2023 Health Care Predictions

hospital beds in a ward
Bruce D. Armon, Alyson M. Leone, Katie Barrett Wiik, Michael A. Finio, Brenda Glaser Abrams, Matthew D. Kohel, Jonathan Havens, Adam S. Fayne, Athira Sivan, Richard T. Frazier, Rob Duston
Published

See below the Saul Ewing LLP Health Law Practice Group 2023 predictions from various members of our practice group! Our colleagues help interested parties in the health care delivery system with transactional, regulatory, compliance and litigation issues at the Federal and state level. We are pleased to introduce the newest partner in our health care group, Alyson Leone, who is based in our Princeton office and our new-ish colleagues, partner Katie Barrett Wiik, who is based in our Minneapolis office, partner Matthew Kohel from our Baltimore office, and counsel Brenda Glaser Abrams based in our Philadelphia office, plus colleagues who have been with Saul Ewing for a ‘few’ years and several who have spent a few decades with the Firm. The health care delivery landscape continues to change and our colleagues in the Health Law Practice Group remain committed to providing excellent legal advice to every client and helping our clients achieve their business objectives in a compliant manner. Each of our Health Law Practice Group colleagues are Inspired People who are Inspiring Trust. We hope you enjoy our ‘predictions’ which are non-binding 😊 and we welcome your feedback and sincerely appreciate your confidence in using Saul Ewing for your legal needs.

Bruce Armon
Chair, Health Law Practice Group



Investment in Health Care Likely to Continue in 2023
Author: Alyson Leone

Notwithstanding concerns about the economy, investments in the health care industry are likely to continue to proliferate in 2023. M&A deals hit their peak in 2021, but still continued at above average rates in 2022. Health care remains an attractive investment for private equity this year. Innovation in the space, especially after COVID, has helped streamline care and increase profits. Investors have realized that an efficient, well-run operations team is critical to financial success. And no one knows business like Wall Street.

Consolidation will remain a key factor to the viability of medical practices and health care facilities both financially and operationally. It is just not possible for the smaller entities to negotiate reasonable rates from third-party payors without the data analytics that a larger structure can provide. And with the continued push towards value-based care, the multi-specialty practices have an advantage.

However, buyers will need to overcome uncertainties in the economy, including inflation and interest rate hikes. There is also an increased focus on antitrust reviews and government scrutiny of fraud and abuse. And we cannot forget about the FTC’s push to eliminate non-compete restrictions, which has been a staple protecting health care investments for years.

It remains to be seen what will happen, but a crystal ball would likely show that acquisitions and divestitures will remain significant in the health care industry in 2023.

Pending U.S. Supreme Court Decisions Will Have Substantial Implications for the Health Care Industry
Author: Katie Barrett Wiik

Now that the new year is upon us, the U.S. Supreme Court will be issuing its opinions from this term with increasing frequency. Expect some additional procedural clarity in the area of the federal False Claims Act, which often involves Medicare and Medicaid payments to health care providers. The question of when the federal government can dismiss an FCA lawsuit after initially allowing the relator to pursue the suit is the central issue in United States, ex rel. Polansky v. Executive Health Resources, Inc. The oral argument suggests that the Court is likely to fashion a procedural rule between the two parties’ positions and reject both the government’s position that it can dismiss at any time as well as the relator’s suggestion that the government lacks the authority now, after the litigation at issue has been underway for several years.

 

There are several other pending U.S. Supreme Court cases that do not expressly involve the health care industry but are nevertheless expected to have significant implications for the industry. By late June, the Court will also provide clarity on:

  •  whether and when federal overtime pay for highly-compensated employees is mandated by the Fair Labor Standards Act, in Helix Energy Solutions Group v. Hewitt;
  • whether the Court will sharpen the sword of First Amendment religious objections to state anti-discrimination laws—those protecting LGBTQIA people face the most sustained attacks—in 303 Creative LLC v. Elenis;
  • when the dormant commerce clause prohibits a state from setting regulatory standards for products sold within its own borders, when the standards have substantial economic effects outside its borders, in National Pork Producers Council v. Ross;
  • whether the federal constitution’s equal protection clause prohibits colleges and universities from considering incoming students’ racial and ethnic backgrounds as one of many factors in admissions decisions, in Students for Fair Admissions v. University of North Carolina and Students for Fair Admissions Inc. v. President & Fellows of Harvard College.

Given the high demand for providers and the desire of many patients to receive care from providers rooted in their own communities, additional legal barriers to diversifying the health care profession and its educational pipeline could be an unwelcome setback for many in and wishing to join the health care industry. Dust from the Court’s Dobbs decision that eliminated the longstanding Fourteenth-Amendment federal right to access abortion also continues to swirl. 2023 is likely to bring substantial additional regulation occurring at the state level, both by legislators looking to protect as well as those looking to eliminate access to abortion care.
 

Health Care Antitrust Predictions
Author: Mike Finio

The upcoming year stands a good chance to scoop health care and hospital systems under the increasingly aggressive activities umbrella of the Federal Trade Commission and U.S. Department of Justice. Both agencies are taking to heart the Biden Administration’s commitment to increasing competition across all sectors of the economy, and two areas of recent highlight promise to have more light shining on health care providers in 2023:

  1. From the FTC, a vigorous enforcement effort to call out non-compete agreements, especially across lower-wage earning workers. Several recent enforcement activities were followed by a proposed new FTC rule that would both outlaw virtually all non-competes nationwide and require all employers to rescind almost all in-place non-compete restrictions. The proposed rule will soon be open for comment. Given it and the enforcement activities, health care providers would be wise to scour their existing use of non-competes across their work forces, and to work with counsel to assess what, if any risks, they pose across the spectrum from the lowest wage earner to the most senior executive to physicians.
  2. From the DOJ, a renewed enforcement vigor to vet out interlocking directorates – situations where one person serves on more than one board of entities which compete with each other. These investigations are simple and easy, the low hanging fruit for DOJ, but, and given that the relief possible is simply the removal of the offending director, a fight is unwise because it risks that the fight will expand into more sensitive areas, in particular, how competitively sensitive information is shared with directors who also sit on competitor boards. The possibility of such a risk can be assessed by looking at other board seats held by an entity’s directors, and if the risk of interlock is presented, to do a deeper dive to look at the efficacy of the entity’s existing (if it has one) antitrust compliance policy and training, and the manner in which competitively sensitive information is shared.

DOJ and FTC are not excluding any commercial space from these two examples of renewed enforcement vigor, and health care executives should consult with counsel to be prepared for any inquiry from either agency that might arise.

The DOJ, with the FTC very likely to follow suit, on February 3, 2023 “withdrew” three important long-standing policy statements which have for years guided health care lawyers on important antitrust issues. The policies include a 1993 statement dealing with when hospital mergers and health care joint ventures would be challenged; a 1996 statement dealing with health care provider networks; and a 2011 statement addressing ACO participation in the Medicare Shared Savings Program. The market impacts of these withdrawals will be determined as time passes, but all involved in the health care world should be advised that guidance is no longer in place and that the impact of those withdrawals on specific situations in which they are involved may need some immediate attention and review. 

2023 Data Privacy Considerations
Author: Samantha Gross

2022 was a landmark year for data privacy legislation across the United States, and there is no reason to suspect 2023 will be any different. The National Conference of State Legislatures conducted an analysis that found “At least 35 states and the District of Columbia in 2022 introduced or considered almost 200 consumer privacy bills in 2022.” To date, five states have passed comprehensive data privacy laws:

  • California Privacy Rights Act (modifying the California Consumer Privacy Act): On August 31st, the California legislative session closed without passing amendments to the California Consumer Privacy Act (“CCPA”), meaning the CCPA’s prior exemptions for employment and business-to-business information no longer apply. The California Privacy Rights Act (“CPRA”), which California voters adopted through a ballot initiative in November 2020, amended and expanded CCPA effective January 1, 2023. Notably, CCPA and CPRA do not provide a blanket exemption for medical data; instead, only certain health care data sets are exempt. More details can be found here.
  • Virginia Consumer Data Protection Act: Went into effect January 1, 2023.  
  • Colorado Privacy Act: Takes effect July 1, 2023.
  • Connecticut Data Privacy Act: Takes effect July 1, 2023.  
  • Utah Consumer Privacy Act: Takes effect December 31, 2023. 

The Colorado, Connecticut, and Utah laws provide exemptions for data regulated by the Health Insurance Portability and Accountability Act (“HIPAA”). The Virginia law exempts both data regulated by HIPAA as well as HIPAA covered entities and business associates. However, to the extent provider organizations collect, store, or process data that is not covered by HIPAA (e.g., website information such as usernames, passwords, or cookie usage and personal data of employees, contractors, or job applicants), those organizations may need to comply with these state data privacy laws. 

Prudent organizations should map the data the organization collects, stores, shares, and uses. To comply with each state’s patchwork of consumer privacy laws, the organization may need to review and (if necessary) amend privacy notices, which should be easily accessible to consumers. Finally, the organization should review its contracts with third parties, data retention practices, and consider conducting a data protection assessment.
 

Increased Use of Precision Medicine
Author: Brenda Glaser Abrams

Precision medicine encompasses the use of biomarkers, tailored medicines, and the integration of patient health data to transfer scientific breakthroughs into improved human health. Utilization of precision health solutions has grown as a result of their success in cancer genomic biomarkers and tailored cancer therapies, and now comprise a wide spectrum of tests and treatments for both rare and common disorders. 

NIH Director Francis S. Collins, M.D., Ph.D., and Joshua C. Denny, M.D., CEO, of the All of Us Research Program observed in a commentary published in the journal Cell on March 18, 2021 that “COVID-19 has highlighted the need for precision medicine to move further and faster.” According to ResearchandMarkets.com, the precision medicine market is expected to rise to $100.168 billion by 2026, from $60.422 billion in 2020.

On October 14, 2022, President Biden issued an executive order on lower drug prices (the “Executive Order”), stating that he wants the US Department of Health and Human Services Secretary Xavier Becerra to consider whether the Center for Medicare and Medicaid Innovation should test “new health care payment and delivery models that would reduce drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs.” With precision medicine now extending beyond oncology and treatments for rare diseases and potentially providing innovative drug therapies that could reduce health care costs, renewed bi-partisan interest might be possible to provide access to precision medicine by reducing barriers to the use of genetic and genomic testing. 

Looking ahead to 2023, the Executive Order, continued interest in and the reduced cost of genetic testing, and the availability of genetic data will pressure Medicare, Medicaid, and other insurers to cover certain costs of precision medicine. These pressures, coupled with the continuing evolution of COVID 19 variants and flu variants, the increased presence of RSV, and costs associated with their treatment, should result in the reduction of barriers to the use of genetic and genomic testing and broader coverage for certain precision medicine initiatives.


The Continued Adoption of Artificial Intelligence in Patient Care
Author: Matthew Kohel

The health care industry generates a voluminous amount of patient information. In 2023, the use of artificial intelligence (AI) and machine learning (ML) to collect, manage, and analyze this data will continue to increase. The growing clinical adoption of AI/ML will lead to more personalized health care, and hopefully, better treatment and patient outcomes.

AI/ML systems get “trained” on large amounts of data in order to help them process inputs and generate accurate predictions, diagnoses, and other outputs that are relevant to clinical care. Patient data is collected in a variety of ways and is not limited to a patient’s direct interactions with a health care professional. Wearable devices and biosensors that continuously and remotely monitor a patient’s status allow data to be collected when patients are awake, sleeping, and while someone engages in physical activity. Such devices essentially provide a constant stream of data that can be collected and analyzed. This has the potential to benefit patients, because the accuracy of an AI/ML system’s diagnoses and predictions is enhanced when it has more data to analyze.

In addition, the more widespread adoption of AI/ML for clinical treatment will hopefully help to eliminate biases that may exist in health care, including those found in AI/ML systems that are being used today. These biases can exist in the algorithms that power AI/ML. Biases also exist in the information used by AI/ML systems, due to the historic underrepresentation of minorities in datasets.

These biases can lead to negative patient outcomes. For example, non-White or female patients may be treated based on data that is more relevant to White male patients, even though Black patients or women may be at a greater risk of cardiovascular disease, certain types of cancers, etc. than White men. Because the use of AI/ML in medicine implicates significant ethical considerations, algorithms should be rigorously evaluated and data-sharing, inclusivity, and transparency in AI/ML systems should be prioritized.

In sum, AI/ML based solutions should lead to more personalized, and thus, more accurate patient treatment in 2023. At the same time, the health care industry and creators of AI/ML systems should utilize the increasing adoption of this technology to eliminate biases in patient treatment as a way to promote equity and better outcomes for everyone.

Cannabis and Psychedelics - A Year in Review and the Road Ahead

Authors: Seth Gitner, Jonathan Havens, and Adam Fayne

Could federal cannabis reform finally be on the horizon? On October 6, 2022, President Biden issued a statement that, among other things, initiated the administrative process to review how cannabis is scheduled under the federal Controlled Substances Act (CSA).[1] Currently, cannabis is a schedule I substance, meaning that, by definition, it has a high potential for abuse and no accepted medical use. What is yet to be seen is whether cannabis will be rescheduled (i.e., placed into schedule II of the CSA or lower, loosening but not removing federal restrictions), or descheduled (i.e., removed from the list of controlled substances entirely), or if it will remain in schedule I. Whereas descheduling would remove the conflict between federal law and state laws that have authorized certain cannabis-related activities, rescheduling would likely result in continued conflicts between federal and state laws. It is unclear if the review of how cannabis is scheduled under the CSA will conclude in 2023, but significant progress is expected to occur this year. Our view is that rescheduling is far more likely than descheduling, but that either scenario will take time to implement and that both would have significant implications for the current state cannabis regulatory landscape.

2023 may also bring changes to federal policies that govern hemp-derived cannabinoids, including cannabidiol (CBD), delta-8 tetrahydrocannabinol (THC), delta-9 THC, and beyond. Since the passage of the 2018 Farm Bill, U.S. Food and Drug Administration (FDA or the Agency) enforcement letters regarding CBD products have largely been limited to firms making particularly aggressive therapeutic claims (e.g., that CBD will help treat cancer, COVID-19, AIDS, and the like). In November of 2022, however, FDA issued a slate of warning letters targeting companies selling products that could allegedly be confused with traditional foods, potentially leading to, in FDA’s view, unintentional or overconsumption of CBD.[2] 

2022 also brought FDA’s first set of warning letters targeting products containing delta-8 THC, where the Agency primarily targeted firms making unapproved therapeutic claims about their D8 products.[3] While we predict FDA’s enforcement of products containing hemp-derived cannabinoids will remain largely the same this year, we do expect these recent trends in FDA warning letters to continue. Another item we are monitoring is what, if anything, FDA does by way of addressing the regulation of cannabinoids. Recent statements from the Agency suggest an announcement regarding the same could be coming soon.[4] In addition, more recently, Congressman James Comer (R-Ky.), who chairs the House Oversight and Accountability Committee, said that he would like to bring FDA Commissioner Robert Califf, M.D., before the panel to address FDA’s lack of action on CBD regulations.[5]

The 2023 Farm Bill also has the potential to shift federal policy regarding hemp and hemp-derived cannabinoids. While we expect debates regarding whether to raise the permissible level of Delta-9 THC in hemp and the legality of CBD as a dietary ingredient to predominate cannabinoid-related discussions during debate of the legislation (which is considered every five years), we will be keeping a close eye on the entirety of the Farm Bill negotiation process to evaluate the legislation’s impact on hemp and hemp-derived product stakeholders.  

Two of the most notable developments at the ballot box in 2022 were Maryland and Missouri voters approving adult-use cannabis ballot measures in the respective states.[6] Missouri wasted no time issuing draft rules for the state’s adult-use program,[7] and the Maryland legislature is expected to pass legislation this session to inform the regulation of the state’s adult-use market. This will occur in the context of several other east coast adult-use cannabis markets coming online and into their own, including Connecticut, Rhode Island, and New York. What remains to be seen is whether Virginia, which approved the legalization of adult-use cannabis in 2021 with no statutory structure to create a regulated marketplace, will make progress toward developing the a framework for its own adult-use cannabis marketplace in the year to come.

Finally, 2023 will be an exciting year for psychedelics law and policy, with Oregon becoming the first state to launch a state-authorized regulated psilocybin marketplace.[8] Colorado voters approved last November a ballot measure to permit the therapeutic use of psilocybin; state regulators are expected to develop licensing criteria this year, with an aim to begin accepting applications in 2024.[9] Additional state-legal therapeutic psilocybin bills have already been introduced in a handful of states so far this year, including Connecticut, Virginia, and Illinois.[10] While the chances of these bills being signed into law are unclear, these developments signal continued progress in domestic psychedelics law and policy reform in 2023.


The Continuing Plight of the No Surprises Act - What to Look Out for in 2023
Author: Athira Sivan 

The No Surprises Act (“NSA”) is a federal law that went into effect January 1, 2022 designed to protect patients from unexpected hospital and physician bills that would typically be reimbursed by a group health plan or a health insurance issuer. With patient protection in mind, the NSA puts in place important safeguards from surprise medical bills, while imposing significant obligations on health care providers and facilities. 

The onus on providers and facilities – who face large monetary penalties and other repercussions if they fail to ensure compliance – has resulted in the NSA being subject to a number of legal challenges and requests for clarifications from frustrated and confused providers as they scramble to implement procedures to bring their practices to compliance.[11]

Portions of the NSA have been vacated as a result of legal challenges in 2022. The February 2022 challenge vacated the arbitration process established in the NSA. The July 2022 challenge vacated an interim final rule applicable to air ambulance service providers. The October 2022 challenge was most recently decided in February 2023 against the NSA and remanded several provisions for further consideration. The legal pushback has continued into 2023 with The Texas Medical Association (“TMA”) filing in January 2023 to challenge a 600% hike in administrative fees for seeking federal dispute resolution. The January filing by TMA marks its fourth lawsuit against provisions of the NSA and we do not expect this to be the last in 2023. 

The Centers for Medicare & Medicaid Services (“CMS”) has published guidance documents to clarify provisions of the NSA, in part to respond to these legal challenges. In February 2022, CMS issued FAQs answering almost 50 questions on independent dispute resolution (“IDR”) under the NSA along with a chart to help determine out-of-network rates. In April 2022, CMS issued a two-part FAQ focused on good faith estimates (“GFEs”) that providers must provide to uninsured and self-pay patients and provider NSA compliance guidance, addressing topics such as who is exempt from and who falls under NSA requirements, signature requirements, and IDR fees. In June 2022, in response to ongoing confusion by providers, CMS issued more FAQs clarifying which providers must comply with the NSA rules, answering questions regarding providing notice to a patient, and obtaining the patient’s consent to waive balance billing and cost-sharing protections. In August 2022, CMS issued additional FAQs intended to clarify the application of NSA billing provisions. In December 2022, CMS released two more FAQs clarifying enforcement discretion, pending future rulemaking, and additional guidance for providers that offer sliding fee discounts and providers who do not expect to charge patients a fee.

In addition to FAQs, in August 2022, the Office of Personnel Management, Department of the Treasury, Department of Labor and Department of Health and Human Services jointly issued a rule finalizing certain interim rules from 2021 (“Final Rule”).[2] The Final Rule attempted to account for the portions of the NSA vacated by the legal decisions in 2022 regarding IDR. The terms of the Final Rule went into effect October 25, 2022, but was followed almost immediately by a legal challenge from TMA. In February 2023, a Texas judge ruled in favor of TMA that the revised NSA provisions are still illegal. As a result, effective February 2023, all IDR processes have been halted until the rules can be reviewed and updated. With a new year of legal entanglements laying ahead, it will be important to keep an eye on the changing landscape of the NSA as providers seek assistance with compliance.


Tax Updates
Author: Rich Frazier

With the two chambers of Congress now split following the 2022 elections, it appears unlikely that there will be any significant tax legislation moving through Congress in 2023. That may be a good thing as the health care sector tries to recover from the devastating effects of the COVID-19 pandemic. All health care employers, whether tax-exempt and taxable, should double-check to be certain that they have received every dollar of support that was made available to them by the federal, state and local governments. Those supports came through a variety of programs, and the requirements to qualify were often modified as the programs were rolled out. Suffice it to say, one last look may capture some more dollars. The IRS was also given a huge funding boost in 2022 which should have a profound effect on its ability to do its job. However, it is too soon to tell what parts of the IRS will benefit the most. It will take months, if not years, to train new agents to take the place of the many agents who are “aging out” of the IRS. We think that the Exempt Organizations Group at the IRS will be especially understaffed and underexperienced in the coming years.

On the litigation front, the Mayo Clinic finally prevailed in its argument that it is an “educational organization” within the meaning of section 170(b)(1)(A)(ii) of the Internal Revenue Code. As a result, its income from real estate partnerships, which are largely debt-financed, is not subject to the unrelated business income tax. The decision will have far-ranging effects on many large, integrated academic health systems because it will expand their ability to develop and finance real estate using similar techniques.


HHS Non-Discrimination Rules Will Require Changes
Author: Rob Duston

In July 2022 HHS issued an NPRM to amend Section 1557 of the Affordable Care Act, and the comment period ended in October 2022. According to the Unified Federal Agenda, HHS is planning to issue a final rule in March 2023. That is the same month when HHS plans to issue an NPRM to revise its regulations under Section 504. There are parallel rule revisions planned for CMS. It is uncommon for agencies to regularly push these deadlines further, but I predict that these will come out in 2023. The 1557 proposed rule is primarily intended to reverse interpretations by the Trump administration, but goes further. HHS has an interest in getting these regulations in place prior to the 2024 election cycle.

At a high level, ACA Section 1557 does not establish new obligations; it incorporates the non-discrimination principles in other laws that apply to recipients of federal financial assistance (Title VI, Title IX, Section 504 and the Age Discrimination Act). In practice, however, the HHS 1557 regulations expanded the coverage of those laws in the health care industry, and included a number of specific requirements to implement those principles. The HHS summary of the NPRM stated: “The Section 1557 Notice of Proposed Rulemaking (NPRM) seeks to address gaps identified in prior regulations.” In order to advance protections under this rule it:

  • Reinstates the scope of Section 1557 to cover HHS’ health programs and activities.
  • Clarifies the application of Section 1557 nondiscrimination requirements to health insurance issuers that receive federal financial assistance.
  • Aligns regulatory requirements with Federal court opinions to prohibit discrimination on the basis of sex including sexual orientation and gender identity.
  • Makes clear that discrimination on the basis of sex includes discrimination on the basis of pregnancy or related conditions, including “pregnancy termination.”
  • Ensures requirements to prevent and combat discrimination are operationalized by entities receiving federal funding by requiring civil rights policies and procedures.
  • Requires entities to give staff training on the provision of language assistance services for individuals with limited English proficiency (LEP), and effective communication and reasonable modifications to policies and procedures for people with disabilities.
  • Requires covered entities to provide a notice of nondiscrimination along with a notice of the availability of language assistance services and auxiliary aids and services.
  • Explicitly prohibits discrimination in the use of clinical algorithms to support decision-making in covered health programs and activities.
  • Clarifies that nondiscrimination requirements applicable to health programs and activities include those services offered via telehealth, which must be accessible to LEP individuals and individuals with disabilities.
  • Interprets Medicare Part B as federal financial assistance.
  • Refines and strengthens the process for raising conscience and religious freedom objections. 

HHS states in the Unified Federal Agenda that the “proposed rule would revise regulations under section 504 of the Rehabilitation Act of 1973 to address unlawful discrimination on the basis of disability in vital HHS-funded health and human services programs. Covered topics may include nondiscrimination in medical treatment, child welfare programs and activities, value assessment methods, accessible medical equipment, information and communication technology, and other relevant health and human services activities.” Under Section 504 of the Rehabilitation Act of 1973, each agency that provides federal financial assistance issues its own regulations. The description of possible proposed changes includes some issues that are already addressed by Department of Justice regulations or guidance under ADA Title II and III, but suggests it may include other priorities of the Biden Administration and address some issues on access to care raised during the COVID-19 pandemic. The reference to “information and communication technology” might be limited to those requirements for effective communication already present in ADA regulations, but also might include digital accessibility requirements (e.g. websites, on-line portals for patient communication and records, or any other web-based programs or services). Give HHS’s broad interpretation of what is considered “federal financial assistance”, this proposed rule may be significant.  

There are very few entities in the health care industry that will not be impacted by these rules and the parallel rules being proposed by CMS.  
 

Increased Scrutiny of Non-Compete Agreements Brings Opportunities and Challenges
Author: Katie Barrett Wiik

Non-competition agreements will be under increased scrutiny in 2023. In early January, the Federal Trade Commission issued a proposed rule that would almost entirely ban non-compete agreements between employers and workers, on the theory that they are a form of unfair competition. Other forms of restrictive employment covenants, such as non-disclosure agreements and client or customer non-solicitation agreements—would not be prohibited under the rule because such contractual limitations do not typically prevent a worker from seeking or accepting other employment. The rule would implement a functional test to determine whether a restrictive covenant was a prohibited non-compete agreement, to ensure that form does not triumph over substance. An exception would allow a non-compete agreement in the context of the sale of a business, and the rule would not prohibit non-compete agreements between two businesses. The FTC’s notice and comment period is accepting input until March 20, 2023.

If the proposed rule becomes law, employees in the health care industry currently subject to non-compete agreements would have increased mobility. This will bring challenges but also opportunities. Employers will need to ensure they have policies in place to protect trade secrets and other confidential business information. With tight labor markets and competition for talent already high, higher worker mobility would put increased pressure on employers to offer strong wages, benefits, and other desirable conditions to retain employees. At the same time, the inability to enforce existing non-compete agreements will mean the ability to hire talent from competitors that may have previously been off-limits, enabling growth. A non-compete ban could also help recruit talent to smaller markets and rural communities, because non-compete agreements may have served as deterrents to those considering relocating. Stay tuned, as the FTC could finalize the rule later this year, with compliance required 180 days after issuance.  


Digital Health/FemTech
Author: Samantha Gross

The COVID-19 pandemic brought more urgency to digital health innovation in 2020 and 2021, when we also saw significant investment in the industry, government stimulus, and regulatory clarity. Health care’s shift into the digital space is likely to continue in 2023. Outlined below are several high-level policy updates that may impact the growth of digital health in 2023:

  • New CPT codes take effect this year, including for remote therapeutic monitoring treatment-management services, codes for digital ophthalmology services, and codes for remote examination by pathologists.
  • The 2023 Consolidated Appropriations Act extends various regulatory flexibilities, including permitting:
    • Medicare beneficiaries to receive telehealth services from any geographic location;
    • Federally Qualified Health Centers and Rural Health Clinics to continue to provide telehealth services;
    • Health care providers to continue to use telehealth for hospice face-to-face recertification requirements; and
    • Telehealth services to be conducted through audio-only communications — at least through 2024.
  • In July 2022, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a Special Fraud Alert alerting practitioners to exercise caution when entering into arrangements with telemedicine companies. 
  • The Federal Trade Commission (FTC) issued guidance stating it has concerns about digital health companies’ ability to collect, store, and share personal health information. 

As the digital health market grows, we are likely to see an increase in enforcement actions. This was exemplified most recently in the FTC’s enforcement action against GoodRx, which was quickly followed by a class action lawsuit. GoodRx is a digital health platform that offers prescription drug discounts, telehealth visits, and other health services. In the FTC’s first enforcement action under its Health Breach Notification Rule, the FTC’s complaint stated GoodRx failed to notify consumers and others of its unauthorized disclosures of consumers’ personal health information to Facebook, Google, and other companies. GoodRx will be prohibited from sharing users’ health data with third parties for advertising and will pay a $1.5 million civil penalty. Several days after the FTC’s proposed settlement was announced, GoodRx was hit with the class action lawsuit claiming that it breached state data privacy laws by sharing users’ sensitive health data with advertisers. 

As we continue to see growth in the digital health industry, vendors and providers using these technologies must be sensitive to regulatory compliance requirements


Endemics Aren’t Necessarily Better Than Pandemics for the Health Care Delivery System
Author: Bruce Armon

Transitioning from a pandemic to an endemic is hard and ‘winners’ and ‘losers’ are still being determined. COVID has dramatically affected the entire health care delivery system – understatement of the year, I know. Previously financially strong and healthy academic medical centers are struggling across the country. Independent community hospitals are rapidly becoming an endangered species. Many medical practices are being contacted by private equity and or looking to merge with other medical practices to stay competitive. Nurses are in such high demand that many employers can’t afford to – but need to – pay increased wages to keep their facilities and or medical practices operational. With COVID regulatory emergencies scheduled to sunset later this year, telehealth options – more specifically, reimbursement for these visits – may become more limited as payors looks to re-instill fiscal discipline.  

In the absence of commercial payors increasing their contracted reimbursement rates and Medicare and Medicaid increasing their payments to account for inflation and increased costs for providers, ‘profit’ margins will continue to decrease. Health care providers – nursing homes, hospitals, ambulatory surgery centers, and medical practices – will see 2023 as a very challenging environment. Bankruptcies, consolidations and mergers are inevitable. It is unlikely that the federal government will provide much of a financial lifeline and state governments will be forced to react as local events propel patient outrage and media attention on crises affecting the health care delivery system.  

NIMBY – not in my backyard – will demonstrate the elasticity of the health care delivery system as providers look to adjust to the ‘new normal’ and determine what they can do to survive and provide essential services. 2023 will be a bumpy year for health care that will create opportunities for private equity to fill delivery voids.
 



[1]  The White House, “Statement from President Biden on Marijuana Reform,” October 6, 2022, available here
[2]  FDA, “FDA Warns Companies for Illegally Selling Food and Beverage Products that Contain CBD,” November 21, 2022, available here
[3]  FDA, “FDA Issues Warning Letters to Companies Illegally Selling CBD and Delta-8 THC Products,” May 4, 2022, available here.
[4]  Melissa Schiller, Question: Will the FDA Take Steps to Regulate CBD This Year? Answer: Well…Maybe., Cannabis Business Times, January 13, 2023, available here.
[5]  Kyle Jaeger, New GOP Congressional Panel Chairman Plans To Grill FDA On Lack Of Hemp And CBD Regulations, Marijuana Moment, January 12, 2023, available here
[6]  Tom Angell, Cannabis Election Results (Newsletter: November 9, 2022), Marijuana Moment, November 9, 2022, available here.
[7]  Missouri Department of Health and Senior Services, “DHSS publishes draft rules for Missouri’s adult use cannabis program,” November 10, 2022, available here.
[8]  Andrew Jacobs, Legal Use of Hallucinogenic Mushrooms Begins in Oregon, The New York Times, January 13, 2023, available here
[9]  Tiney Ricciardi, Colorado voters legalize psilocybin and psychedelic therapy, The Denver Post, November 8, 2022, available here.
[10]  Kyle Jaeger, Lawmakers Are Already Pursuing Psychedelics Legislation in Nearly A Dozen States for 2023, Marijuana Moment, January 9, 2023, available here and Press Release: News from the Illinois House of Representatives, January 11, 2023, available here
[11] Check out Saul Ewing’s article on The 2022 Evolution of the No Surprises Act for more detail.
[12] https://www.federalregister.gov/documents/2022/08/26/2022-18202/requirements-related-to-surprise-billing

Authors
Bruce Armon Headshot
Alyson Leone
Katie Barrett Wiik
Michael A. Finio
Brenda Abrams Headshot
Matthew D. Kohel
Jonathan A. Havens
Adam Fayne
Athira Sivan
Richard T. Frazier
Robert Duston Headshot
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