Health Law Advisor

In September 2024, a group of Washington, D.C., legislators introduced the Certificate of Need (CON) Improvement Act of 2024, B25-0948. If passed, the measure will reform the requirements and process for health establishments in the District to obtain CONs from D.C.’s State Health Planning and Development Agency (SHPDA).

Background

D.C.’s CON requirements were originally established in 1980 to ensure that access to health care services is available to all D.C. residents and to contain the costs of such health care services. D.C. regulators have more recently argued that D.C. was experiencing an overabundance of primary care providers, which has led regulators to apply the CON process in an overly broad manner to prevent a doctor on every block.^[1] The CON requirements have been applied in an inconsistent manner such that similarly situated providers may or may not have a CON depending on enforcement by regulators. Stakeholders within the D.C. community have contested the overly broad interpretation and enforcement of the CON law in D.C. and have argued that such interpretations are in fact creating provider shortages, increasing health care costs, and decreasing access to care.

In addition, the time and expense of complying with the CON requirements is enough of a barrier to potentially send independent physician practices across the border into Maryland and Virginia.^[2] Stakeholders have asserted that rather than decrease health care costs and increase access to care, the CON laws have had the opposite effect.

Lastly, the current requirements for institutional and physician providers to apply for a CON for even routine projects or activities is unnecessary and overly burdensome. For example, hospitals must wait months to a year following the CON process to get non-patient improvements like heating, ventilation, and air conditioning (HVAC). Furthermore, under the current interpretation by regulators, a physician group could subject itself to requiring a CON simply by hiring a non-owner physician or maintain a separate room to perform non-surgical procedures.

In April, we shared with you our thoughts on what to consider before opening in or investing in a medical spa, thinking about corporate structure, scope of practice, licenses and registrations, referral restrictions, HIPAA and data privacy, and more. This month, we’re focusing on how states are beginning to regulate in this area, so owners and operators can hit the ground running in terms of compliance—or relax and breathe deep, knowing they are ahead of the plan. 

In March 2024, the state of Rhode Island introduced S 2870, the Medical Spas Safety Act, providing (within the definition of “cosmetic medical procedure”) that:

• The performance of cosmetic medical services is the practice of medicine and surgery; and
• A cosmetic medical service shall be performed by a qualified licensed or certified non-physician only if the services have been delegated by a medical director, supervising physician, supervising physician’s assistant (PA) or supervising advanced practice registered nurse (APRN) who is responsible for onsite supervision of services performed.

Aesthetic services and the medical spa industry have continued to grow over the past few years as clients continue to demand the availability of such cosmetic services. In response, many providers and investors in the health care industry are seeing opportunities to open or invest in a medical spa.

Before opening or investing in a medical spa there are several key elements to be considered:

Corporate Structure

One of the first elements to consider when opening a medical spa is the corporate structure and ownership of the medical spa. Many jurisdictions have “Corporate Practice of ...

On December 6, 2023, Senate Budget Committee Ranking Member Chuck Grassley (R-Iowa) and Chair Sheldon Whitehouse (D.-R.I.) announced a new bipartisan investigation into private equity ownership in hospitals—just ahead of a new plan by the Biden-Harris Administration to crack down on anticompetitive practices in health care.

Under the Biden plan, announced December 7, the Department of Justice (DOJ), the Federal Trade Commission (FTC), and Department of Health and Human Services (HHS) will seek input on how private equity is affecting the health care of Americans and the ...

An increasing number of states are requiring advance notice of health care transactions.  These requirements may delay transactions or result in confidential information becoming accessible to the public. Effective August 1, 2023, New York[1] enacted legislation that requires health care entities involved in material transaction(s) to provide written notice to the New York Department of Health at least 30 days prior to the closing of the transaction. In enacting the legislation, New York joined Connecticut[2], Massachusetts[3], Nevada[4], Oregon[5], Rhode Island[6], and ...

The U.S. Department of Health and Human Services’ Office of Inspector General (“OIG”) recently issued Advisory Opinion No. 21-02, regarding a joint investment by a health system, a manager, and certain surgeons in an ambulatory surgery center (“ASC”) (the “Proposed Arrangement”). According to a national survey, most hospitals and health systems are planning to increase their investments in ASCs and anticipate converting hospital outpatient departments to ASCs. Many hospitals with ASCs operate the ASCs as physician joint ventures. As payors and patients continue to show interest in having outpatient procedures performed in ASCs, there is an expected trend to see an increase in investments and joint ventures in ASCs therefore making the Advisory Opinion particularly noteworthy.

In their request to OIG, the health system and the manager (“Requestors”) specifically inquired whether the Proposed Arrangement would constitute grounds for sanctions under the Federal Anti-Kickback statute (“AKS”). Based upon the facts provided in the request for the Advisory Opinion and a supplemental submission, the OIG reached the favorable conclusion that due to the low risk of fraud and abuse, the OIG would not impose sanctions on the health system or the manager in connection with the Proposed Arrangement.

The Proposed Arrangement

Under the Proposed Arrangement, the health system, five orthopedic surgeons, three neurosurgeons employed by the health system, and a manager, would invest in a new ASC. The health system would own 46 percent of the ASC, the surgeons would collectively own 46 percent of the ASC, and the manager would own 8 percent of the ASC. The manager certified that no physician has had, or would have, ownership in the manager that provides management and other services to the ASC. Furthermore, the ASC would operate in a medical facility owned by a real estate company jointly owned by the health system, the surgeons, and the manager. The ASC would enter into space and equipment leases as well as service arrangements with the health system and the real estate company.

OIG’s Analysis

Based on the following criteria, the OIG determined that the following safeguards in the Proposed Arrangement would mitigate the risk and that, as such, the OIG would not impose administrative sanctions in connection with the Proposed Arrangement:

Health System and Physician Investor Interest

(1) Although one or more of the neurosurgeons would fail to meet the Hospital-Physician ASC Safe Harbor Provision requirement that a physician investor derive at least one-third of his or her medical practice income for the previous fiscal year or previous 12-month period from the performance of ASC-qualified procedures, the health system certified that the neurosurgeons would use the ASC on a regular basis as part of their medical practices. Additionally, the health system certified that the surgeons would rarely refer patients to each other.

(2) The Proposed Arrangement would contain certain safeguards to reduce the risk that the health system would make or influence referrals to the ASC or the surgeons. For example, the health system certified that any compensation paid by the health system to affiliated physicians for services furnished would be consistent with fair market value and would not be related, directly or indirectly, to the volume or value of any referrals. In addition, the health system certified that it would refrain from any actions designed to require or encourage affiliated physicians to refer patients to the ASC or the surgeons and would not track referrals made to the ASC.

Among the many concerns arising from rampant spread of COVID-19, are provider concerns regarding potential liability for care provided during the pandemic due to limited medical resources. Providers and policy makers have discussed such concerns particularly given the currently limited number of available ventilators and qualified technicians as compared to the numbers of patients who may need access to such equipment.[1] Congress and states have provided varying levels of liability protection, though such protections are themselves limited.

Under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Congress provided liability protection to volunteer health care professionals providing health care services during the current public health emergency. [2] Specifically, the CARES Act exempts volunteer health care professionals from liability under federal or state law for any harm caused by an act or omission, unless the harm was caused by willful or criminal misconduct, gross negligence, reckless misconduct, conscious flagrant indifference, or under the influence of alcohol or intoxicating drugs, in providing health care services during the public health emergency with respect to the coronavirus. This provision preempts state or local laws that provide such volunteers with lesser protection from liability.

Notably, Congress chose not to extend liability protection to non-volunteer health care professionals, affording no wide-spread federal protection to those employed or contracted professionals treating patients during the emergency. Certain states, however, have extended liability protection to employed or contracted health care professionals through state orders. For example, Governor Cuomo of New York, through executive order, waived certain state laws to provide immunity from civil liability to certain health care professionals for any injury or death alleged to have been sustained directly as a result of an act or omission by such professional in providing medical services during the pandemic, unless such injury or death was caused by the professional’s gross negligence.[3]

Numerous media reports concern the shortage of medical resources, personal protective equipment, and qualified professionals during the growing COVID-19 medical emergency.  As a result, providers may ultimately have to make choices regarding resource allocation among hospitalized patients suffering from COVID-19.  Disability rights and other advocacy groups have expressed concern about resource allocation from the point of view of how individuals with pre-existing disabilities and other individuals may have been treated in the past by the medical system.  While bioethicists may work to address the ethical issues involved with treating patients under conditions of resource scarcity, providers rightfully may worry about potential legal liability in distributing scarce resources among those in need.  While both the Trump Administration and Congress have acted to allay some of these worries, concerns remain for both individual practitioners and the facilities with which they work.

On March 22, 2020, the U.S. Food and Drug Administration (“FDA”) issued guidance, for immediate implementation, that aims to increase the availability of ventilators and other respiratory devices needed to address the COVID-19 pandemic.  While FDA urges health care facilities to use, wherever possible, FDA-cleared standard full-featured ventilators to treat COVID-19 patients (as well as other patients requiring ventilatory support), FDA will allow a more flexible approach to modifications to these devices to help boost manufacturing capacity and supply.  FDA also took the opportunity to lay out guidelines that encourage submission of Emergency Use Authorization (“EUA”) applications for devices not marketed in the United States, continuing an unprecedented Agency response to the pandemic.

Guidance Scope

Specifically, FDA will allow manufacturers of certain FDA-cleared ventilator/respiratory devices (as detailed in the table below) to make modifications to the indications, claims, functionality, or to the hardware, software, or materials of the device without making a new 510(k) submission to FDA, so long as the modification will not create undue risk in light of the public health emergency.  Such changes, which would normally require a new 510(k), could include a significant change or modification in design, material, chemical composition, energy source, or manufacturing process.

Based on findings of the Payment Accuracy Report recently issued by the Department of Health and Human Services (DHHS), six Democratic United States Senators questioned the Centers of Medicare and Medicaid Services’ (CMS) oversight and enforcement of Medicare Advantage (MA) plans. In a letter dated September 13, 2019, the Senators highlighted their belief that MA plans have been overbilling the federal government for years, specifically in excess of $30 billion dollars over the last three years.

The Senators requested that CMS provide a response on how the Agency intends to ...