Health Care Law Blog

Healthcare executives are advised to consider the significance of a ruling issued in 2024 by the Internal Revenue Service (IRS) which revoked the tax-exempt status of a non-profit organization. In Private Letter Ruling* 202437007, the IRS determined that a non-profit organization had failed the “operational test” and revoked its tax-exempt status.

The entity in question had indicated no charitable activities or related expenses, leading the IRS to conclude that the organization was not operating exclusively for tax-exempt purposes.

Implications for Healthcare ...

The Centers for Medicare & Medicaid Services (CMS) have recently released updated guidance regarding hospital co-locations arrangements. After nearly two years of deliberations and revisions, the final Guidance for Hospital Co-location with Other Hospitals or Health Care Facilities (the “Final Guidance”) was released on November 12, 2021 and took effect immediately upon publication. The Final Guidance is meant to address how CMS and other state agency surveyors will evaluate how hospitals share their space, services, and staff.

On December 27, 2021, Governor Gretchen Whitmer signed Senate Bill 759 into law, which took effect immediately. SB 759 allows individuals without a license for the practice of a health profession to perform certain limited duties. For example, students in a health profession training program may perform duties assigned while training.

On July 9, 2021, President Biden issued an Executive Order (EO) on Promoting Competition in the American Economy where he seeks to address many facets of the American economy and promote a more competitive marketplace.

On March 2, 2021, the Michigan Department of Health and Human Services (“MDHHS”) issued an Emergency Order that relaxes the visitation requirements for residential care facilities. The December 8, 2020 MDHHS Order involving residential care facilities was rescinded. The March 2, 2021 Order (the “Order”) became effective immediately.

On October 6, 2020, the Michigan Department of Health and Human Services ("MDHHS") issued an emergency order (the "MDHHS Order") that retains many of the same requirements that apply to residential care facilities under the previously issued executive orders. As noted in a prior blog post, the Michigan Supreme Court recently held that Governor Whitmer did not have authority after April 30, 2020 to issue or renew any executive orders related to the COVID-19 pandemic. Most of the same requirements will continue to apply to residential care facilities under the MDHHS Order. The MDHHS Order became effective immediately, and will remain in effect through October 30, 2020 (and may be renewed through a subsequent order).

On July 23, 2020, Governor Whitmer issued Executive Order 2020-156, which extends the current restrictions limiting the visitors allowed at health care facilities, residential care facilities, congregate care facilities, and juvenile justice facilities. Executive Order 2020-136 and its predecessors initially imposed these restrictions on visitors permitted to such facilities. Executive Order 2020-156 extends the restrictions through August 31, 2020.

In response to the improvements in hospitals’ and health care professionals’ capacity to care for COVID-19 patients, Governor Whitmer has rescinded Executive Order 2020-61, which temporarily suspended the scope of practice, supervision, and delegation restrictions for many health care providers during the initial surge of cases in March.

Through Executive Order 2020-136, Governor Whitmer has extended the duration of restrictions on the entry of visitors into health care facilities and residential care facilities. These restrictions were originally imposed through Executive Order 2020-72 and extended through Executive Order 2020-108. Executive Order 2020-136 now extends the restrictions through July 24, 2020.

On May 20, 2020, Governor Gretchen Whitmer issued Executive Order 2020-95, which updates precautionary and notification requirements for long-term care facilities to protect residents and employees from the spread of COVID-19. Executive Order 2020-95 rescinds Executive Order 2020-84, which provided initial protections for long-term care residents. “Long-term care facility” includes a nursing home, home for the aged, adult foster care facility, or assisted living facility.

The Provider Relief Fund was established through the Coronavirus Aid, Relief and Economic Security (CARES Act) to support health care providers facing lost revenue and increased expenses relating to COVID-19. Within the Provider Relief Fund, certain amounts are allocated for various types of providers. For example, there are specific allocations to hospitals, rural hospitals, and providers treating uninsured patients for COVID-19. Additionally, $50 billion was allocated for general distribution to providers. Of the $50 billion, the first $30 billion was quickly disbursed to facilities and providers who received Medicare fee-for-service reimbursements in 2019. The remaining $20 billion of the general distribution was distributed beginning on April 24, 2020.

On May 3, 2020, the Michigan Department of Health and Human Services (MDHHS) provided guidance on the best practices for continued compliance with Executive Order 2020-17. Executive Order 2020-17 implemented temporary restrictions on non-essential medical and dental procedures as of March 21, 2020. Executive Order 2020-17 required all hospitals, freestanding surgical outpatient facilities, dental facilities, and state operated outpatient facilities (collectively, “covered facilities”) to temporarily postpone all non-essential medical and dental procedures until the state of emergency in Michigan is lifted. Currently, the state of emergency is set to continue through May 28, 2020 under Executive Order 2020-68.

On April 23, 2020, the Centers for Medicare and Medicaid Services (CMS) updated its guidance on infection control and prevention of COVID-19 for Home Health Agencies (HHAs). CMS provided initial guidance on March 10, 2020, which addressed the concerns of COVID-19 and provided answers to practical questions impacting HHAs. In this update, CMS has expanded the COVID-19 guidance and regulations to apply to Religious Nonmedical Healthcare Institutions (RNHCIs).

This blog has since been updated with new information since its original publication. Due to rapidly changing laws and regulations surrounding COVID-19 matters, please consult your attorney and/or advisor for the latest information before taking any action.

On April 15, 2020, Governor Gretchen Whitmer issued Executive Order 2020-50 which provides protection for residents of long-term care facilities and guidance on the reporting, discharge and transfer of COVID-19 patients. Long term care facility residents are particularly susceptible to the rapid spread of COVID-19. The enhanced restrictions and regulations of Executive Order 2020-50 aim to protect both residents and employees of long term care facilities from the virus, while ensuring residents receive the care they need. The restrictions of Executive Order 2020-50 currently continue through May 13, 2020.

On April 5, 2020, Governor Whitmer issued Executive Order 2020-37 which extends restrictions on the entry of individuals into health care facilities, residential care facilities, congregate care facilities, and juvenile justice facilities. Previously, Executive Order 2020-07 prohibited visitors that were not necessary to the provision of medical care, to support the activities of daily living, or to exercise the power of attorney or court-appointed guardianship for an individual under the facility’s care from these facilities.

Nursing homes are potential hotspots where COVID-19 can quickly spread to vulnerable individuals. Life Care Center in Kirkland, Washington became the epicenter of the outbreak in Washington after the virus spread rapidly among residents. Life Care Center is not the only nursing home affected, as the CDC reported on March 23, 2020 that 147 nursing homes in 27 states have at least one COVID-19 positive patient. Recognizing the need to keep nursing home residents and healthcare workers safe, the Centers for Medicare and Medicaid Services has implemented an enhanced, focused inspection process for nursing homes to combat the spread of COVID-19.

In response to COVID-19, the Centers for Medicare and Medicaid Services has issued blanket waivers of certain requirements so that hospitals and health care systems have the flexibility needed to manage potential surges. The waiver of these requirements is retroactively effective as of March 1, 2020 and lasts until the end of the emergency declaration for COVID-19.

Last year, the Centers for Medicare and Medicaid Services (“CMS”) issued long-anticipated draft guidance concerning shared space and co-location arrangements between hospitals and other providers. The guidance is meant to clarify how CMS and state agency surveyors will evaluate a hospital’s space sharing or contracted staff arrangements when assessing the hospital’s compliance with the Medicare Conditions of Participation (CoPs).

Recently, the Department of Licensing and Regulatory Affairs finalized changes to the licensing rules for Family and Group Child Care Homes and the licensing rules for Child Care Centers. The purpose of these changes is to maintain compliance with the recent amendments to the Child Care Organization Act and the new requirements of the federal Child Care and Development Block Grant.

On May 28, 2019, the Centers for Medicare & Medicaid Services ("CMS") finalized a rule (the "Final Rule") to update and modernize requirements for the Programs of All-Inclusive Care for the Elderly ("PACE").

The Centers for Medicare & Medicaid Services ("CMS") recently lifted its temporary moratorium on the Medicare enrollment of new home health agencies ("HHAs"), subunits, and branch locations in Michigan, Florida, Illinois and Texas. As of January 31, 2019, there are no active Medicare provider enrollment moratoria in any state.

The Michigan Health Insurance Claims Assessment (“HICA”) tax has been repealed, effective as of October 1, 2018. On June 11, 2018, Governor Snyder signed a series of bills repealing the HICA tax.

Effective November 28, 2016, the Centers for Medicare and Medicaid Services published a final rule which revised the Medicare Conditions of Participation for Long-Term Care Facilities. There are three different phases of implementation.

Earlier this year, the Michigan Department of Licensing and Regulatory Affairs (LARA) issued proposed administrative rules relating to the licensing of health care facilities. Currently, there are separate sets of rules that apply to each type of health facility, such as hospitals, hospices, and nursing homes.

Programs of All-Inclusive Care for the Elderly (PACE) organizations provide certain medical and social services to eligible individuals who meet the Long Term Care level of care criteria.

Chemed Corporation and various of its subsidiaries, including Vitas Hospice Services LLC and Vitas Healthcare Corporation (collectively “Vitas”), recently settled allegations brought by the federal government that Vitas violated the False Claims Act by submitting to Medicare false claims for hospice services.

Earlier this year, the Internal Revenue Service (IRS) revoked the tax exempt status of an unidentified hospital for failing to comply with the Affordable Care Act (ACA).

The U.S. Department of Health & Human Services ("HHS") Office of Inspector General ("OIG") recently issued a preliminary report regarding quality-of-care concerns at skilled nursing facilities ("SNFs"). The report was issued in connection with the OIG's ongoing review of potential abuse and neglect of Medicare beneficiaries in SNFs.

The Centers for Medicare & Medicaid Services ("CMS") recently extended the temporary moratorium on the Medicare enrollment of new home health agencies ("HHAs"), subunits, and branch locations in Michigan.

The Centers for Medicare & Medicaid Services ("CMS") recently announced that they will delay enforcement penalties related to Phase 2 of their revised nursing home Requirements for Participation (commonly referred to in the industry as the "Mega Rule").

Governor Snyder recently signed into law Public Act 22 (Senate Bill 213), which revises the 2016 telehealth bill to clarify that health professionals in Michigan may prescribe controlled substances without an in-person examination. Michigan now joins a growing number of states that allow health professionals to prescribe controlled substances via telemedicine.

On January 9, 2017, the Centers for Medicare & Medicaid Services (“CMS”) issued final rules that establish minimum standards for home health agencies (the “Rules”). According to CMS, the Rules are intended to improve the quality of health care services for Medicare and Medicaid patients and strengthen patients’ rights.

The Rules, which were published in the Federal Register on January 13, 2017, come more than two years after a draft proposal was introduced in October 2014. The Rules are mostly adopted as proposed, with a few clarifying changes. The Rules will become effective on July 13, 2017. This means agencies have less than six months to make changes necessary to comply with the revisions.

Hospice care is intended to help terminally ill beneficiaries continue living with minimal disruptions and to provide support for a beneficiary’s family and caregivers. In a recent report, the Department of Health and Human Services Office of Inspector General (OIG) found that hospices are not always meeting two key coverage requirements for the Medicare hospice benefit: (1) that beneficiaries sign an election statement and (2) that a physician certifies that the beneficiary is terminally ill. The purpose of these requirements is, among other things, to properly inform beneficiaries of the implications of hospice care and to prevent Medicare fraud.

Recently, the Centers for Medicare & Medicaid Services (“CMS”) issued a final rule (“Final Rule”) updating the Medicare Conditions of Participation (“CoPs”) for long-term care (“LTC”) facilities. It is the first time in over 15 years that substantial LTC CoP revisions have been released.

LTC facilities affected by the Final Rule include skilled nursing facilities for Medicare and nursing facilities for Medicaid, or those facilities that are duly certified. The Final Rule took effect on November 28, 2016, however CMS has planned for a phased implementation. LTC providers must complete the three implementation phases by November 28 in the years 2016, 2017 and 2018, respectively. CMS has estimated that the costs of compliance will be $62,900 in the first phase of implementation, and $55,000 per year for phases two and three.

A recent Memorandum issued by the Centers for Medicare & Medicaid Services ("CMS") to state survey agency directors (the "Memorandum") discusses a nursing home's responsibility to protect residents' privacy, particularly with regard to social media. The Memorandum was issued following a series of media reports documenting the inappropriate posting of residents' photographs on social media by nursing home staff. 

The Centers for Medicare & Medicaid Services ("CMS") recently announced the statewide expansion of its temporary moratorium on the Medicare enrollment of new home health agencies ("HHAs"), subunits, and branch locations in Michigan.  As a result of the moratorium expansion, effective as of July 29, 2016, new HHAs in Michigan are precluded from enrolling in Medicare until the moratorium is lifted. The temporary moratorium also precludes the Medicare enrollment of new HHAs in Florida, Illinois, and Texas.  

The U.S. Department of Health & Human Services ("HHS") recently issued a final rule that implements the nondiscrimination provisions under Section 1557 of the Affordable Care Act (the "Final Rule"). The Final Rule becomes effective July 18, 2016.

On March 31, 2016, the United States District Court for the Northern District of Alabama granted summary judgment for AseraCare in one of the largest False Claims Act (FCA) lawsuits against a hospice provider. In this whistleblower case, the government sought over $200 million, alleging that defendant AseraCare overbilled Medicare for hospice services by falsely certifying that patients were eligible for hospice care.

The litigation began when six AseraCare employees in Alabama, Wisconsin and Georgia (the "relators") filed whistleblower cases under the FCA. The employees alleged that AseraCare knowingly submitted false claims to Medicare by falsely certifying that patients met the Medicare eligibility requirements for the hospice benefit. In order to be eligible for the Medicare hospice benefit, a patient's physician must certify that "the individual's prognosis is for a life expectancy of 6 months or less if the terminal illness runs its normal course." 42 C.F.R. § 418.22(b)(1). The Department of Justice (DOJ) intervened in January 2012.

The Affordable Care Act ("ACA") authorizes the innovative payment model referred to as direct primary care, and more commonly known as “concierge medicine.” Under the direct primary care model, patients can access comprehensive coverage of basic healthcare services for a flat monthly fee.  Such services generally include guaranteed same-day or next-day visits with no waiting times. Concierge medicine is becoming increasingly popular in states where it is allowed.

On April 30, 2015, the Centers for Medicare & Medicaid Services (“CMS”) issued a proposed rule that would update fiscal year (“FY”) 2016 Medicare payment rates and the wage index for hospices serving Medicare beneficiaries (the “Proposed Rule”). CMS estimates that the Proposed Rule would result in a 1.3 percent ($200 million) increase in hospice payments for FY 2016. The highlights of the Proposed Rule are summarized below. 

On Friday, October 17, Governor Rick Snyder signed the Right to Try Act, which allows patients to try experimental drugs and other treatments before they have been approved by the Food and Drug Administration (FDA). The law gives patients with advanced illnesses access to drugs that successfully cleared Phase 1 of an FDA approval. Phase 1 testing seeks to establish a drug's safety and profile and evaluates possible side effects. It involves 20-80 volunteers and lasts approximately one year.

The Centers for Medicare & Medicaid Services ("CMS") recently announced proposed changes to the Medicare home health prospective payment system (“PPS”) for the 2015 calendar year. CMS is proposing to tighten eligibility requirements for home health services and set a minimum requirement on Home Health Agencies ("HHAs") to prove their effectiveness, as well as revise how much CMS will pay for certain services. These proposed changes are expected to reduce Medicare payments to HHAs by $58 million next year alone, a reduction of .30 percent.

To qualify for the Medicare home health benefit, a beneficiary must be under the care of a physician, have a need for skilled nursing care, physical therapy, speech-language pathology, or continued need for occupational therapy. Further, the beneficiary must be homebound and receive home health services from a Medicare approved agency.

The proposed changes include the following:

The Office of the Inspector General for the United States Department of Health and Human Services (the “OIG”) recently issued a Special Fraud Alert regarding laboratory payments to referring physicians (the “Alert”). The Alert relates to two types of compensation arrangements - Specimen Processing Arrangements and Registry Arrangements - between clinical laboratories and physicians who order clinical laboratory tests that the OIG believes present a substantial risk of fraud and abuse under the federal anti-kickback statute.

Due to regulatory and reimbursement constraints, health care providers are increasingly merging, affiliating, and acquiring other health care entities. In these transactions, the Medicare providers must identify whether a Medicare change of ownership (“CHOW”) will occur. Although it may appear, from a business standpoint, that a change of ownership will occur, the transaction may not necessarily be considered a CHOW for Medicare. Essentially, if the person or entity with ultimate responsibility for the provider changes, typically there will be a Medicare CHOW. Sometimes, but not always, this will be indicated by whether there has been a change in the taxpayer identification number.

CHOWs impact the Medicare provider agreement involved in the sale. Unless the buyer takes steps to affirmatively reject the seller's provider agreement, in a Medicare CHOW, the seller's provider agreement is automatically assigned to the buyer. This provides billing advantages for the buyer without having to enroll as a new Medicare provider, go through the initial enrollment process, and be re-surveyed or re-accredited, which takes several months.  

In March of 2014, the Office of the Inspector General ("OIG") released the "OIG Compendium of Priority Recommendations." The recommendations offered are designed to help current programs for the Department of Health and Human Services ("HHS") run more effectively. The recommendation discussed twenty-five "opportunities" which, if addressed, would help to eliminate fraud and waste among HHS programs. The “opportunities” include the following:

On Feb. 4, 2014, new legislation took effect amending Michigan's Do-Not-Resuscitate Procedure Act (the "Act").The Act allows a guardian, who has the power under Michigan’s guardianship laws, to consent to a do-not-resuscitate order (“DNR Order”) on behalf of a legally incapacitated person under certain conditions. This power does not extend to a guardian ad litem.

In 1996, Michigan passed the Act, which permits a competent adult or his or her patient advocate to sign a DNR Order instructing emergency personnel not to perform potentially life-saving procedures in the event of the cessation of respiration and circulation. However, the Act did not give express authority to a guardian acting on behalf of an individual to authorize a DNR Order.

Omnicare Inc., the nation's largest dispenser of prescription drugs in nursing homes, announced on October 23, 2013, that it has agreed to pay $120 million to settle a whistleblower lawsuit alleging kickbacks to nursing homes.

The whistleblower in the case, an Ohio pharmacist named Donald Gale, worked for Omnicare from 1993 until 2010. The lawsuit, filed in federal court in Cleveland in 2010, accused Omnicare of giving discounts for prescription drugs to nursing homes for certain Medicare patients in return for referrals of other patients at higher prices paid for by the federal government.

On March 7 and 8, 2013, the members of Foster Swift’s Health Care Law Group attended the 19^th Annual Health Law Institute. This two-day institute, which is co-sponsored by the Institute for Continuing Legal Education and the Health Care Law Section of the State Bar of Michigan, focused on recent legal developments in health care law. Specific topics addressed at this year’s Health Law Institute included:

On February 11, 2013, the Departments of Justice and Health and Human Services jointly released a report stating that the government recovered $4.2 billion in fiscal year 2012 and for every dollar spent on health care-related fraud and abuse investigations in the last three years, the government recovered $7.90. The report indicates that this is the highest 3-year average return on investment in the 16 year history of the Health Care Fraud and Abuse program. The Health Care Fraud Prevention and Enforcement Action Team (“HEAT”), which has operations in Detroit, was instrumental in this recovery effort.

Recently, health care organizations have been inquiring about employment tax issues, and more specifically, the proper tax classification of their workers.  Questions include whether to classify medical directors, such as hospice medical directors, as employees versus independent contractors.

The latest edition of the Foster Swift Health Care Law Newsletter has just been released.  Topics include Electronic Health Records, Medicare Reimbursement for Resident Research and Hospital Community Needs Assessments.  In order to whet your appetite, below is a brief summary of the articles:

On August 24, the Michigan legislature passed two bills which are expected to be signed by Governor Snyder, which will be known as the "Health Insurance Claims Assessment Act".  The Health Insurance Claims Assessment Act will assess a 1% health care claims tax on paid health insurance claims in Michigan.  This tax will be paid by health insurers and replaces an existing 6% assessment on Medicaid health claims.  The tax will be assessed for a period of two years, beginning January 1, 2012 and ending January 1, 2014.

In conjunction with a step-up in other fraud and abuse enforcement activities, CMS recently announced new screening procedures, which will be applicable to newly enrolling providers and suppliers as well as to providers and suppliers who are currently enrolled in Medicare, Medicaid and CHIP who revalidate their enrollment information.