Life Science Compliance Update

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February 11, 2016

Bloomberg Health Law Reporter Outlook 2016 – Issues Driving the Healthcare System

Now that the year has gotten off to a quick start with all things healthcare-related, we would like to take a moment to acknowledge the Bloomberg Health Reporter's 2016 Outlook. Each year, Bloomberg BNA publishes a brief outlook on the issues they think will be front and center in the upcoming year. Because this is an election year we believe that uncertainty will have significant impact on the healthcare economy similar to 2008.

This year, according to Bloomberg BNA, the top ten issues that will commandeer the healthcare arena are:

  1. Compliance challenges of responding to unprecedented hospital/physician alignment pressures make this the top issue for the second year in a row.
  2. Fraud and abuse remains a huge practice focus for nearly every health lawyer.
  3. Concerns over implementation costs and data breaches make health information and technology a top issue.
  4. Medicare payment and audit regimes continue to drive health system change.
  5. Realignment pressures and focused enforcement scrutiny keep antitrust law compliance key.
  6. Overall provider compliance and individual liability risks demand substantial attention to corporate governance.
  7. Healthcare quality remains the guiding principal of health system reform.
  8. Regulatory uncertainties facing commercial payers and new provider payment methods elevate health plan regulation concerns.
  9. The growing field of telemedicine provides new challenges for providers and regulators alike.
  10. Medicaid program expansion and states' adoption of managed care to meet recipient needs continue.

Hospital/Physician Alignment

Hospital and physician alignment remains a top concern for 2016 with the Affordable Care Act and its goals of improving access to high-quality healthcare at low costs. Such a lofty goal requires collaboration of providers and will likely lead to more mergers, affiliations, and cooperative endeavors.

Fraud and Abuse

As stated by Gary W. Herschman, an attorney with Epstein Becker & Green PC in Newark, NJ, "there are so many ambiguities in the Stark law and Anti-Kickback Statute (AKS) that even health-care facilities and companies that think they are compliant may be targets for major compliance and False Claims Act (FCA) exposures." Such concerns and ambiguities are partly driven by changes in healthcare delivery patterns and changing provider relationships.

Health Information and Technology

Health IT issues are becoming more prevalent, and are posing some of the most complex and challenging hurdles in the healthcare arena. The cost and complexity of health information technology is a major concern, as is the slow rate of adoption and unavoidable risk of data breaches.

Interoperability and determining how systems can share data in a meaningful way takes up a tremendous amount of time and resources. A failure to achieve interoperability "raises the risk of losing meaningful use incentive payments, Stark law exceptions, and AKS safe-harbors." While there has been slight progress toward interoperability, it is likely that in order for progress to continue to be made and full interoperability achieved, the government may have to keep the pressure on, including incentives.

Data breaches is another large area for concern, especially as more and more medical records are becoming digitized. A cybersecurity law recently passed by the Senate carves out the healthcare industry for receiving special attention in the data breach arena.


Given that Medicare is the main revenue source of many healthcare providers, it will remain an important topic in the healthcare world. Advisory board members believe that this year, we will see an increase in questions revolving around the number of baby boomers that are becoming Medicare-eligible and the continued solvency of the program. It is likely that this year, there will be an increased focus by healthcare providers on meeting the requirements of the new payment system announced in January 2015, where by the end of 2016, 30% of Medicare reimbursements will be linked to the quality and value metrics in the Merit-Based Incentive Payment System (MIPS).

This year we will also see the grace period for the newly implemented ICD-10 expire on October 1, 2016. Healthcare providers will need to continue to work through any growing pains and changes associated with this more detailed coding system, so they are in compliance come October 1.


John Washlick, of Buchanan Ingersoll & Rooney, Philadelphia, believes that "as a result of the surge of M&A and other strategic affiliations, antitrust is a serious consideration" when determining whether a transaction can take place at all. The Federal Trade Commission (FTC) and state agencies have been keeping an eye on the recent hospital consolidation trend and will challenge any merger or acquisition they feel is reducing patient options.

It isn't just hospital and healthcare mergers to be watchful of, however, pending insurance company mergers should also be on the radar. Hospitals and physicians groups have expressed concerns about the effects of such mergers on payer consolidation, and the DOJ has been weighing the effect of those mergers on competition and consumers. It has yet to be seen if the FTC will put insurance company mergers through the same ringer as they do hospital and healthcare mergers.

Corporate Governance

While governance has always been an important issue, it is beginning to come to the forefront. The government's more aggressive ways of enforcing fraud and abuse laws, combined with a perception that directors should be doing more to ensure compliance to avoid damages and settlement costs, are leading to an increased concern and focus on governance.

It seems as though the non-profit world is starting to shift to using similar practices as the for-profit world, with emphasis being placed on "pursuing competency-based board selection; more precise executive succession practices; broader attention to director refreshment mechanisms such as tenure, term and age limitations and fitness-to-serve policies; assuring an equal distribution of labor across board committees; assuring a sufficient number of directors to address the increasing demands of the enterprise; and greater engagement between the board and the executive leadership team."

There is continuing to be an increased emphasis on individual accountability, and officers and directors of healthcare companies need to be aware of that and work to protect themselves against any fines that could be levied against them. This helps to increase the attention paid to what is going on within the company and forces executives to understand all facets of their company or organization.

Additionally, it is likely that, according to Gerry Griffith, there will be continuing attention paid to governance issues at the state level and that state attorneys general "will continue to focus on conflicts of interest and insider deals" as they review major transactions.

Healthcare Quality

Almost every issue in the top ten includes at least some indication that the decision makers involved are concerned about maintaining, and even improving, the quality of care that is available to patients. It is likely that in the coming year, increased pressure will be felt by healthcare providers to "expand quality metrics to cover areas like patient engagement and social determinants of health that are hard to quantify."

In 2015, the Institute of Medicine (IOM) released a report that focused on eliminating diagnostic errors, which supposedly "persist throughout all settings of care, involve common and rare diseases and continue to harm an unacceptable number of patients." This report will likely be emphasized by providers who are looking to increase the quality of care that they offer.

Health Plan Regulation

With continued changes brought about by the Affordable Care Act (ACA), healthcare attorneys advice to health plan clients in the coming year may change, depending on the viability of the ACA. Health plans continue to face enormous challenges, ranging from data issues, cybersecurity risks, and antitrust concerns.

Issues with narrow networks and other plans that limit the number of in-network providers will remain an issue as health insurance plans struggle to balance access with the need to control for costs, and remain viable as insurance companies themselves.


Telemedicine is likely to have a larger impact and larger role to play in the upcoming year, considering the development of technologies that allow more remote access to healthcare providers, and insurers' expansion of coverage for such services.

However, there are still many legal hurdles to overcome. For example, the failure to "properly structure telemedicine agreements, including credentialing providers who are rendering actual services to patients, is a chronic problem that will only get worse." Another legal concern is the ability to secure health information that is transmitted and stored by providers, telemedicine entities, and others in the chain of electrons.

Lastly, the expansion of telemedicine relies, in part, on state licensing requirements. In 2015, eleven states adopted the Federation of State Medical Board's Interstate Medical Licensure Compact, and nine other states have introduced legislation to follow. The Compact allows for an expedited licensure process for eligible physicians and is intended to "improve license portability and increase patient access to care." Once the licensure issue is resolved, a next step is to resolve professional liability issues; providers who engage in telehealth will need to check their own malpractice insurance coverage to determine whether or not it covers telemedicine/telehealth services.


Medicaid has two separate, but related issues, that will likely present themselves for the 2016 calendar year. The first is the expansion of Medicaid under the ACA, along with the affect it has on the budgets of states that participated in the Medicaid expansion, even after considering the federal funds that are available to help cover the costs until 2017.

The second issue is agreements with managed care organizations, which states are beginning to enter into to help cover extra costs. It is also likely that the current lame duck administration will continue to look favorably upon granting waivers to implement Medicaid managed care and other initiatives to help fulfill the aspirations of the ACA. The growth of managed Medicaid will increase as a financially- and care management-attractive alternative for states, as well as a significant business expansion opportunity for health insurers.

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