Bankers, Lawyers, and the Conflict Between State and Federal Marijuana Laws

An article in The Philadelphia Inquirer reported about the reluctance of major banks to participate in the marijuana industries in those states that have legalized marijuana for recreational and/or medicinal purposes because marijuana is still a Schedule 1 controlled substance under the federal Controlled Substance Act.   I have previously written that lawyers in those states share similar concerns because the rules of ethics prohibit lawyers from assisting clients in illegal activities.

The conflict between state legalization and federal criminalization of marijuana thus appears to be depriving the businesses and individuals, such as investors, growers, manufacturers, dispensaries, physicians, patients, and consumers, currently or potentially participating in the emerging marijuana industry from the two resources – lawyers and bankers – that are arguably the most important to the establishment and sustained growth of an emerging, regulated industry.    This is especially concerning given the importance to all citizens of the careful implementation of marijuana legislation. Continue reading Bankers, Lawyers, and the Conflict Between State and Federal Marijuana Laws

PA Senate Passes Medical Marijuana Legislation Again

Earlier this year, I wrote that 2015 might be the year that medical marijuana legislation is passed in Pennsylvania.  This was because in 2014 the PA Senate approved such legislation, and, although the legislation sat in the PA House through the end of the term, the election of Governor Tom Wolf removed the additional hurdle of a veto by former Governor Tom Corbett were the PA House to pass the legislation.

On May 12, 2015, the PA Senate again passed a medical marijuana bill.  It obviously remains to be seen what the PA House will do, but given Governor Wolf’s indication that he would not veto such legislation should it reach his desk, and reports that up to 88% of PA residents are in favor of legalized medical marijuana, the odds of legalization in 2015 seem to be improving. Continue reading PA Senate Passes Medical Marijuana Legislation Again

Texas Supreme Court Holds That Compounding Pharmacies Are Health Care Providers Under Texas Medical Liability Act

On April 24, 2015, the Texas Supreme Court dismissed claims against a compounding pharmacy and its individual pharmacists which alleged negligence in compounding a lipoic acid medication, finding that the defendants were health care providers entitled to the protections in the Texas Medical Liability Act (“TMLA”).

Continue reading Texas Supreme Court Holds That Compounding Pharmacies Are Health Care Providers Under Texas Medical Liability Act

SCOTUS Limits Claims Brought by Healthcare Providers’ for Denied Medicaid Reimbursement

In a recent 5-4 decision by the U.S. Supreme Court, Armstrong v. Exceptional Child Center, Inc., Slip. Op., 575 U.S. ____ (March 31, 2015), Justice Scalia, writing for the majority, took aim at health care providers seeking to enforce Medicaid rate-setting provisions against a state that refused to incorporate those provisions in the state’s Medicaid plan, and instead reimbursed providers for Medicaid services at lower rates.

In Armstrong, the plaintiffs, providers of habilitation services under Idaho’s Medicaid plan sought an injunction to prevent Idaho’s State Department of Health from violating Section 30(A) of Medicaid, 42 U.S.C. § 1396(a)(30)(A), which requires a state to “assure that payments are consistent with efficiency, economy, and quality of care,” while “safeguard[ing] against unnecessary utilization of. . . care and services.”  The Court reversed the Ninth Circuit’s decision that the Supremacy Clause gave the providers an implied right of action to seek an injunction requiring Idaho to comply with Section 30(a). Continue reading SCOTUS Limits Claims Brought by Healthcare Providers’ for Denied Medicaid Reimbursement

OIG Issues Guide For Health Care Boards on Compliance Oversight

On April 20, 2015, the Department of Health and Human Services Office of Inspector General (“OIG“) published its “Practical Guidance for Health Care Governing Boards on Compliance Oversight” (the “Guide“).  The Guide was prepared in collaboration with the Association of Healthcare Internal Auditors, the American Health Lawyers Association, the Health Care Compliance Association, and according to the Guide, provides tips to health care boards (“Boards“) on four categories: “(1) roles of, and relationships between, the organization’s audit, compliance, and legal departments; (2) mechanism and process for issue-reporting within an organization; (3) approach to identifying regulatory risk; and (4) methods of encouraging enterprise-wide accountability for achievement of compliance goals and objectives.”  While not a legally binding document, the Guide provides helpful insight for Boards and underscores best practices in these areas. Continue reading OIG Issues Guide For Health Care Boards on Compliance Oversight

Health Care Deals 2015 – ACG NY Panel May 15, 2015

Connect with Duane Morris LLP’s Health Law and Private Equity practices at the ACG NY Health Care Deals 2015 panel, in Tarrytown, New York, May 15, 2015.

Ari J. Markenson will be moderating the panel.

Panelists will talk about the state of the health care deal market in 2015, the effects of health reform and regulatory changes and talk about what might be on the horizon.

The panel includes –

Joshua Cherry-Seto, Chief Financial Officer, Blue Wolf Capital Partners LLC

John Cramer, Managing Director, Oppenheimer & Co.

Scott Gold, Senior Vice President, Alcentra Capital Corporation

Jeff Woods, Partner, Head of Healthcare Practice, The Parthenon Group

Event and Registration Information is available at ->

You can reach Ari J. Markenson at 212.692.1012 or

We look forward to seeing you at the event.

For more information about our healthcare and private equity practice, please visit:

Specific Facts Suggest Hospitals and Insurers Agreed to Group Boycott

A per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, generally requires an agreement among horizontal competitors that unreasonably restrains trade. To withstand a motion to dismiss, a Section 1 plaintiff must allege facts that suggest direct of evidence of an agreement among the defendants, as opposed to alleging facts that merely are consistent with parallel conduct. These principles have been referred to by some courts as creating a heightened pleading standard for Section 1 claims.

In Arapahoe Surgery Center, LLC, et al. v. Cigna Healthcare, Inc., et al., 2015 U.S. Dist. Lexis 28375 (D. CO.), the Colorado District Court determined that the plaintiffs’ allegations of a group boycott were sufficient to meet the pleading requirements under Section 1, and therefore denied a motion to dismiss filed by three insurance carrier defendants. The specificity of the factual allegations concerning the agreement among the defendants, and the acts in furtherance thereof, underscore the importance of antitrust compliance in the healthcare and health insurance industries. Continue reading Specific Facts Suggest Hospitals and Insurers Agreed to Group Boycott

On-call coverage contracts are OK

An  orthopedic surgeon agreed on two separate occasions to an on-call coverage contract with a local hospital in which he warranted that no portion of his compensation was in exchange for referrals.  When the contracts were terminated by the hospital after the surgeon invested in a competing surgery center, the surgeon brought a whistleblower False Claims Act action against the hospital, alleging that the contract was intended to induce his referrals.

The U.S. District Court for the Eastern District of Pennsylvania, in Cooper v. Pottstown Hospital Co., LLC, et al., dismissed the surgeon’s complaint.  The district court’s description of the failure of the complaint illustrates the characteristics of on-call contracts that make them a permissible relationship between hospitals and physicians.  Continue reading On-call coverage contracts are OK

Certain FCA Defendants Dismissed; “Lumping” Defendants Together Is Not Enough To State An FCA Claim

A district court in the Northern District of Illinois recently partially granted a motion to dismiss the Government’s False Claims Act (“FCA”) complaint filed against IPC The Hospitalist Company, Inc. (“IPC”) and its subsidiaries and affiliates. The district court dismissed IPC’s subsidiaries and affiliates because the Government simply “lumped” those subsidiaries and affiliates in with IPC, and did not plead facts tying the subsidiaries and affiliates to the alleged fraud. The decision underscores an important defense available to FCA defendants, and highlights the nuanced pleading requirements that the Government must meet in an FCA case. Continue reading Certain FCA Defendants Dismissed; “Lumping” Defendants Together Is Not Enough To State An FCA Claim

CMS Announces “Next Generation” ACO Model

The Centers for Medicare and Medicaid Services (CMS) recently announced the creation of the Next Generation Accountable Care Organization (ACO) model (see

The new model builds on lessons learned from the earlier Pioneer Model and Medicare Shared Savings Program (MSSP) ACOs.  As with the earlier ACOs, the new model aims to improve quality and coordination of care.  The new model is also part of a larger, ongoing effort to shift Medicare reimbursement away from traditional fee-for-service payment models to alternative and value-based payment models.  Next Generation ACOs will take on greater risk than ACOs did under the earlier models, but will also have the potential to reap greater rewards.

CMS touts its new model as “one that sets predictable financial targets, enables providers and beneficiaries greater opportunities to coordinate care, and aims to attain the highest quality standards of care.” (  The Next Generation model provides several new “benefit enhancement” tools to further these goals.   While patients will be free to visit doctors outside the ACO, the model seeks to encourage patient participation by providing a reward of up to $50 per year to patients who obtain a majority of their care from ACO-participating providers.  Beneficiaries will also have greater ability to confirm their ACO participation and to communicate with their providers.  The new model will increase the availability of home visits, telemedicine services and skilled nursing facilities.  Finally, CMS envisions increased communication and collaboration between CMS and ACOs themselves.

Next Generation ACOs will be measured against new, prospectively determined benchmarks, a change from the current ACO models for which benchmarks are finalized at the end of the performance year.   The new model also provides a choice between two risk arrangements for assessing the ACO’s share of savings or losses.  Four payment systems will be available to the Next Generation ACOs:  traditional fee-for-service; fee-for-service with an additional monthly, per-beneficiary infrastructure payment; population-based; and capitation. 

Letters of Intent for the first round of Next Generation ACO applications are due by May 1, 2015; and the applications themselves are due by June 1, 2015.  A second round of applications will take place during Spring of 2016.