• Defining and Resolving the Provider Data Dilemma
• Antitrust Issues Under the DSRIP Process
• New Webinar: “Gene Therapy: Understanding Evolving Coverage and Reimbursement Challenges.”
• Antitrust Corner: Third Circuit Reverses Hospital Merger Loss
• Unleash Social Media’s Engagement Power, While Protecting Consumer Privacy
• Now, You Have a Second Chance to Benefit from “Social Media for Healthcare: Optimizing Opportunities, Overcoming Legal Risks.”
• How Will AB 72 (and Similar Laws) Impact Provider/Payer Disputes?

Defining and Resolving the Provider Data Dilemma

By Jonah Frohlich, Managing Director, Manatt Health | Kier Wallis, Senior Manager, Manatt Health | Keith Nevitt, Consultant, Manatt Health

Editor’s Note: Provider data drives the most fundamental processes in the healthcare system. Inaccurate provider data puts patient care and billions of dollars at risk. While provider data is essential to our healthcare system, access to high-quality data remains elusive. In a new white paper for CAQH, summarized below, Manatt Health explores critical provider data elements, summarizes major challenges associated with creating and maintaining high-quality provider data, and proposes areas where the industry can collaborate to make demonstrable progress toward improving provider data. To download a free copy of the full white paper, click here.

__________________________________________________

A Tumultuous Market, a Need for Better Information

The healthcare system is undergoing massive transformation, including new insurance marketplaces, expanded public and commercial coverage, rapid digitalization and emerging value-based regulatory and payment reforms. As the industry adjusts, it faces the daunting but necessary task of safely and securely assembling provider data to manage risk, meet consumer demand, improve quality, control costs and support decision making.

• Accurate provider data is crucial for healthcare business processes and patient care.
• The evolving healthcare system requires high-quality provider data to function effectively.
• The industry must balance the challenges of a digital world with consumer protections.

Laying the Foundation for a Meaningful Provider Data Conversation: Defining the Terms

1. What is a provider?

Today, the term provider extends beyond physicians, hospitals and allied health professionals to other practitioners and institutions that deliver or coordinate healthcare services, such as nurse practitioners, social workers, addiction counselors, community health centers, behavioral health agencies and other community-based organizations. Given the industry’s migration toward value-based care and increasing reliance on other provider types, addressing today’s provider data challenges requires a more expansive definition of provider.

2. What is provider data?

Provider data is information about individual providers, groups of providers and institutions—who or what they are, how to access them, the services they provide, the health plan networks or products they participate in and other important attributes. These data facilitate everyday business and regulatory transactions, including claims processing, credentialing, contracting and licensing, as well as allow patients to find and access care.

3. How do stakeholders interface with provider data?

Health plans, providers, consumers, government agencies and regulators all may function as provider data producers and users. Producers generate and may share provider data with one or more users. Users receive provider data from one or more producers to support specific business processes and decision making. Because many stakeholders are both producers and users of provider data, they depend on each other to successfully generate and utilize the data to support essential functions.

Key Provider Data Challenges

Significant challenges impact stakeholders’ abilities to use provider data reliably to support core business functions, such as claims processing, referrals, credentialing, provider directories, and information exchange. Shared pain points across these core functions present opportunities for industry collaboration. The root causes of these pain points result in costly inefficiencies and are related to overarching challenges that no one stakeholder can tackle on its own:

1. The lack of authoritative and reliable sources results in a piecemeal approach to acquiring and maintaining provider data.
2. The industry lacks definitions and benchmarks for provider data quality, leaving individuals and organizations to define, measure and improve quality in silos.
3. The healthcare systems lacks agreed-upon definitions and governance for provider data elements, creating irreconcilable inconsistencies across stakeholders.
4. Provider data producers and users do not hold each other accountable for high-quality provider data.

Industry and Public Policy Efforts to Improve Provider Data Quality Are Nascent but Gaining Traction

Industry efforts have emerged in response to provider data challenges. Examples include:

• Nonprofits and associations bring stakeholders together to consider, evaluate and implement provider data solutions.
• Some nonprofit, for-profit, state and federal entities are developing tools that address the provider data problem.
• Regulatory and policy initiatives are increasingly addressing provider data challenges across the country.

Call to Action

Given the common needs and challenges that stakeholders face, there is significant opportunity for the industry to collaborate to develop and implement a road map toward high-quality provider data. Below are recommendations for collective action to advance provider data quality:

• Create multistakeholder alignment to expedite progress, avoid fragmented investments, and ensure sustainable and reliable results.
• Define a minimum data set and quality thresholds to ensure that all stakeholders are collectively working toward the same goal of producing and using high-quality data.
• Establish provider data governance and accountability.
• Institute constructive policies that support resolutions to provider data problems.

Conclusion

Provider data producers and users are interdependent. An industry solution must take into consideration the needs and challenges that all stakeholders face. By working together to address barriers, develop service level and quality standards and define accountability, the industry has the opportunity to resolve the inefficiencies that have plagued the healthcare system for decades.

back to top

Antitrust Issues Under the DSRIP Process

By David Oakley, Counsel, Manatt Health 

Editor’s Note: Although there are strong benefits to encouraging provider collaboration and breaking down traditional healthcare silos, the reality is that healthcare organizations still compete—and antitrust laws regulating interactions between competitors continue to apply. In a new article for the New York State Bar Association’s Health Law Journal, summarized below, Manatt Health reviews the major antitrust issues that competitive healthcare organizations need to take into account when they are considering working together. To download the full article, click here.

__________________________________________________

The Medicaid Delivery System Reform Incentive Payment Program (DSRIP), the resulting regional Performing Provider Systems (PPSs) and the move toward value-based payments (VBPs) with health plans are all based on certain assumptions, including that providers should collaborate more, some clinical and/or administrative services should be shared, silos should be breached, and economies of scale should be achieved. While many agree with these assumptions, it’s important to remember that many providers (and other stakeholders) compete with each other. That competition means that antitrust laws must be considered.

The DSRIP transformation process presents two key issues. The first is obvious. There are certain situations where competitors cannot collaborate or share information. The second is less obvious. There is much that competitors can do without violating the antitrust laws. It’s critical to know when enthusiasm for health reform should not be allowed to obscure antitrust limits—and when, in fact, antitrust laws may not preclude competitive activities.

The Key Antitrust Laws

Antitrust laws (both federal and state) generally prohibit agreements to restrain trade and conduct furtherance of such agreements. Antitrust law does not prohibit or even address discussions that do not result in anticompetitive agreements.

There is also First Amendment protection for agreements to seek government action, even if such agreements would otherwise be illegal. The First Amendment protection also gives broad immunity for the process leading up to the request for government action.

Defining Competitors

There are two key steps to determining who competes with whom:

1. Define which healthcare services or products are offered.
2. Define the geographic markets in which those services or products are offered.

The typical concern is when two providers offer the same or similar services within the same defined geographic areas where patients or buyers would realistically choose to receive services from one provider or another. Collaboration and concerted action by providers who are not competitors are rarely antitrust problems.

Many issues can add complexity to identifying competitors. Examples include multipractice specialties, clinics or federally qualified health centers that create a range of competition beyond what their name implies, and telehealth and email-based provider/patient interactions that expand the geographic areas in which providers compete.

What Competitors Usually Cannot Do

Most problems posed by collective behavior by competitors relate to pricing and other monetary issues. Discussions and subsequent conduct around fees charged, agreements to boycott plans and other payers unless they pay fees above a certain level, and discussions or agreements around the terms and conditions of health plan contracts that impact the revenues from those plans all may be regarded as price-fixing. Agreements not to compete, as well as agreements that call for providers to restrict their practices to differing geographic regions also are prohibited.

What Competitors Can Do

In general, discussions to improve patient care or cooperate when rendering care to shared patients are not prohibited. The key is that, prior to attaining formal clinical integration status, any agreements must be nonbinding and leave the parties free to change course.

A. Discussions to measure and improve quality of care or establish care protocols would not typically be prohibited, even among competitors. The parties might feel that such an agreement should be legally binding—but the binding aspect injects antitrust concerns.

B. Discussions about delivery system change pursuant to DSRIP can usually occur without special legal protections. When these discussions are held in anticipation of a subsequent state application and approval process, they enjoy broad immunity from antitrust prohibitions. The important point is that no actual implementation can occur at this stage.

C. Many parties avoid even the discussion stage (covered in B above) to ensure there is not even the appearance of implementation. However, in the context of the DSRIP process, the discussion phase is permitted under the antitrust laws. A written agreement reflecting the parties’ consent to a reform plan proposal usually also is permitted, as long as the agreement notes that implementation is contingent upon receiving subsequent state approvals. As an extra precaution during the discussion phase, the parties can place on record their intent to comply with antitrust laws or have counsel attend the meetings and interject, if discussions veer into prohibited territory.

Data Sharing

The DSRIP process involves extensive review of data. Data related to prohibited collective activity by competitors (such as fees charged) should not be shared in a way that lets competitors see each other’s competitively sensitive information. Sensitive data can be excluded from circulation, protected from access by PPS participants or handled by an independent third party subject to nondisclosure obligations.

State Action Protections

Actions that are prohibited by antitrust laws will be permitted if the state has implemented a state policy to replace competition with a regulatory regime and supervise those actions in a particular manner. Conduct which could be exempt as state action when adequately supervised could include such things as market allocations or mergers and acquisitions.

It is important to note that state action protection applies under federal antitrust laws, even though the determination is made by state officials. The joint federal/state protection makes the state action protections particularly valuable. Sufficient documentation of state action may occur in numerous forms. Following are some options:

A. A Certificate of Public Advantage (COPA) is a state document created for the express purpose of conferring state action protection. Antitrust officials and parties, such as health plans, are not usually enamored of COPAs, since the issuing state agency essentially trumps the role of the Department of Justice (DOJ) and Federal Trade Commission (FTC) or the state’s attorney general, as the lead arbiters of antitrust policy. Therefore, applicants for a COPA should be prepared to be strong advocates for their applications, including having a persuasive written argument. While the COPA process is frequently thought of as involving only providers, the language of the statute and regulations is broad enough to include a variety of players, including plans.

B. State approval of a DSRIP application or a state capital funding RFP award may be sufficient. However, regulators and courts may impose a very high burden on the state supervision, the details of which have not been specifically addressed in state law. Therefore, the COPA process is likely the safer approach.

C. Possible other state approvals may be requested and granted. Here again, the uncertainty of this informal approach renders the COPA process a safer choice.

The Leap from PPS Efforts to VBP Contracting with Health Plans

VBP contracting is one of the long-term goals of DSRIP and the PPS efforts. Antitrust concerns arise when competitors join together to negotiate collectively with payers over financial or operational issues with a strong linkage to financial impact.

The legal basis for collective contracting efforts by competitors with a health plan is usually that the collective efforts of the competitors (and associated noncompetitors) constitute a sort of joint venture. The shared future of the parties (at least as it relates to the particular contract) as a result of the joint venture permits collective behavior that is otherwise denied to outright competitors. Therefore, a joint venture of sorts can arise under either of two approaches:

• Financial integration occurs when the parties share sufficient financial upside and/or downside from the joint venture.
• Clinical integration requires an extensive and genuine integration of key quality and utilization practices among providers which are otherwise separate, unaffiliated entities. The exact level of integration required, however, is a murky standard.

The competing parties need only be financially integrated or clinically integrated. There is no need for both. The parties should consult with their counsel to ensure the standards are met in their particular case. In the case of both financial integration and clinical integration, the safe harbor or deemed status may not be available when the entity has a particularly large market share or engages in specific behaviors which antitrust officials do not condone.

Conclusion

There are numerous danger zones for DSRIP and PPS activities which focus solely on collaboration or restructuring without regard to situations that involve competitors. On the other hand, there are numerous opportunities to successfully navigate the DSRIP and PPS process to attain health reform even when competitors are part of the collaboration.

back to top

New Webinar: “Gene Therapy: Understanding Evolving Coverage and Reimbursement Challenges.”

Click Here to Register Free—And Discover How to Balance Gene Therapy’s Promise and Price.

Exciting advances in science have led to developing treatment breakthroughs—such as gene scripting therapies—that could represent the first potential cures for rare diseases and other life-threatening conditions. Gene therapies offer dramatic promise—but also come with high costs. When viewing gene therapies and other expensive treatment options against the backdrop of an evolving healthcare landscape, several reimbursement challenges emerge.

In a new webinar for PharmaVOICE, Manatt Health examines the key issues that life sciences companies should consider when developing their reimbursement strategies for high-cost therapies, as both public and private payers struggle with balancing budgets against increasing demands. Scheduled for November 16 from 1:00 to 2:00 p.m. ET, the program will:

• Explore the evolving landscape of expensive yet potentially curative therapies.
• Analyze the challenges of care delivery and coordination to ensure patient access.
• Discuss coverage and reimbursement challenges for both public and private payers.
• Reveal innovative models that could potentially overcome coverage and reimbursement hurdles.

Even if you can’t make the November 16 session, click here to register free now and receive a link to view this “can’t miss” program on demand.

Speakers:
Melinda Dutton, Partner, Manatt Health
Jon Glaudemans, Managing Director, Manatt Health
Sandy Robinson, Managing Director, Manatt Health

back to top

Antitrust Corner: Third Circuit Reverses Hospital Merger Loss

By Lisl Dunlop, Partner, Antitrust and Competition

Editor’s Note: On September 27, 2016, the Third Circuit handed the Federal Trade Commission (FTC) a significant victory in its campaign against hospital consolidation, reversing a District Court decision that denied a preliminary injunction against the merger of Penn State Hershey Medical Center (Hershey) and PinnacleHealth System (Pinnacle).¹ The decision restores the FTC’s 8-year winning record in challenging hospital mergers and sets a high bar for providers considering transactions in concentrated markets. In the following two-part article, Manatt takes a look at the FTC victory and its implications. Part 1 provides an overview of key points, while Part 2 digs into the details to offer an in-depth analysis.

__________________________________________________

Part 1: The FTC Gets Its Mojo Back

Hershey, a leading academic medical center and teaching hospital in Hershey, PA, and Pinnacle, a provider of cost-effective primary and secondary services over three hospital campuses in nearby Harrisburg and Mechanicsburg, PA, first announced their proposed merger in June 2014. After an extensive investigation, the FTC commenced administrative proceedings against the transaction in December 2015 and, with the Commonwealth, sought a preliminary injunction in District Court in Pennsylvania. In May 2016, the District Court denied the injunction.

The Third Circuit rejected the District Court’s reasoning on all counts: market definition, the relevance and persuasiveness of the parties’ 5-year contracts with payers, whether the claimed efficiencies were cognizable and potentially sufficient to overcome the government’s prima facie case, and how the equities should be balanced in an FTC preliminary injunction proceeding. (See Part 2 of this article for a detailed analysis.) In response, on October 14 Hershey and Pinnacle announced that they had ended their efforts to integrate, citing “the time and cost associated with continuing litigation.”

The key takeaways from the decision are discussed below:

1. The FTC’s Approach to Hospital Merger Challenges Is Confirmed.

The decision endorses the FTC’s current approach to hospital merger cases, which the agency has been following since its 2004 case against Evanston Northwestern’s acquisition of Highland Park Hospital in Illinois. After a string of successes in several challenges from 2008 to 2014, the 2016 District Court losses in the Hershey/Pinnacle challenge and another merger challenge against the Advocate and NorthShore in Illinois had brought the agency’s approach into question. The Third Circuit decision—written in very strong terms—confirms the effectiveness of the current approach going forward.

2. Payer Testimony Is Important.

The Third Circuit’s decision states clearly that the focus of the inquiry into hospital market definition is on payers, not patients, and rejected the District Court’s reliance on patient flow data. Central to the Third Circuit’s reversal was payer testimony to the effect that insurers would have no choice but to accept a price increase from a combined Hershey/Pinnacle in lieu of excluding the hospitals from their networks, and that it is unlikely that payers could successfully market a network excluding the combined system to employers. Particularly persuasive was a “natural experiment” where a payer marketed a network that initially included Pinnacle, but subsequently lost Pinnacle. Even after offering a substantial discount, the loss of Pinnacle still resulted in the loss of over half of the plan’s members to other plans.

3. The Bar for Efficiencies Is Higher Than Ever.

The Third Circuit gave short shrift to the hospitals’ claims that the merger would allow them to avoid capital investment in a new bed tower and enhance their move toward risk-based contracting. The court endorsed agency requirements that efficiencies be merger-specific, verifiable and not themselves result in anticompetitive outcomes. The court required the efficiencies to offset the anticompetitive harm in this case to be “extraordinary” and held the claims to a high level of proof, which was found lacking. In particular, the claim that the merger would allow a party to avoid increasing capacity—usually considered a procompetitive outcome leading to lower prices—could not be a cognizable efficiency. Claims about risk-based contracting were either too speculative or not merger-specific, because the hospitals already were able to engage in this conduct or enter into collaborations short of a merger to do so.

4. The ACA Is Not an Excuse.

The District Court decision in Hershey/Pinnacle was notable in acknowledging and giving credence to concerns that healthcare policy was driving hospitals to “unite and survive,” a defense sometimes scornfully referred to as “the ACA made me do it.” The FTC has consistently rejected this concept in numerous speeches, advocacy letters and merger challenges. The agency’s position is that there is nothing in healthcare policy that displaces the antitrust laws, and collaborations seeking to advance the aims of healthcare policy can be equally effective operating within the existing antitrust framework. The Third Circuit recognized the existence of “extrinsic factors” that may encourage hospital mergers, but effectively took the courts out of this debate, noting that such issues are “not within our purview.”

5. The Decision Gives the FTC a Boost in Its Illinois Appeal.

The decision will assist the FTC in its appeal to the Seventh Circuit Court of Appeal against the lower court’s denial of an injunction against the Advocate/NorthShore merger in Illinois. Both sides already have submitted letter briefs bringing the Third Circuit’s decision to the attention of the Seventh Circuit panel. In oral argument before the Seventh Circuit in August, Judge Wood already had expressed doubts about the District Court’s application of the horizontal monopolist test² to the market definition in that case. Although the particular market facts differ, the Third Circuit decision increases the odds that the Seventh Circuit will rule in similar terms.

Part 2: A Detailed Analysis of the FTC’s Third Circuit Victory

1. Market Definition

The parties agreed that the relevant product market was the provision of general acute care services sold to commercial payers. The field of battle was over geographic market definition. The parties and the District Court agreed that the hypothetical monopolist test outlined in the FTC and Department of Justice (DOJ) 2010 Horizontal Merger Guidelines³ should be applied, but the Third Circuit found that the District Court failed to articulate and apply the test properly. The hypothetical monopolist test approaches market definition from the perspective of a “hypothetical monopolist” operating in the proposed market; that is, a single provider of general acute care services in the proposed geographic area. If a hypothetical monopolist could impose a small but significant nontransitory increase in price (SSNIP) in the proposed market, the market is properly defined. If, however, customers would respond to the SSNIP by shifting to suppliers outside the proposed market, then the market is drawn too narrowly.

The District Court expressed its aim in geographic market definition as being able to identify an area in which “few patients leave…and few patients enter.” Relying on evidence of substantial numbers of patients coming into the geographic area from outside the FTC’s proposed market (four counties in the Harrisburg area), the District Court found the market too restrictive. The Third Circuit rejected the District Court’s conclusions, finding that “relying solely on patient flow data is not consistent with the hypothetical monopolist test”⁴ because it ignores the commercial realities of healthcare markets in which insurers—not patients—pay for services.

Although price increases may eventually be passed on to patients through higher premiums, the effect is not felt immediately and is unlikely to impact patient choice directly. Accordingly, the Third Circuit found that the hypothetical monopolist test must be applied “through the lens of the insurers.”⁵ On this basis, the Third Circuit found that the government had adequately met its burden of proving geographic market through the use of extensive payer testimony to the effect that payers relied on competition between Hershey and Pinnacle and that they could not successfully market a plan in the Harrisburg area without Hershey and Pinnacle.

2. Contracts with Payers

The District Court had discussed with approval contracts that the parties had entered into with two of Central Pennsylvania’s largest payers to maintain the existing rate structure for five years. The District Court commented that, because these agreements would maintain the status quo for at least five years, it could not make predictions of the potential impact of the transaction particularly in an industry undergoing rapid change, such as the healthcare system.⁶

The Third Circuit disagreed, noting that the antitrust laws (and in particular the language of Section 7 of the Clayton Act under which the government had challenged the transaction) explicitly call on the courts to make predictions as to the future. In addition, the Third Circuit stated that private pricing agreements, such as those the parties entered into with payers should not be considered in the market definition analysis at all.⁷

3. Efficiencies

The Third Circuit discussed the hospitals’ efficiency claims in terms very similar to the Ninth Circuit in St. Luke’s.⁸ Both courts expressed doubts as to whether an efficiencies defense exists at all. The Third Circuit reached no conclusions on this subject, however, since it found that the hospitals could not clearly show that their claimed efficiencies offset the anticompetitive effects of the merger.

In order to be recognized by the court, efficiencies need to meet the requirements of the FTC and DOJ Merger Guidelines; that is, they need to be merger-specific, verifiable and not speculative, and not arise from anticompetitive reductions in output or service. In this case, the main efficiencies were the avoidance of significant capital investments in additional beds by Hershey and enhanced ability to engage in risk-based contracting. The court rejected both of these claimed efficiencies.

The court found that the capital avoidance efficiency was not cognizable because the need for additional beds was ambiguous, and failing to invest in additional capacity is potentially an anticompetitive reduction in output. The claimed enhanced ability to participate in risk-based contracting was not necessarily merger-specific, had not been demonstrated to result in benefits that would be passed on to consumers, and was too speculative.

4. Equities

Finally, the court considered whether the harm that the public would suffer if the merger were delayed would be greater than if the injunction were not issued.

The hospitals attempted to claim that if the injunction were issued, they would abandon the transaction entirely (which has in fact proved to be the case) and the public would then lose any benefits to be derived from the merger. The court dismissed this as being in the hospitals’ control, since if the merger makes economic sense now, it would be equally sensible following an FTC adjudication. In any event, this was not sufficient to overcome the strong public interest in the effective enforcement of the antitrust laws.

5. Impact of the Affordable Care Act (ACA)

One interesting aspect of the District Court’s decision had been dicta concerning the importance of “the evolving landscape of healthcare” and the climate created by government healthcare policy that “virtually compels institutions to seek alliances such as the Hospitals intend here.”⁹ For the first time, a court appeared to credit providers’ arguments that healthcare policy has strengthened incentives to consolidate and that they should be permitted to do so despite the antitrust laws. The Third Circuit rejected this idea, stating that “[o]pining on the soundness of any legislative policy that may have compelled the Hospitals to undertake this merger is not within our purview.”¹⁰

_{¹FTC et al. v. Penn State Hershey Medical Center et al., No. 16-2365 (3d Cir. Sept. 27, 2016), reversing FTC v. Penn State Hershey Medical Center et al., No. 1:15-cv-2362-JEJ (M.D. Pa. May 9, 2016).}

_{²See detailed analysis below.}

_{³U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines (2010), available at https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf.}

_{⁴Id. at 20.}

_{⁵Id. at 23.}

_{⁶District Court Op., at 11.}

_{⁷3d Cir. Op., at 27.}

_{⁸St. Alphonsus Med. Ctr.-Nampa Inc. v. St. Luke’s Health Sys., Ltd., 778 F.3d 775 (9th Cir. 2015).}

_{⁹District Court Op., at 25.}

_{¹⁰3d Cir. Op., at 45.}

back to top

Unleash Social Media’s Engagement Power, While Protecting Consumer Privacy

By Jill DeGraff Thorpe, Partner, Manatt Health | Richard Lawson, Partner, Consumer Protection

Editor’s Note: In a recent webinar, Manatt Health explored the latest social media advances in the context of the Health Insurance Portability and Accountability Act (HIPAA) and other consumer protection and privacy statutes. (See the next article for full details on the program.) In a two-part series, Manatt Health summarizes the important information shared during the session. In Part 1, below, we review emerging technology trends, the critical role of legal and compliance teams and next steps.

__________________________________________________

Introduction

Because patient engagement is top of mind across the continuum of healthcare, many healthcare organizations turn to social media as a powerful tool in their efforts to attract, engage and retain patients and plan members. At the same time, social media presents specific privacy and data security challenges for healthcare organizations. Fortunately, emerging trends suggest that social media sites are beginning to accommodate consumer (and advertiser) preferences for privacy. As a result, it makes sense for healthcare organizations to reevaluate the role social media can play in their growth and population health strategies, as well as in their efforts to reach traditionally underserved populations.

Emerging Technology Trends

Three emerging technology trends are likely to influence expectations for the way consumers wish to be engaged on social media.

• Added Security in Mobile Devices and App Platforms. Many mobile devices now include security features, such as end-to-end encryption, biometric locking features, and two-step authentication. Some mobile app platforms—notably, Apple’s HealthKit, CareKit and ResearchKit—take advantage of the expanding computing power of smart devices. Untethering app functionality from cloud-based computing power reduces the transmission of personal data over networks and takes advantage of a device’s native security features, which should reduce exposure of personal health data to mass security breaches.
• Social Use Media for Direct, Consumer-Initiated Communication. While social media enables a degree of “over-sharing,” many consumers still wish to keep some conversations private. Through Facebook’s Messenger app, consumers can now send a text directly to healthcare organizations. Healthcare organizations support this mode of direct, consumer-initiated engagement to varying degrees, in part because the content of messages exchanged in Messenger can still be mined by Facebook and associated with a user profile. Interestingly, in April 2016, Facebook announced end-to-end encryption of messages delivered using WhatsApp, the mobile app for text, voice and video communication that it acquired in 2014. If and when WhatsApp is integrated as a secure alternative to Messenger, social media sites like Facebook could become a dominant channel for instant and secure communication between consumers and healthcare organizations.
• Increasingly Personalized Online Engagement. A number of technology leaders, including Amazon, Apple, Facebook and Google, have added “chatbot” features to their platforms. Chatbots are automated, intelligent applications that make the user of a virtual assistant or text messaging app feel like she is talking or texting with an actual person. Chatbots will make it easier for healthcare organizations to use social media and integrated messaging apps to deliver personalized content at scale, without interrupting the user experience.

There are hundreds of potential use cases to illustrate how these emerging technology trends will change the paradigm for healthcare organizations’ social media engagement strategies. Following is one example:

Public Service Announcements for General Outreach

The Role of Legal and Compliance Teams in Setting Up Social Media Programs for Healthcare Organizations

Assuming that healthcare organizations accept the need to invest in a social media presence, their legal and compliance teams will play an integral role throughout the development and ongoing operation of their social media programs. From the outset, the legal and compliance teams serve as subject matter experts of the regulation and industry practices of digital advertising and privacy. Key legal concepts to consider include:

1. Privacy for Healthcare- and Non-Healthcare-Related Components of a HIPAA Entity

Under HIPAA, protected health information (PHI) is broadly defined to include any “individually identifiable health information,” if it is collected from an individual; is created or received by a HIPAA-covered entity; and is related to an individual’s past, present or future physical or mental health, the provision of healthcare or payment for healthcare services. Unless a covered entity designates itself as a “hybrid entity,” any individually identifiable health information acquired through social media could be characterized as PHI and be subject to all the protections under HIPAA.

However, if the HIPAA-covered entity designates itself as a “hybrid entity” and adheres to prescribed safeguards, policies and procedures to keep healthcare components of its activities separate from non-healthcare components and social media-related activities and data separate from healthcare-related functions, the individually identifiable health information acquired through social media can avoid being treated as PHI. Consequently, the legal and compliance teams play an important role in maintaining a covered entity’s status as a hybrid entity and preventing individually identifiable health information acquired through social media from becoming PHI.

2. Privacy Under State Laws

HIPAA sets a minimum floor of federal protection of PHI but does not preempt more restrictive state laws. Consequently, legal and compliance teams need to advise their clients of stricter state laws and their implications for an organization’s social media practices. For example, a social media program in California would need to accommodate restrictions under California’s Confidentiality of Medical Information Act, which applies to social media sites, in addition to healthcare providers, health plans and pharmaceutical companies.

Where to Go from Here

Typically, legal teams are asked to develop two social media policies—one for employees and another for an organization’s public website. However, they can provide even more value for their organizations by advancing a process for developing a comprehensive social media program. Broadly, such a program could include the following steps:

• Assemble the Team. Form an internal working group focused on social media engagement.
  • Have “fast-following” practitioners, business leaders and patient/member “champions” lead.
  • Include digital marketing, legal, compliance, IT and finance as subject matter experts.
• Understand What Consumers Need, and When They Need It. Develop a common vision of what consumers want at the moment they are “activated” in their own health or the health of a close family member or friend.
• Reach Consensus on the Social Media Vision. Develop a vision that advances the organization’s broader strategic vision and reflects its core values.
• Set Up Guardrails. Develop comprehensive Social Media Standards and Practice Guidelines. These Standards and Guidelines integrate the legal guardrails and an organization’s core values. They serve as a governance document that incorporates an organization’s legal requirements, as well as educates and empowers internal stakeholders. The Guidelines should define a governance infrastructure, as well as establish criteria for evaluating evolving campaign strategies and new social tools.
  
  The Guidelines also need to accommodate consensus and joint governance among diverse stakeholders. They should facilitate decision making as social media practices evolve and align an organization’s social media activities with its broader strategic vision. In addition, they might serve as a starting point for bringing cohesion to an organization’s use of other connected health and consumer engagement initiatives.
• Get Started. Draw from the organization’s transformation road map to identify projects that benefit from enhanced consumer engagement.

back to top

Now, You Have a Second Chance to Benefit from “Social Media for Healthcare: Optimizing Opportunities, Overcoming Legal Risks.”

Click Here to Download a Free PDF of the Presentation.

The rise of social media platforms has opened powerful opportunities for healthcare organizations to develop personalized strategies that engage consumers—and improve their health. The potential of these new platforms, however, can be offset by their legal risks. The emergence of groundbreaking tools—such as the recent launch of HealthTap using Facebook Messenger to target information to consumers based on their health symptoms and concerns—is raising pressing new privacy questions for providers and plans.

In our recent webinar, Manatt examined the latest social media breakthroughs in the context of the Health Information Portability and Accountability Act (HIPAA) and other consumer protection standards. If you would like to download a free copy of the presentation for your continued reference, click here.

Providing a valuable guide to unleashing social media’s engagement power, while protecting consumer privacy, the webinar:

• Explores the latest social media tools and approaches for healthcare organizations.
• Examines real-world scenarios for putting the power of social media into practice while ensuring compliance with HIPAA and other consumer protections.
• Analyzes the latest legal decisions around privacy and their implications for healthcare entities, including Spokeo, Practice Fusion and LabMD.
• Reveals the consumer protection and privacy statutes you need to consider before using Facebook Messenger.
• Explains how social media metadata is used, shared—and protected.

If you have any questions or want to discuss your organization’s specific social media challenges, please reach out to our presenters:

• Richard Lawson, Partner, Consumer Protection, at 212.790.4539 or rlawson@manatt.com
• Jill Thorpe, Partner, Manatt Health, at 202.585.6656 or jthorpe@manatt.com

back to top

How Will AB 72 (and Similar Laws) Impact Provider/Payer Disputes?

By John LeBlanc, Partner, Healthcare Litigation | Andrew Struve, Partner, Healthcare Litigation | Jessica Slusser, Counsel, Litigation

Recently, California Governor Jerry Brown signed into law “surprise medical bill legislation,” seeking to curb out-of-network medical bills. This law, designated AB 72, amends California’s Health and Safety Code to limit the ability of out-of-network physicians who provide services at in-network facilities to balance bill patients. (Balance billing is the practice of billing patients for the difference between what the patient’s health insurance reimburses and what the provider charges.) With the goal of keeping patients out of the fight between providers and insurers, the new law essentially sets a reimbursement rate schedule that insurers are required to pay to out-of-network providers, and promises to establish a binding independent dispute resolution process.

New California Law

AB 72, a bipartisan bill authored by Democratic Assemblyman Rob Bonta, provides that if an insured receives covered services by an out-of-network provider at a facility that is in the insured’s network, the patient’s financial obligation is limited to no more than what he would have owed had the provider been in-network.

Out-of-network providers are prohibited from billing or collecting any amount beyond the insured’s cost sharing obligation (a practice known as balance billing), unless the insured’s plan includes out-of-network benefits and the insured consents in writing to receive services from the out-of-network provider at least 24 hours in advance of the care. Additionally, out-of-network providers must give the insured a written estimate of total out-of-pocket costs for the care at the time consent is provided.

The new law applies to commercial coverage through health maintenance organizations (HMOs) and preferred provider organizations (PPOs) regulated by the Department of Managed Health Care (DMHC), which are the most common types of commercial coverage in California. It also applies to individual coverage and PPOs regulated by the California Department of Insurance. AB 72’s provisions do not apply to Medicaid, Medicare or self-insured employer health plans, which are not subject to state regulations pursuant to the federal Employee Retirement Income Security Act (ERISA).

AB 72 applies only to nonemergency care, as balance billing by emergency physicians in California already is barred under Prospect Med. Grp. v. Northridge Emergency Med. Grp., 2009 BL 3336, Cal., No. S142209, 1/8/09. Similarly, balance billing is prohibited in public coverage.

Reimbursement Rate Dictated by Law

Avoiding problems faced by prior legislation related to balance billing, AB 72 sets the payment rate for out-of-network providers at either the amount the insurer normally pays an in-network physician for such services in the same general geographic region in which the services were rendered or 125% of the Medicare rate, whichever is greater.

Health plans also are required to report data showing average contracted rates for those services most frequently subject to out-of-network bills during the 2015 calendar year, and their methodology for determining such rates, to the DMHC. The DMHC, in turn, will establish one methodology for health plans to determine average contract rates by January 1, 2019.

Binding Independent Dispute Resolution

Reimbursement by a plan to an out-of-network provider at the rate established in AB 72 will constitute payment in full unless either party employs the yet-to-be-established independent dispute resolution process. To that end, AB 72 requires the DMHC to institute an independent dispute resolution process, by September 1, 2017, for resolving payment disputes between out-of-network providers and payers—and the decision will be binding. The parties must complete the plan’s internal appeals process prior to proceeding to independent dispute resolution.

Other Out-of-Network Legislation

Florida enacted a similar law this year (extending a ban on balance billing of managed care enrollees for out-of-network emergency and other hospital visits to include PPO members), joining New York (holding consumers harmless on bills for emergency services from out-of-network providers when no in-network providers are available) and Connecticut (protecting consumers against surprise bills for nonemergency services from out-of-network providers at in-network facilities if the patient did not knowingly choose the non-network provider over a network provider and limiting consumer costs to in-network cost sharing, similar to California).

On the other hand, similar bills proposed in seven other states, including Colorado, New Jersey, Pennsylvania and Tennessee, failed in 2016. According to the National Conference of State Legislatures, as reported by BNA,¹ Georgia and other states are studying the issue or considering legislation. Observers predict the bipartisan passage of the California law may boost legislative efforts in other states.²

Potential for Provider Litigation

The goal of AB 72 is to incentivize physicians to contract with health plans. With AB 72, the Legislature has taken the position that providers should not include balance billing as part of their payment model. Even so, it is possible that providers will have less incentive than before to enter contracts with health plans if the doctors using the new independent dispute resolution process achieve higher overall payments than the rate allowed in AB 72. While some argue that AB 72 will create further narrowing of already narrow networks, because specialists most affected by the new law will not be inclined to contract with health plans, the law’s authors answer that existing DMHC rules for network adequacy—including specialists—and timely access to care will prevent the narrowing of networks under AB 72.

Those on both sides of the issue have questioned whether AB 72’s dispute resolution process will spark more lawsuits between providers and health insurers than it avoids. If that is the case, the dispute resolution process may actually drive up healthcare costs by increasing litigation between providers and health plans.

Initial data from New York following passage of similar legislation indicates that results have so far been fairly even between payers and providers, with insurers prevailing slightly more often than providers in several hundred conflicts adjudicated by the state’s independent entity, as reported by Crain’s New York Business.³

New York is now closely watching the outcome of the mechanism its Department of Financial Services created for providers and insurers to arrive at reimbursement figures, using several independent contractors to determine payment conflicts.

In New York, disputes are settled through an arbitration process where both sides submit what they believe to be an appropriate reimbursement amount, and an independent contractor choses one of those options.

In several hundred arbitrations on bills for emergency services, data shows the amount paid by health plans was deemed reasonable in 22% of the cases, whereas providers won 13% of the time. Many claims were ineligible for the process or are still pending, and as such, the results at this point are incomplete. Preliminary data indicates that insurers were more likely to win disputes in cases where the final resolution awarded doctors $500 or less. As the amount in dispute increased, the likelihood of either party to prevail leveled to even. In emergency cases where the payment at issue fell between $1,000 and $5,000, independent contractors found the provider’s charges to be more reasonable in 18 cases, as compared to 20 cases where the insurer’s payment won.

New York has found certain billing issues more difficult to resolve for providers. For example, New York law requires written consent for an in-network doctor to send a specimen out to an out-of-network lab.

In short, while the volume of new litigation cannot be determined at this early stage, if the New York equivalent of AB 72 is any indication, the outcome of out-of-network provider disputes with payers does not appear to be skewed in favor of one party or another. Only time will tell.

AB 72 takes effect January 1, 2017.

_{¹ New California Law Bans Surprise Medical Bills, BNA’s Health Care Policy Report (October 3, 2016).}

_{² Passage of California surprise‐bill legislation could spur other states to act, Modern Healthcare (September 1, 2016), last accessed at http://www.modernhealthcare.com/article/20160901/NEWS/160909980?template=print.}

_{³ New York law to curb surprise billing shows promising results, Modern Healthcare (April 7, 2016), last accessed at http://www.modernhealthcare.com/article/20160407/NEWS/304079996?template=print.}

back to top