Sebelius v. Auburn Regional Medical Center: Hospitals Allege Medicare Intentionally Underpaid Providers–And Got Away With It

By Katie Booth

In the Supreme Court’s recent decision in Auburn Regional Medical Center, the Court held that a suit against HHS by eighteen hospitals alleging intentional underpayment of Medicare reimbursements was barred by a 180-day internal agency deadline for appeals of reimbursement decisions. The rub is that the hospitals only found out about the underpayments, which allegedly occurred from 1987 to 1994, in March of 2006. These underpayments affected thousands of hospitals and added up to billions of dollars. Yet under Auburn, since the hospitals did not sue within 180 days of the underpayment (or even within an extended three-year window for “good cause”), they cannot recover. The Court in Auburn rejected the hospitals’ argument that equitable tolling should apply, finding instead that “the presumption in favor of equitable tolling does not apply to administrative appeals of the kind here at issue.”

The Auburn decision raises important questions about the ability of the federal government to intentionally underpay healthcare providers. In oral argument, the lawyer for the hospitals characterized HHS’s actions as “intentional concealment . . . [and] misconduct by the Secretary, that caused the statute of limitations time to be missed.” While there are good reasons not to disturb decades-old reimbursement decisions, it is sobering that the federal government can intentionally conceal underpayments and—if it conceals the underpayment for only 180 days—never have to reimburse the injured party. This situation presents a striking contrast “to 42 CFR § 405.1885(b)(3) (2012), which permits reopening of an intermediary’s reimbursement determination ‘at any time if it is established that such determination . . . was procured by fraud or similar fault of any party to the determination.’” In other words, HHS can reopen reimbursement decisions if a provider intentionally conceals important information, but not vice versa.

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A Myriad of Options in the Spirit of the Law

by Adriana Lee Benedict

In a couple days, petitioners in AMP v. USPTO will be filing their brief on the merits following the Supreme Court’s grant of certiorari in late November.  For many, the Supreme Court’s ruling in this case will provide a long-awaited answer to the question of whether or not isolated DNA is patentable subject matter under §101.  In August, the Federal Circuit ruled on the case for a second time following a remand from the Supreme Court, in which the Federal Circuit was asked to reconsider its ruling in light of the Supreme Court’s recent ruling in Mayo v. PrometheusThe majority, written by Judge Lourie, found that Mayo did “not control the question of patent-eligibility of such claims. They are claims to compositions of matter” and that while “Plaintiffs and certain amici state, that the composition claims are mere reflections of a law of nature.  Respectfully, they are not, any more than any product of man reflects and is consistent with a law of nature.”  Judge Bryson’s dissent, on the other hand, explained that, “In cases such as this one, in which the applicant claims a composition of matter that is nearly identical to a product of nature, it is appropriate to ask whether the applicant has done ‘enough’ to distinguish his alleged invention from the similar product of nature,” concluding that Myriad had not made a “substantial ‘inventive’ contribution” or claimed anything more than a combination of “well-understood, routine, conventional” elements.”

It seems likely that the Supreme Court will agree with Judge Lourie that the gene patents in question in Myriad, whether or not they are products of nature, are not laws of nature, as some of the patents in question in Mayo were.  Yet I would be surprised if they took this to mean that Mayo therefore does not control the question of patent-eligibility in Myriad.  In Mayo, Justice Breyer’s majority opinion was incredibly clear that the metabolic correlation at issue was not patentable under §101 because it tied up a law of nature and therefore preempted its use for further research.  Isn’t that exactly what Myriad is about?  Certainly all parties would agree that Myriad’s patents, whether natural products (physical phenomena) or not, serve to preempt breast cancer research on the BRCA1 and BRCA2 genes.

When the Supreme Court articulated the §101 exception for laws of nature, physical phenomena and abstract ideas in Gottschalk v. Benson, it explained that these kinds of claims were not patentable because they consist of the “basic tools of scientific and technological work.”  It is difficult to dispute that Myriad’s isolated genes are basic scientific tools. But according to Myriad, under this rule, their patents would only be invalid if they claimed real human DNA, and that it is not dispositive that their isolated DNA is nearly identical to real human DNA, because it is not naturally occurring.

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On Behalf of John Robertson: May Guardians Terminate Treatment Without Judicial Review?

By John Robertson

Legal questions about end-of-life decisions have moved on since the paradigm-setting battles in the 1980’s and 1990’s.  It is now clearly established that a competent person has the right to refuse needed medical treatment and to make binding advance directives about treatment if she becomes incompetent.  Physician-assisted suicide is a policy choice for states, not a constitutional right.  National debate now focuses on providing palliative care rather than high-tech interventions to prolong  fading life.  Cost reduction consistent with these values remain an omnipresent dilemma.

Sticky legal issues, however, remain, particularly with regard to the care of incompetent patients, as a Minnesota trial court recently reminded us (In re the Guardianship of Jeffers J. Tschumy, Hennepin County District Court, Fourth Judicial District, #27-GC-PR-07-496, October 18, 2012).   The question before the court was whether a broad grant of power to a guardian to make decisions about consenting or not consenting to medical treatment includes the power to have treatment terminated that will result in the ward’s death.  While allowing treatment to be withheld in that case, the court decided that only a judge, not the guardian on his own, could make that decision.  An appeal is now pending.

The court’s opinion catalogued the main arguments for each position before coming down on the side of judicial review.  Allowing the guardian to decide without court review was supported by the broad language of powers granted to guardians—to make decision about providing or withholding medical treatment—and the legislature’s failure to list termination of treatment as something that was explicitly denied the guardian (as it had done with certain other procedures).  It would also be quicker and less cumbersome, expensive, and burdensome  both for judges and family members to have guardians empowered to terminate treatment.

On the other side were the argument that the awesome power to end life was not specifically granted the guardian, and the fact that guardians are often appointed years before such decisions must be made.  At that time of appointment there is usually little thought of ending the life at some future time, and guardians so appointed may have not expertise or training in such matters.  The court concluded that until the legislature decided otherwise, a guardian would have to return to court for permission to end treatment that would result in the ward’s death.

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Where Are We Now: Post 3, The Agony (and Potential Ecstasy) of Defeat

By Scott Burris

Law has been an extremely effective mode of public health intervention in the last thirty years, which means that proponents of its use have won more than a few tough political battles.  Nonetheless, it is hard to escape the fact that, in recent years, the public health side has been getting killed wherever law is made. The First Amendment turns out to create a right to mine prescription records for data (Sorrell v. IMS Health), advertise liquor prices (44 Liquormart), keep warning labels off cigarette packs (RJ Reynolds v FDA)  – even operate a tattoo parlor in a city that lacks the resources to regulate its safety.  With the Heller case, the strictest forms of gun control were taken off the table, and there is a lot more litigation ahead to define what can be done. The ACA case raises the possibility of future limits on federal regulation via the spending clause. In the latest and most chilling development, the DC Circuit panel in the FDA label case laid the foundation for questioning whether there is even a rational basis for regulations aimed at discouraging people from using “lawful” but dangerous products:

We are skeptical that the government can assert a substantial interest in discouraging consumers from purchasing a lawful product, even one that has been conclusively linked to adverse health consequences.

Things aren’t a whole lot better over in the elected parts of government.  State and local health departments have been experiencing steady budget strangulation ever since (and even before) the Great Recession. The federal life-line, the Prevention and Public Health Fund, was raided once already by Congress, and remains a tempting target. Using the money we do get to promote legal interventions for health is under attack: with the help or acquiescence of Democrats, the long-standing restriction on lobbying in the HHS appropriations bill was changed. Despite legal analysis concluding that the old lines – educating public and policy makers is OK, just don’t push for specific legislation – are still in place, broad language about “future” legislation and threatening letters from an outfit called “Cause of Action” has reportedly chilled a lot of funding recipients.

For many of us, the succession of reverses and cuts looks like public health as usual: public health is usually the underdog whatever the topic. On the other hand, there are arguments that things are different now, ranging from the simple claim that the cuts have now reached bone to the belief that there is an active effort to put the “new public health” entirely out of business. So what is happening?

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Elhauge on Solving the Patent Settlement Puzzle

Founding Director of the Petrie-Flom Center, Professor Einer Elhauge, has just published an article with co-author Alex Krueger on an issue that the Supreme Court just granted certiorari on in FTC v. Watson: the proper antitrust analysis of reverse payment patent settlements.  In such settlements, the alleged infringer receives a payment and agrees to stay out of the market for a number of years.  Such settlements have been particularly prevalent in the pharmaceutical industry that has such a large effect on health care costs. The appellate courts have all recognized that such settlements have anticompetitive potential to exclude entry for far longer than merited by the probability of patent victory.  However, the courts have split on whether to find these settlements presumptively anticompetitive or lawful if within the formal scope of a non-sham patent.  The latter courts have focused on the possibility that a settlement might not exclude entry for longer than merited by the probability of patent victory and the administrative difficulty of conducting case-by-case inquiries into that probability.  Professor Elhauge’s article seeks to solve this puzzle by showing that case-by-case inquiries are unnecessary when the reverse payment amount exceeds the patent holder’s future anticipated litigation costs, because one can infer that such settlements will exclude entry for longer than merited by that probability of patent victory, whatever that probability may be.

Twitter Round-Up (12/2-12/8)

By Casey Thomson
This week’s Twitter Round-Up features an “American Idol-style” selection of research grant winners, the problems facing children in Syria attempting to be vaccinated, and a review of where we stand with current patient health information privacy and security.
  • Michelle Meyer (@MichelleNMeyer) retweeted an article about a newly emerging landmark case in the United Kingdom. In the suit, a childless couple denied IVF funding due to the woman’s age is suing Health Secretary Jeremy Hunt (because he is “ultimately accountable for healthcare in England”) on the basis of age discrimination. Thought to be the first venture to sue the Health Secretary concerning decisions about this NHS fund rationing, this case also will be the first instance where age discrimination laws have been employed to try for fertility treatment. (12/3)
  • Alex Smith (@AlexSmithMD) shared an article about a problem patients must deal with when approaching post-hospitalization care: Medicare’s offer to pay for hospice care or for a Skilled Nursing Facility (S.N.F.), but only rarely at the same time. Not only does the choice create a financial predicament, but it also has extensive repercussions for the patient’s health. Calls for a combined benefit process between hospice/palliative care and S.N.F. have been made, including a proposed “concurrent care” demonstration project in the Affordable Care Act. (12/6)
  • Dan Vorhaus (@genomicslawyer) linked to a summary of the Ponemon Institute’s Third Annual Benchmark Study on Patient Privacy & Data Security, reporting on the challenges still being faced to safeguard protected health information (“PHI”). (12/6)
  • Michelle Meyer (@MichelleNMeyer) additionally retweeted a link explaining Brigham and Women’s Hospital’s attempt to deal with the rising difficulty of choosing which research grants to support: an “American Idol-style” public online voting. With almost 6,500 votes cast, the public engagement experiment picked a project hoping to research methods for integrating genomic sequencing into newborns’ routine medical care. When future grant holders are struggling to award between a set of equally deserving project proposals, this push for public involvement (after having confirmed scientific rigor) may have intriguing implications. (12/6)
  • Daniel Goldberg (@prof_goldberg) also linked to a study in Denmark testing the relationship between socio-economic status (SES) and blood pressure levels. Despite having a healthcare system that is free and equal-access regardless of factors like SES, the study found that SES had a “significant effect on BP [blood pressure] control” in this survey. (12/7)
  • Arthur Caplan (@ArthurCaplan) posted a report by UNICEF on the efforts by parents in the Syrian Arab Republic to get their children vaccinated. With many medical centers destroyed by the conflict, and with health practitioners having to operate and transport supplies in the dangerous environment, children have been unable to receive routine vaccinations for several months. This campaign aims to provide such vaccinations (specifically for measles and polio) to children, having advertised via churches, mosques, schools, television, and even by SMS to get greater coverage. (12/7)
  • Frank Pasquale (@FrankPasquale) included a book review of Pharmageddon by David Healy, a look at how pharmaceutical companies are excessively influencing the medical industry particularly with “diagnostic categories and clinical guidelines.” The result, according to Healy: a society where people “think about their bodies as a bundle of risks to be managed by drugs,” with a workforce that is “getting ‘sicker,'” and with “major pharmaceutical companies…banking on further overdiagnosis and overtreatment,” all “undermining universal health care.” (12/8)

Note: As mentioned in previous posts, retweeting should not be considered as an endorsement of or agreement with the content of the original tweet.

Myriad Updates: Clinical Data as Trade Secrets and a Pending Certiorari Decision

By Dan Vorhaus (Cross-Posted from Genomics Law Report)

Earlier this month, my colleagues John Conley, Robert Cook-Deegan, James Evans and I published a policy article in the European Journal of Human Genetics (EJHG) entitled “The next controversy in genetic testing: clinical data as trade secrets.”  The EJHG article is open access so you can read the entire article at the EJHG website, but here is the abstract:

Sole-source business models for genetic testing can create private databases containing information vital to interpreting the clinical significance of human genetic variations. But incomplete access to those databases threatens to impede the clinical interpretation of genomic medicine. National health systems and insurers, regulators, researchers, providers and patients all have a strong interest in ensuring broad access to information about the clinical significance of variants discovered through genetic testing. They can create incentives for sharing data and interpretive algorithms in several ways, including: promoting voluntary sharing; requiring laboratories to share as a condition of payment for or regulatory approval of laboratory services; establishing – and compelling participation in – resources that capture the information needed to interpret the data independent of company policies; and paying for sharing and interpretation in addition to paying for the test itself. US policies have failed to address the data-sharing issue. The entry of new and established firms into the European genetic testing market presents an opportunity to correct this failure.

In certain respects, this article is an expansion of a previous piece three of us wrote on the Genomics Law Report last year discussing Myriad Genetics’ response to the rise of whole-genome sequencing technologies in the context of diagnostic genetic testing. The current EJHG expands upon that discussion, while still using Myriad Genetics as a case study, particularly the company’s development of a proprietary database of DNA sequence variants (including variants of uncertain significance, or VUSs) and related clinical information pertaining to the breast cancer genes BRCA-1 and BRCA-2.

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Another Contraceptives Mandate Case

Following up on Chris Robertson’s and Kevin Outterson’s posts below (here and here), I just wanted to draw your attention to another federal district court opinion on the contraceptives coverage mandate.  This one is from Nov. 19 and involves the owners of Hobby Lobby.  The court denied their motion for a preliminary injunction on the following grounds:

Plaintiffs have not demonstrated a probability of success on their First Amendment claims. Hobby Lobby and Mardel, secular, for-profit corporations, do not have free exercise rights. The Greens [the individual owners] do have such rights, but are unlikely to prevail as to their constitutional claims because the preventive care coverage regulations they challenge are neutral laws of general applicability which are rationally related to a legitimate governmental objective.

Plaintiffs also have failed to demonstrate a probability of success on their Religious Freedom Restoration Act claims. Hobby Lobby and Mardel are not “persons” for purposes of the RFRA and the Greens have not established that compliance with the preventive care coverage regulations would “substantially burden” their religious exercise, as the term “substantially burdened” is used in the statute. Therefore, plaintiffs have not met their prima facie burden under RFRA and have not demonstrated a probability of success as to their RFRA claims.

There are tens of cases challenging the contraceptives mandate pending at the moment, and several have already been dismissed on procedural grounds.  But my current count of the substantive cases is 3 preliminary injunctions granted (Newland, Weingartz Supply, and Tyndale House Publishers), 1 denied (Hobby Lobby), and 1 case holding outright that the mandate violates neither the First Amendment nor RFRA (O’Brien).  Have I missed any?

Opinion granting preliminary injunction on contraceptive coverage mandate

By Christopher Robertson

Yesterday (Friday Nov 16), U.S. District Judge Reggie Walton granted a preliminary injunction barring enforcement of the contraceptive coverage mandate that was part of the regulations implementing the Affordable Care Act (ACA).  There is lots of news coverage (e.g., HuffPo and WaPo), but as usual, the news organizations do not link to the opinion.  For your convenience, I’ve linked to it in the prior sentence, and provide some very preliminary observations below the fold.

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Gowder on Death and Taxes in the individual mandate: The Finger-Wagging Lopsided Giant?

By Christopher Robertson

Paul Gowder (Iowa Law) has shared a draft of his new article, Death and Taxes in NFIB v Sebelius.  Gowder thoughtfully develops some of the themes that I gestured towards in my “Lopsided Giant” post last week, trying to figure out how the Roberts opinion could uphold the constitutionality of the individual mandate as a regulatory tax but not as a regulation of commerce.  Drawing on a range of philosophical sources, Gowder tries “to aggressively apply the principle of charity to understand what the opinion actually means by making sense of it.”  (I love the ambiguity with the word, ‘making.’)

Gowder is smart in his use of philosophers (from Hayek to Raz, and others) to try to shed some light on Roberts’ ideas about coercion and regulation.  Gowder’s analysis makes me think that the Roberts’ opinion might deserve an even broader examination of whether there is a coherent theory of coercion between the individual mandate section and state mandate to expand Medicare section.  On the other hand, Gowder reaffirms my sense that the individual mandate’s Commerce Clause problem was not that it was too coercive.

The most provocative question is why the mandate was upheld as a tax.  On Gowder’s charitable reading, Roberts’ opinion does not provide Congress with unlimited power to mandate behavior using the tax power.  It is strictly limited.  But the limitation is merely one of “expressiveness”, depending on whether a mandate “labels those who break it as lawbreakers.”  (p16)  As I discuss below the fold, this creates a novel rule of Constitutional law — we might call it the finger-wagging-rule.    Read More