Law360 (June 5, 2020, 8:01 PM EDT) -- In this edition of Coronavirus Q&A, King & Spalding LLP's national health team leader discusses how health care providers are struggling to resume normal operations, what the pandemic means for M&A, and why COVID-19 will spark a litigation firestorm involving insurance reimbursement, workplace safety, patient deaths and the False Claims Act.
He shared his perspective as part of a series of interviews Law360 is conducting with prominent attorneys across the nation regarding the wide-ranging legal, regulatory and business fallout of the coronavirus crisis, which has claimed roughly 110,000 American lives and plunged the U.S. into economic misery.
This interview has been edited for length and clarity.
How has your practice's work been affected by the crisis?
Some of the things we do, like Medicare appeals and advising clients on commercial reimbursement, are more important than ever. Clients are trying to make up for lost funds from the cancellation of elective and scheduled procedures. So those reimbursement activities are really more important than ever.
We've also had a lot of compliance questions surrounding federal funds — the CARES Act terms and conditions, the records they need to keep, how to not run afoul of the rules. For example, there can be a lot of complexity around balance billing of patients [for charges not covered by insurance]. That's one of the conditions of CARES Act funds — you have to agree not to balance bill patients.
We've heard questions about whether that prohibits collecting copayments and deductibles and patient responsibility payments. And the balance billing rules extend to a broad range of patients, including commercially insured patients, patients in ERISA-covered health plans and uninsured patients. It's a significant issue and sometimes requires providers to change their processes.
But much of our practice's work has not changed because we find that, for example, the Department of Justice is pursuing its investigations under a work-from-home setting. They're still asking us questions. They're still wanting to develop facts and information.
I know you also handle transactions. How is the pandemic affecting that work?
One thing that's directly tied to the pandemic and the economic situation is we certainly have more restructuring work. Particularly for private equity-sponsored health care companies, we've been consulted about strategies and enlisted to do deals in a variety of areas — behavioral health management, physician practices, durable medical equipment. We're seeing those kinds of deals and expect there to be more in the months ahead.
And I'm seeing more activity in the mergers and acquisitions and the strategic affiliations areas. People who have strong balance sheets are looking for opportunities to invest, and people who are struggling have been looking for a sale or recapitalization or something like that. So that activity is going pretty strong for us.
Is it a buyer's market right now, given the financial distress some companies are feeling?
I think the period of financial strain is really starting, rather than in full swing, because of some programs, like the Medicare Advance Payment Program, that have helped to shore up balance sheets temporarily.
But over the next few months, as the federal funds are digested and spent, you're going to have the day of reckoning. If hospitals are not able to ramp back up on the more lucrative procedures, then they're going to be in trouble, and they're going to be looking for partners. That is going to become known over the next few months.
You mentioned deals involving durable medical equipment. What exactly are you watching there?
We've seen some troubled investments that private equity companies have in DME. You have forms of DME that are not being supplied very much right now that relate to orthopedic surgery, for example, because some of the procedures aren't happening.
It's like many areas in health care — depending on the type of product you supply, you may have had a vanishing market over the last three months.
So if I'm a private equity firm that owns a DME supplier in distress, what might I be doing right now?
You may be looking for a recapitalization, you may be looking for a sale, and you may be looking for a restructuring with a bankruptcy. And there are a lot of ways to restructure and change the credit arrangements and the debt burden on the company without bankruptcy.
But you would be looking for a suite of restructuring services for troubled companies, and potentially a sale to try to get the company out of your portfolio.
How have the operations of your clients changed because of the pandemic?
Probably the most notable thing is that the infrastructure around telehealth has proliferated. You see a lot of organizations that have gone from like 30 telehealth visits a week to 5,000 telehealth visits a week. The significance of that can't be overstated.
Some organizations are waiting to see what comes down the pike in terms of long-term reimbursement changes to decide how much they want to invest in new infrastructure or expensive IT projects. We still don't know what the permanent reimbursement rules will be around telehealth.
Another thing is with physician practices, all the infection control processes have really slowed patient care and throughput considerably. That's really affected profitability.
To be clear, in your region you're seeing a big resumption of non-COVID visits to the doctor's office?
Yes. There's a lot of geographic variation with that, obviously, but yes, physicians are seeing patients in person in the Southeast.
And so how's the resumption of business going for your clients?
[One challenge] is how quickly to dismantle the COVID-related infrastructure. People feel the responsibility to plan for future hot spots and surges. Our clients are thinking about, "How much PPE [personal protective equipment] do we need to reserve? What can we allocate to quote-unquote normal operations? Can we safely expect that the curve is going to continue in the direction that it's headed right now?"
Another challenge is that even when facilities open back up, there's a significant reluctance on the part of patients to come back. That's why you see public relations campaigns to help patients understand all the things in place to protect them.
What kind of PR is happening?
I've seen, for example, an academic medical center basically publish a full-page ad saying, "These are all the things we're doing to protect you." Providers can also put that information on their websites and maybe discuss that with patients who call to make appointments. That sort of public relations blitz is probably going to be necessary to make people feel safe to come back.
I also know you're anticipating reimbursement disputes between insurers and providers because of the pandemic. What exactly are you expecting?
One of the biggest ones I foresee is disagreements and misunderstandings over when normal rules apply and when special flexibilities for COVID-19 apply. A lot of payors say those [flexibilities] are coming to an end. They even say things like, "Check our website daily for changes and updates." So there's going to be a lot of confusion about what rules are in effect.
And one thing that we're bracing for is, we've been through a period when a lot of health insurers have suspended the obligation to get a prior authorization before a treatment or even a surgery in some instances. But they didn't necessarily agree not to review the service after the fact. We're concerned that in some cases where no objection was raised about a particular hospital service, there's going to be a retrospective look and a denial of the service and disputes arising out of that.
I've also been looking into the rules around when patients are held harmless for paying for COVID testing and treatment. Under the CARES Act, patients don't have to pay for testing. And for treatment, there's a patchwork of different rules, but if the patient doesn't have to pay, then the health plan would be expected to pay for the patient's portion. And whether they do that or not is going to have to be cleaned up on the back end. There's been a lot of confusion about when the patient would be held harmless.
What litigation do you expect as a result of the pandemic?
We certainly expect litigation surrounding patient deaths in skilled nursing facilities and also the conditions for employees in those facilities. There have been congressional inquiries directed toward some of the large operators of senior living facilities. And there was already a Department of Justice initiative directed toward elder care and skilled nursing prior to COVID, and that is sort of going to merge into the COVID-related issues.
Another one is certainly government and whistleblower lawsuits over how CARES Act funds are used, and records that have to be kept and whether funds were improperly retained. There are a lot of conditions suggesting that if you don't have the requisite revenue loss or COVID expenses and you retain the funds, that could be considered a false claim.
Another one is the allegation that COVID diagnoses were improperly used to increase federal reimbursement because of the 20% bump for Medicare payments for individuals with COVID diagnoses. There's a fair amount of potential False Claims Act litigation there.
Can you give me an example of billing that could be questioned?
It could happen for a patient who is in a facility for something other than COVID. There's been some guidance from [the U.S. Department of Health and Human Services] — it can be confusing at times — to the effect that every patient is a potential COVID patient. But does that mean you can give them a COVID diagnosis on the claim form and bill for that? The potential that that could be used for patients who are not COVID patients is an obvious one.
But clearly you couldn't deem every patient who came through the door to be a COVID patient, could you?
Let's just say for purposes of quantifying your COVID-related expenses for PPE, even if someone is not ultimately a COVID patient, you have extra expenses because they were a potential COVID patient. Those would be legitimate COVID-related expenses. But that's a different matter from how you code a patient visit, and whether you code the person as having COVID.
The anticipated whistleblower activity is going to be, basically, overuse of COVID diagnosis [codes] for patients who had COVID ruled out. And there are a lot of ambiguities, and there are people who died without being tested. You can imagine all kinds of creative theories, and there's a lot of gray area.
That makes sense. Any other possible litigation?
Another one I'm personally looking into is, you have states that have [granted immunity to] providers for activities they conduct in good faith during the pandemic to protect patients from the disease. When claims are ruled to be barred by those immunity statutes, we expect litigation challenging their constitutionality and whether the governors and legislators had authority to grant immunity.
Lastly, I would point to employment litigation — maybe class action litigation — surrounding working conditions and exposure to COVID. That's certainly a foreseeable category of litigation. Probably the failure to supply adequate PPE for people working in health care settings — that's the most likely.
It could also be failure to notify employees of potential exposure. If there's someone in the workplace three cubicles over who was diagnosed, and the employer knew that and they didn't disclose that to people in that area, I could imagine that as another employment claim.
What's a notable impact of the pandemic that hasn't received as much attention as it deserves?
It's a curious phenomenon of the ability of patients to avoid coming to the emergency room. Huge numbers have avoided coming. You have facilities with emergency departments that have half the throughput they've had in the past. We have clients scratching their heads and asking, "Where are the chest pain patients? Where are the stroke patients?"
Hasn't there been some evidence that people are dying because they're not seeking care in settings with higher risks of coronavirus infections?
Yes. It's very concerning if you have people who need the ER and don't come at all.
But there have also been some theories that, due to the different lifestyle that people are living right now, those conditions are developing less. Is there [something about] the stay-at-home world we live in that causes some people not to develop chest pains, and for health outcomes and conditions to be different?
There's certainly likely to be fewer trauma cases if you have fewer people driving cars and fewer people in bars getting in fights and things like that. And then another potential factor is people getting care in different ways — maybe they can do a telemedicine visit right now with the doctor they have access to.
It's hard to know which one of those is right. Probably all of them are right to some degree.
--Editing by Jill Coffey.
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