marijuana Review Board.  This will permit the Commissioner of the DOH to add debilitating conditions in extraordinary circumstance without a lengthy review process;
  • Permitting designation of a second primary caregiver for patients in the MPP.  The second primary caregiver will be subject to the same requirements as the primary caregiver.  In advance of formal rulemaking, the DOH intends to lift the one-person primary caregiver designation upon request;
  • Creating an endorsement system within the ATC permitting process that would allow ATC’s to engage in one or more of the following activities: (1) cultivation and harvesting of usable marijuana; (2) manufacturing and processing of usable marijuana; and (3) dispensing usable marijuana.  This revision would permit the DOH to approve ATC’s to perform the specific activities for which they are qualified, rather than limiting approval to ATC’s qualified to perform all of these activities;
  • Elimination of the 10% THC limit on products sold.  In its report the DOH pointed to an analysis performed by the State of Minnesota which found that higher potency THC treatments provide more effective treatment for a number of conditions; and
  • Elimination of the requirement of a psychiatrist’s evaluation prior to a physician authorizing medical marijuana use by minors. The DOH indicated in its report that the current requirement creates an artificial barrier to care, and there should be parity in the treatment of patients regardless of age.

Statutory Recommendations  

The DOH’s report recognizes that certain recommendations require revisions to the Compassionate Use Medical Marijuana Act (“CUMMA”) and thus fall beyond its authority. Therefore, it recommends working with the Legislature to revise CUMMA in a manner which will permit the following changes to the MMP:

  • Permitting edible products for all patients. Currently the CUMMA restricts use of edible products to qualifying patients who are minors;
  • Permitting patients to register at more than one ATC;
  • Permitting the use of marijuana as a first line treatment.  Currently, the CUMMA states that certain medical conditions must be “resistant to conventional medical therapy” to be considered a debilitating medical condition appropriate for treatment by medical marijuana;
  • Increasing the permitted monthly supply to four ounces for most patients and an unlimited supply for hospice patients.  Currently, the CUMMA limits physicians to authorizing a limit of two ounces in a 30 day period for all patients;
  • Removal of the requirement that the original ATCs be not-for-profit entities.

In addition to the recommendations discussed above the DOH’s report indicates it will continue exploring additional areas that could expand patient access to medical marijuana including: (1) home delivery; (2) permitting external companies to conduct quality control testing; (3) development of provider education programs and dosing guidelines; (4) elimination of the state sales tax; and (5) review of the ATC permitting and background check process.

The review of the MPP and the DOH’s recommendations are designed to change what Governor Murphy has referred to as the “restrictive culture” of New Jersey’s MPP.  The changes that go into effect immediately will certainly foster that goal, and it will be interesting to see how the other recommendations will proceed through the regulatory and legislative processes in the coming months.  It seems clear that the State is intent on ensuring all patients in need of medical marijuana are not restricted from that access by bureaucratic barriers.

Can Corporate America Save the Health Care System?

After months of unsuccessful attempts by Congress to pass a bill overhauling America’s healthcare system, several private parties are stepping forward in an attempt to solve the issue on their own.

In late January, Inc., Berkshire Hathaway Inc. and JP Morgan Chase & Co. announced plans to join forces by forming a new company to change how healthcare is provided in the United States. While the parties provided little detail about their plan, the announcement nevertheless provided some insight.

In the announcement, the three corporate powerhouses indicated that the new independent company would be one “that is free from profit making incentives and constraints.” They further indicated that the company would initially focus on the healthcare provided to the individual companies’ combined nearly one million employees and would focus on moving healthcare forward through technology.

This newly announced partnership will not be the only set of corporate players attempting to overhaul the healthcare system. Following the announcement by Amazon, Berkshire Hathaway and JP Morgan, CVS Health Chief Executive Officer, Larry Merlo, indicated that he believed the proposed new venture is more aspirational than what CVS will be able to accomplish after the completion of its merger with Aetna.  Merlo indicated that the combined CVS Aetna entity will have the infrastructure, assets and healthcare expertise to execute on the goals and objectives sought by the Amazon, Berkshire Hathaway, JP Morgan venture.

Mr. Merlo further indicated that he was willing to partner with others in attempting to find ways to improve the healthcare system, indicating that he wants the new CVS Aetna combination to be an “open source model”, and that he is looking forward to partnering with all groups, including the new Amazon, Berkshire and JP Morgan venture, to help reinvent the healthcare system.

While no specific plans have been announced on how these parties intend to reach their goals, the ingenuity that has been displayed by these corporate giants in their individual industries, suggests they will take a truly innovative and aggressive approach to address what they believe are problems with the current healthcare system. These attempts will surely be closely watched by not only the healthcare industry, but America as a whole.

CMS Releases CY 2018 OPPS and ASC Payment System Final Rules Slashing Reimbursement for the 340B Program

On November 1, 2017 the Centers for Medicare and Medicaid Services (CMS) issued its final rule updating payment rates and policy changes for the Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System.

The most controversial aspect of the Rule is the significant reductions to reimbursement for drugs purchased through the 340B program. The final Rule reduces reimbursement for such drugs from the Average Sale Price (ASP) plus 6% to ASP minus 22.5%.  CMS indicated that it selected this reimbursement rate based on an analysis previously performed by the Medicare Payment Advisory Commission (MedPAC).  However, this reduction greatly exceeds that suggested by MedPAC who when commenting on the proposed Rule recommended a reduction of only 10% of the ASP.  Thus, it is unclear exactly what CMS ultimately relied upon to determine the appropriateness of the ASP minus 22.5% rate.

These reductions exclude certain facilities including Rural Sole Community Hospitals, Children’s’ Hospitals and PPS-Exempt Cancer Hospitals. The Rule also does not apply to Critical Access Hospitals and non-excepted provider based sites under Section 603 of the Bipartisan Budget Act.  Each of these facilities will continue to be paid at the prior rate of ASP plus 6%.

CMS anticipates this policy will result in a decrease of $1.6 billion in drug payments which will be redistributed to non-drug items and services throughout the OPPS to maintain budget neutrality. CMS indicates that overall OPPS payments will increase in 2018 by 1.4%.  Nevertheless, 340B facilities will see significant decreases in drug reimbursement in CY 2018.

Unsurprisingly, the reductions in 340B reimbursement have been met with great criticism from the impacted parties. Indeed, within two weeks of the issuance of the final rule several hospital associations and hospitals filed suit seeking to enjoin the implementation of this provision in the CY 2018 OPPS Rule.  The government has moved to dismiss and a hearing on the matter is scheduled for December 21, 2017.

While the reduction in 340B payments is the most significant change in the final Rule, there are several other aspects of the Rule worth commenting on:

  • The Rule increases OPPS payment rates by 1.35% and ASC payment rates by 1.2%.
  • The Rule removes Total Knee Arthroplasty from the Medicare inpatient only list, thereby allowing reimbursement for such procedures performed on an outpatient basis.
  • The Rule also establishes a new modifier, “FY” to be used to identify X-rays taken using computed radiography technology. Claims submitted with this modifier will be subject to phased-in payment reductions of 7% for services provided in CY 2018 through CY 2022 and 10% for services provided in or after CY 2023.
  • The Rule will also allow laboratories to bill Medicare directly for molecular pathology tests and advanced diagnostic laboratory tests in order to reduce concerns that the current date of service policy known as the “14 Day Rule” creates operational burdens for hospitals and laboratories.

Absent the Court issuing a preliminary injunction in the previously mentioned lawsuit, each of these rule changes will become effective January 1, 2018.

New Jersey Bill Limits Exchange of Information between Insurers and Behavioral Health Providers

On November 21, 2016, Senator, Robert M. Gordon, proposed Senate Bill No. 2805 which is intended to limit the scope of information which can be exchanged between behavioral health providers and insurance carriers. Following recent testimony earlier this month on the bill, it passed the Senate Subcommittee on Commerce and appears primed to makes it way before the full Senate and Assembly in the near future.

The bill specifically prohibits a behavioral health provider from providing, and insurance carriers from requesting, any information regarding a behavioral health patient except the following:

  1. the patient’s name, age, sex, address, educational status, identifying number with in the insurance program, date of onset of difficulty, date of initial consultation, dates of sessions, whether the sessions are individual or group sessions and fees;
  2. diagnostic information defined as therapeutic characterizations of the type found in the current version of the Diagnostic and Statistical Manual of Mental Disorders or in another professionally recognized diagnostic manual;
  3. status of the patient as voluntary or involuntary and inpatient or outpatient;
  4. the reason for continuing behavioral health care services, limited to an assessment of the patient’s current level of functioning and level of stress, to be describes only as “none,” “mild,” “moderate,” “severe,” or “extreme;” and
  5. prognosis, limited to an estimate of the minimal time during which treatment might continue.

In the statement proposing the Bill, Senator Gordon stated that “in certain circumstances health insurance carriers have requested, as part of utilization management, information from mental health care providers that the providers are prohibited from disclosing pursuant to the rules and regulations of the providers professional licensure.” The statement did not identify the specific information that has been requested but went on to explain that the Bill is intended to reconcile that conflict by clearly limiting the information that is permitted to be shared between those parties.

On June 1, 2017, the New Jersey Senate Subcommittee on Commerce took testimony from several individuals in favor of the Bill.  Several other individuals had submitted statements in favor of the Bill with only one individual submitting opposition to the proposed Bill.   The individual opposing the Bill did not testify before the subcommittee.

The subcommittee unanimously voted in favor of the Bill.  The only concern was raised by Senator Cardinale who indicated the Bill did not provide any penalty for insurers who request information beyond the scope of that permitted by the Bill.  He suggested that he would speak to Senator Gordon about adding a provision related to same.

It appears this Bill has a great deal of momentum behind it.  Absent additional revisions to the Bill based on Senator Cardinale’s concerns, it will likely go before the full Senate and Assembly in the near future and eventually be presented to the Governor.

DC Circuit Rejects Attempt to Revive Anthem-Cigna Merger

On April 28, 2017 the United States Court of Appeals for the District of Columbia Circuit, in a split decision, upheld the District Court’s earlier ruling enjoining a merger between Anthem, Inc. (“Anthem”) and Cigna Corporation (“Cigna”) based on the merger’s anticompetitive effects.  The proposed merger was described by the Court as being “the largest in the history of the health insurance industry, between two of four national carriers.”

The appeal had been pushed mostly by Anthem with the Court noting that Cigna was a “reluctant supporter.”  Anthem did not challenge the anticompetitive effects of the increased market share created by the merger which would reduce the number of insurers in the relevant market from four to three.  Rather, Anthem argued that those anticompetitive effects would be outweighed by the efficiencies resulting by combining Cigna’s superior product with Anthem’s lower rates.

Anthem argued that the merged company would realize $2.4 billion in medical cost savings through its ability to (1) rebrand Cigna customers as Anthem to access Anthem’s existing lower rates; (2) exercise a clause in some of Anthem’s provider agreements to permit Cigna customers to obtain Anthem rates; and (3) renegotiate lower rates with providers. Anthem claimed that 98% of these cost savings would be passed through to its customers. The District Court rejected Anthem’s efficiencies defense finding each strategy cited by Anthem to obtain these efficiencies was either likely to fail in the face of business reality or could be achieved by each company without the merger.

Writing for the divided three judge panel, Judge Rodgers found the District Court did not abuse its discretion in rejecting the proposed merger.  Judge Rodgers noted that the evidence presented by Anthem did not support a conclusion that any efficiencies obtained through rebranding were merger specific because they were based on the application of rates that each of the companies had already earned on their own.  Additionally, Judge Rodgers indicated that the ability to obtain lower rates through the renegotiation of provider contracts was speculative and therefore could not outweigh the anticompetitive effects of reduced competition.

Judge Millett issued a concurring opinion which attacked Anthem’s claim of lowered costs to its consumers claiming such decreases would come at the cost of lesser services, stating “[p]aying less to get less is not an efficiency; it is evidence of the anticompetitive consequences of reducing competition and eliminating an innovative competitor in a highly concentrated market.”  Judge Millett also dismissed Anthem’s claim that the merged entity’s ability to negotiate lower rates with providers was procompetitive.  In this regard, Judge Millett indicated that “securing a product at a lower cost due to increased bargaining power is not a procompetitive efficiency when doing so ‘simply transfers income from supplier to purchaser without any resource savings.’”

Judge Kavanaugh in dissent looked at the weight of the evidence differently.  While the majority concluded that Anthem’s ability to negotiate lower rates indicated an ability for Cigna to do the same, the dissent found that Cigna’s inability to do so to date demonstrated that any ability to do so in the future would be caused solely by the merger.  Judge Kavanaugh also rejected the majority’s conclusion that the merged entity’s ability to renegotiate provider rates was speculative. Based on those determinations, Judge Kavanaugh concluded that the consumer would obtain significant procompetitive benefits in the form of lower costs which sufficiently outweighed any anticompetitive effects of decreased competition.

The fact that the Circuit Court issued a divided decision would lead one to conclude Anthem will seek further review from the United States Supreme Court.  However, the Court’s description of Cigna as a “reluctant supporter” may indicate that conflicts between the companies will prevent them from seeking further review.  Only time will tell.