Pennsylvania Medical Marijuana Act: Key Components and Potential Risks

On April 17, 2016, Pennsylvania became the 24th state to legalize the use of marijuana for medicinal purposes when Pennsylvania Governor Tom Wolf signed into law Senate Bill 3, known as the “Medical Marijuana Act” (the “Act”).  While the Act will become effective on May 17, 2016, its implementation will not be fully realized until various reports and regulations contemplated in the Act are developed. The Act will be administered by the Pennsylvania Department of Health (the “Department”).

The Act limits the use of medical marijuana to patients suffering from one of the 17 “Serious Medical Conditions” identified in the Act, which are: cancer; HIV/AIDS; amyotrophic lateral sclerosis; Parkinson’s disease; multiple sclerosis; epilepsy; inflammatory bowel disease; damage to the nervous tissue of the spinal cord with objective neurological indication of intractable spasticity; neuropathies; Huntington’s disease; Crohn’s disease; post-traumatic stress disorder; intractable seizures; glaucoma; sickle cell anemia; severe chronic or intractable pain of neuropathic origin or severe or intractable pain in which conventional therapeutic intervention and opiate therapy is contraindicated or ineffective; and autism.

The Act also restricts the forms in which medical marijuana may be dispensed to patients and caregivers to pill, oil, topical cream/ointment, vaporization, nebulization, tincture or liquid, and it makes smoking and incorporating into edible form unlawful. Continue reading Pennsylvania Medical Marijuana Act: Key Components and Potential Risks

Wound Company’s Antitrust Claim Tossed

Having dismissed the Sherman Act Section 1 conspiracy and Section 2 monopolization claims of Suture Express in August 2013, a federal judge in Kansas, on April 11, 2016, tossed the remainder of plaintiff’s $200 million claim, which asserted that Cardinal Health and Owens & Minor, wound care companies, entered into a predatory pricing scheme to prevent hospitals from buying the plaintiff’s competing products.  Suture Express, Inc., v. Cardinal Health, Inc., et al., 2:12-cv-02760.

The court determined that the summary judgment record did not demonstrate an injury to competition in the acute care market resulting from defendants’ alleged pricing arrangement, as the plaintiff failed to establish that defendants had market power.  Rather, according to the court, the record on summary judgment demonstrated a competitive market, where a number of defendants’ rivals have been able to grow their businesses and compete effectively against defendants, while defendants’ market shares have remained relatively stable; in fact, the court found that defendants’ themselves competed against one another.

In dismissing the case, the court noted, as courts usually do in cases where the record demonstrates, at most, an injury only to the plaintiff, the antitrust laws were designed to protect competition not competitors, and the failure to demonstrate an injury to competition in the market is fatal to a plaintiff’s Sherman Act claims.

Although, as this case shows, antitrust defendants may have to endure lengthy and expensive litigation, experienced antitrust counsel, familiar with the deep and growing body of defense-oriented antitrust decisions, have a number of arrows in their quiver for shooting down antitrust claims.


Come Join Us and Duane Morris Partner – Ari Markenson @ the Columbia – Mailman School 2016 HPM Conference

On April 15,2016 – Columbia University’s Mailman School of Public Health will be putting on its annual Health Policy and Management Conference.

Ari J. Markenson will be moderating a panel entitled – Aging Successfully: How to Direct Policy

This is a wonderful conference, please consider joining us at it.

You can get agenda and registration info here –

Duane Morris is a sponsor of the program.

Hackers Unleash “Ransom” Attack on Health System, Forcing It to Shut Down Computer Systems

By Duane Morris partner Lisa W. Clark 

On March 28 MedStar Health,  the largest health system in the Washington, D.C. area, shut down its computer systems, including its electronic health records, on account of an apparent “ransom” attack in which the hackers infected its system with a virus.  From  media reports, it appears that the hackers demanded an unknown sum to stop the malware attack. The FBI is already involved. This incident, following February’s successful ransom attack on Hollywood Presbyterian Medical Center,  reinforces the need for strong data security protection as well, as an incident response plan that includes law enforcement.

Will Your Non-Profit Hospital Pay Property Taxes in New Jersey?

In the wake of the June 25, 2015 decision of the New Jersey Tax Court in AHS Hospital Corp., d/b/a Morristown Memorial Hospital v. Town of Morristown,  and the hospital’s subsequent $15.5 million settlement with the town, over a dozen municipalities are pursuing tax appeals that challenge the non-profit status of hospitals throughout the State of New Jersey.  With an April 1 deadline for filing tax appeals approaching, additional cases may soon be filed against New Jersey’s 62 non-profit hospitals. Continue reading Will Your Non-Profit Hospital Pay Property Taxes in New Jersey?

For both providers and private equity firms, payment reforms bring rewards

The impact of changing payment models on private equity investments in health care was the topic explored at a February 10 event co-hosted in New York by Duane Morris and Parthenon-EY. Speakers at the program were Rachel Kaprielian, regional director, New England, U.S. Department of Health & Human Services; Lisa Clark, partner, Duane Morris; and from the private equity sector David Terry, founder and CEO, Archway Health; and David Caluori, principal, General Atlantic. The moderator was Jeff Woods, managing director and co-head of health care, Parthenon-EY.

Private equity investors see many opportunities to improve health care delivery through payment reforms being driven by the Centers for Medicare and Medicaid Services (CMS). CMS’ August 2011 launch of a bundled-payment initiative created a model for encouraging specialists to manage care and be held accountable for results. “When Medicare leads, you can bet everybody else is paying attention,” she said.
HHS is embracing value-based payments in part because of the success Accountable Care Organizations (ACOs) have had in improving the quality of care while lowering costs. Private equity firms are pursuing investments in entities that drive those changes, including ACO and bundled-payment models.
“There’s a ton of opportunity to do that better, and to make money,” Archway’s David Terry said.

The complexity of structuring risk-sharing deals was another key theme that emerged from the discussion. Providers must craft their ACO and bundled payment contracts carefully, advised Duane Morris’ Lisa Clark.
An ACO contract requires providers to calculate the risk level they are comfortable with, but it also must take into account such factors as exclusivity and market share. That complexity, Clark noted, is why contracts can take two to three months longer than projected to finalize. Payment reform is a source of anxiety and trepidation for many providers as well as their private equity investors. But for those who have guidance from financial and legal experts in value-based care, the new models represent a unique and lucrative opportunity for them to manage the health care premium dollar. Private equity investors have opportunities to invest in the companies helping providers navigate new payment models or the health care services companies poised to capitalize on those models.

CMS Proposes New Program Integrity Measures for the Medicare Provider Enrollment Process

On March 1, 2016, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule entitled “Program Enhancements to the Provider Enrollment Process”. According to CMS, it is engaging in this new rule making in order to implement several program integrity provisions that were part of the Affordable Care Act.

The major provisions of the proposed rule address a number of program integrity measures that include –

Disclosure of Affiliations:

Health care providers and suppliers must report affiliations with entities and individuals that: (1) currently have uncollected debt to Medicare, Medicaid, or CHIP; (2) have been or are subject to a payment suspension under a federal health care program or subject to an Office of Inspector General (OIG) exclusion; or (3) have had their Medicare, Medicaid, or CHIP enrollment denied or revoked. CMS could deny or revoke the provider’s or supplier’s Medicare, Medicaid, or CHIP enrollment if CMS determines that the affiliation poses an undue risk of fraud, waste, or abuse.

Revocation of Enrollment:

CMS could deny or revoke a provider’s or supplier’s Medicare enrollment if CMS determines that the provider or supplier is currently revoked under a different name, numerical identifier, or business identity.

CMS can revoke a provider’s or supplier’s Medicare enrollment—including all of the provider’s or supplier’s practice locations, regardless of whether they are part of the same enrollment—if the provider or supplier billed for services performed at or items furnished from a location that it knew or should have known did not comply with Medicare enrollment requirements. Continue reading CMS Proposes New Program Integrity Measures for the Medicare Provider Enrollment Process

FTC Settles Antitrust Claims Against Orthopedists

Following an investigation, on December 14, 2015, the FTC filed a Complaint and a Decision and Order that resolved antitrust claims against 19 orthopedists in Berks County, PA, arising out of a 2011 merger of six independent physician groups in which the orthopedists practiced.  Those six groups merged to form Keystone Orthopaedic Specialties (“Keystone”).

According to the Complaint, the 19 orthopedists comprised 76% of the 25 physician orthopedic physician services market in Berks County.  Prior to the merger, competition among orthopedists was robust, with the 25 orthopedists in the market practicing in 11 different physician groups.  The merger, however, resulted in market concentration likely well above the thresholds for presuming market power and illegality under the Herfindahl-Hirschman Index.

According to the Complaint, because of the highly concentrated market and entry barriers, health plans operating in Berks County were unable to establish networks of orthopedists for their enrollees in Berks County, and were therefore forced to pay higher rates to the Keystone  orthopedists, which they passed on to their enrollees.

The Decision and Order imposes extensive multi-year restrictions on the types of joint arrangements the Keystone orthopedists and their practices may enter into going forward, prohibiting some arrangements altogether, while requiring FTC consent for others.

The lesson of Keystone is simple.  Physicians practicing in independent physician groups who are contemplating a joint venture of any kind should retain antitrust counsel to advise on and resolve any antitrust issues before the arrangement is consummated in order to avoid regulator scrutiny and the potential for the severe penalties and practice restrictions that come with it.

ACOs Waking Up to the Value of Post-Acute Care Providers

Recently, the American Hospital Association published in its newletter Trendwatch a detailed 16 page article entitled “The Role of Post-Acute Care in New Care Delivery Models,” December 2015.   The article discusses what we have been trying to tell our post-acute care, especially nursing home clients, for years: become a valued partner of an Accountable Care Organization (“ACO”) and be ready to show your value to those ACOs, or continue to operate as you historically have at your own peril.

When ACOs first started, there was virtually no room or focus on long-term care providers being involved in an ACO. Some hospitals talked initially about home health care, but very little discussion was geared towards long-term care providers being in an ACO network because hospitals did not understand the long-term care environment. Continue reading ACOs Waking Up to the Value of Post-Acute Care Providers