Menu Close

Tag: 2019 News

Insurers Tell Supreme Court Obamacare was “Massive Bait-and-Switch”

The U.S. Supreme Court examined Obamacare for the fifth time on Tuesday. This time the case involves a group of insurers who are claiming the government (and thus taxpayers) owe them $12 billion in promised payments for the costs of providing Obamacare.

The Affordable Care Act promised to partially reimburse insurers if they lost money by covering people with preexisting conditions. The law said that the government “shall” make these payments. But in 2015, Congress attached riders to appropriations bills barring the use of the money for the promised payments.

The consequences were profound. By 2017 three-quarters of the original insurance providers were out of business, and several others stopped participating, leaving just six insurance providers and skyrocketing costs.

The insurers went to court, contending the government had cheated them of $12 billion in promised payments. The effort was to compel the Department of Health and Human Services to make the payments. Insurers involved in the case include Moda Health, Blue Cross and Blue Shield of North Carolina, Maine Community Health Options and Land of Lincoln Mutual Health Insurance Company.

Lower courts split on the merits of the legal claims. Oregon-based Moda Health won a $200 million judgment, but the $70 million claim from the now-defunct Land of Lincoln Health was rejected. A divided appellate court last June ruled against the insurers in a combined case, finding that Congress clearly took action to prevent federal payouts to the program.

Earlier this year the U.S. Supreme Court agreed to have the final word on the dispute. Oral argument was heard this week.

Inside the Supreme Court, lawyer Paul Clement, representing the insurers, told the justices that the case involves a “massive government bait-and-switch.”  When the government makes a promise to pay money, he said, it has to “keep its promise.”

Chief Justice John Roberts chimed in: You claim the insurance companies were “basically seduced” into this program, but they have good lawyers. Why didn’t they “insist upon an appropriations provision” in the law before putting themselves “on the hook for $12 billion?”

Clement replied that when the law was written in 2010, anyone who looked at the money-mandating language would have thought that was sufficient. “Now could it have been better … belt and suspenders,” asked Clement. “Sure, but it’s good enough.”

And so went the back and forth arguments. The case is now under submission, and the Supreme Court will decide the case, for or against the insurance companies, shortly.

Tort Claim Removable to Federal Court Until Employer Intervenes

Jose Gutierrez was injured while working for Green Team of San Jose, a waste disposal company. Gutierrez and his spouse initiated a personal injury suit in state court against Defendant McNeilus Truck & Manufacturing, Inc., the designer and manufacturer of the garbage trucks used by Green Team.

Defendant removed the action from California state court to federal court based on diversity of citizenship under 28 U.S.C. §1441(b).

Diversity jurisdiction in civil procedure provides that a United States district court in the federal judiciary has the power to hear a civil case when the amount in controversy exceeds $75,000 and where the persons that are parties are “diverse” in citizenship or state of incorporation, which generally indicates that they differ in state and/or nationality.

Mostly, in order for diversity jurisdiction to apply, complete diversity is required, where none of the plaintiffs can be from the same state as any of the defendants.

Once the case was in federal court, the Plaintiffs’ filed a motion to remand the case back to state court. A remand may be ordered either for lack of subject matter jurisdiction or for any defect in the removal procedure. 28 U.S.C. § 1447(c). Plaintiffs did not dispute that the parties are diverse and the amount in controversy exceeds the jurisdiction $75,000 minimum. Rather, Plaintiffs contend that this is a “nonremovable action” because Plaintiffs’ claims “aris[e] under” California’s worker compensation law.

28 U.S.C. § 1445(c) provides that “[a] civil action in any State court arising under the workmen’s compensation laws of such State may not be removed to any district court of the United States.” If section 1445(c) applies, a case is not removable even if it presents a federal question or there is diversity. Humphrey v. Sequentia, Inc., 58 F.3d 1238, 1244 (8th Cir. 1995).

However, the federal judge denied the motion for remand in the case of Gutierrez v McNeilus Truck & Manufacturing, Inc.

Plaintiffs contend that their claims “arise under” California’s workers’ compensation law not because their three claims for negligence, products liability and loss of consortium “arise under” California’s workers’ compensation law, but because California Labor Code section 3852 provides Gutierrez’s employer, Green Team, a right to subrogation.

A civil action ‘arises under’ a state’s workers’-compensation law when the worker’s-compensation law creates the plaintiff’s cause of action or is a necessary element of the claim. There is no question that an insurer’s suit under section 3852 to recover workers’ compensation benefits “arises under” California’s workers’ compensation law and is therefore nonremovable.

However, neither Green Team nor the workers’ compensation insurance carrier has sought to intervene. Neither is a party to this action. Plaintiffs anticipate that one or the other will assert their subrogation rights.

Only after a party lawfully intervenes in state court, the plaintiff’s otherwise removable claim can no longer be removed.

Court of Appeal Resolves WCAB Concurrent Jurisdiction Issue

Kirk Hollingsworth was involved in a fatal accident while working for defendant Heavy Transport, Inc. in June 2016. His wife, Leanne Hollingsworth, and son, Mark Hollingsworth, filed a wrongful death complaint in superior court on January 22, 2018.

Plaintiffs alleged that Heavy Transport did not have workers’ compensation insurance. They also alleged that defendant Bragg Investment Company purported to have merged with Heavy Transport in 1986, but that the two companies had always maintained separate operations. Plaintiffs asserted that Bragg “sought to extend Worker’s Compensation Benefits” to them. Plaintiffs also alleged that defective Bragg equipment contributed to the incident.

On March 14, 2018, Bragg and Heavy Transport filed an application for adjudication of claim with the WCAB. The application listed Bragg as the employer, included insurance information, and noted that a lawsuit had been filed.

Bragg and Heavy Transport demurred to plaintiffs’ complaint. They asserted that Heavy Transport was a fictitious business name for Bragg, and therefore they were the same entity. Bragg had a workers’ compensation policy that covered the accident, so plaintiffs’ action was barred by workers’ compensation exclusivity. The Superior Court overruled the demurrer.

In December 2018 the WCAB determined that the accident had occurred in the course of decedent’s employment. The WCAB then set a hearing for February 19, 2019 to determine if any applicable workers’ compensation insurance covered the incident.

Defendants made an application to the Superior Court that the civil case be stayed until the WCAB determined the insurance issue, which would then determine which tribunal had exclusive jurisdiction. Plaintiffs also had filed a motion with the WCAB to stay those proceedings, but rather than grant the motion, the WCAB set the case for trial before a WCAB arbitrator on June 6, 2019, on the issue of insurance coverage. The Superior Court conceded jurisdiction to the WCAB on the issue of insurance coverage.

Plaintiffs then filed a petition for writ of mandate in the Court of Appeal , and requested an order staying the June 6 arbitration scheduled in the WCAB proceeding. It issued an alternative writ and an order staying the WCAB proceedings, and requested briefing from the parties.

This case presented a relatively simple question: Which tribunal – the superior court or the WCAB – should resolve the questions that will determine whether the superior court or the WCAB has exclusive jurisdiction over plaintiffs’ claims?

The Supreme Court in Scott v. Industrial Acc. Commission (1956) 46 Cal.2d 76, 81, decided this issue in 1956, and held that whichever tribunal exercised jurisdiction first should make the necessary findings to determine which tribunal has exclusive jurisdiction over the remainder of the matter.

The Court of Appeal followed that rule, and found that the trial court erred by deferring to the WCAB to determine jurisdiction in the published case of Hollingsworth et al., v. The Superior Court of Los Angeles County et al., (2019) 84 Cal.Comp.Cases 718.

The WCAB argued the statement in Sea World Corp. v. Superior Court (1973) 34 Cal.App.3d 494, at p. 501 that “[p]recedential jurisdiction” – concurrent jurisdiction to determine exclusive jurisdiction – “may be the subject of waiver by the court having it.”

In Sea World the court cited Scott and several similar cases, and noted that “the court where jurisdiction first attaches may yield it, and that it is the right of the court to insist upon or waive its jurisdiction.” Here, however, the evidence does not support a finding of waiver or estoppel, and neither the WCAB or defendants assert facts to support such a finding.

To the contrary, from the initiation of the action, plaintiffs and defendants consistently asserted their respective positions regarding jurisdiction, unlike the employer in Sea World. Thus, waiver or estoppel does not compel us to depart from the rule in Scott.

Here, the superior court exercised jurisdiction first. Plaintiffs’ complaint was filed on January 22, 2018, and defendants’ demurrer was filed on March 5, 2018. Defendants’ WCAB application was filed on March 14, 2018. Under Scott, the appropriate tribunal to determine the question of exclusive jurisdiction is the superior court, because that tribunal exercised jurisdiction first.

San Joaquin County Doctor Indicted

A federal grand jury brought a 14-count indictment against a physician, Edmund Peter Kemprud M.D. charging him with prescribing opioids to patients outside the usual course of professional practice and not for legitimate medical purpose, U.S. Attorney McGregor W. Scott announced.

According to court documents, Kemprud was a physician licensed to practice medicine in California and maintained a medical practice in Dublin and Tracy.

Kemprud is a 1973 graduate of the University of California San Francisco School of Medicine. Medical Board records do not reflect any prior disciplinary matters against him.

Prosecutors say that on 14 occasions between Sept. 6, 2018 and March 13, 2019, Kemprud allegedly prescribed highly addictive, commonly abused prescription drugs, including Hydrocodone, Alprazolam, and Oxycodone – outside the usual course of professional practice and not for legitimate medical purpose.

After Kemprud was arrested he pleaded not guilty at his arraignment. He is due back in court on Jan. 30. If convicted, he faces a maximum statutory penalty of 20 years in prison.

This case is the product of an investigation by the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse Drug Diversion Team, the Drug Enforcement Administration, and the Office of Inspector General for the United States Department of Health and Human Services. Assistant U.S. Attorney Vincenza Rabenn is prosecuting the case.

FDA Rapidly Approving Breakthrough Drugs

The  FDA is approving new drugs so fast that companies are now preparing for a green light months in advance of the scheduled decision date, a pace that’s helping patients with rare or untreatable diseases but raising alarm among consumer advocates.

Global Blood Therapeutics Inc., maker of a new sickle cell disease drug called Oxbryta, built a booth to showcase the medicine at the annual meeting of the American Society of Hematology that begins this weekend — even though the Food and Drug Administration’s deadline for approval was Feb. 26.

The move paid off: Oxbryta was given the go-ahead by the FDA on Nov. 25, almost three months ahead of schedule, and the branded booth will make its debut at the ASH conference in Orlando, Florida, on Saturday.

Oxbryta’s approval added to a growing number of breakthrough products that have beaten their FDA deadlines by weeks and sometimes months. For normal medicines, the agency typically has 10 months to issue a ruling. For those with exceptional benefits, or that treat conditions with few existing therapies, it offers a priority review that takes just six months. From mid-October to mid-November, the agency approved five medicines in as little as eight weeks.

The shift is emerging as the FDA is approving new drugs at a record pace, and breakthroughs in biotechnology and genetics are enabling drug companies and their scientists to provide more specific data to federal regulators.

But even as drugmakers, investors and patients cheer on the agency’s pace, patient-safety advocates argue that speed comes at a price. Studies show medicines approved on a faster time line are more likely to have safety problems emerge after they become broadly available, while other treatments offer fewer benefits than anticipated.

While the Trump administration has focused on reducing regulation across the U.S., the FDA’s new-found speed had its genesis more than a quarter-century ago. Drugmakers agreed to pay the agency user fees in return for firm deadlines after years of wild guesses. Congress and the FDA layered on programs providing incentives for drug developers to craft products for patient groups with critical unmet needs, especially for rare conditions.

It’s not just speed. The FDA also is approving more drugs, hitting a record 59 new therapies in 2018. Almost three-fourths received a priority review. That, combined with more efficient data collection, is responsible for the faster FDA action, said Aaron Kesselheim, a professor at Harvard Medical School. Companies are also communicating earlier and more often with the agency, which can head off issues at preliminary stages and help them get products through on the first attempt, he said.

Vertex Pharmaceuticals Inc.’s Trikafta, a triple combination of drugs to treat cystic fibrosis, won FDA approval in October, five months earlier than expected. Investors dubbed it an early Christmas gift from the FDA.

Clearance for Novartis AG’s Adakveo, another new medication for sickle cell disease, came in November. It was 62 days ahead of the FDA’s deadline, known as the PDUFA date. BeiGene Ltd.’s Brukinsa was approved three months ahead of schedule for mantle cell lymphoma.

Newly Unsealed Court Records Bad News for Opioid Industry

A dozen years ago, the federal government came down hard on Purdue Pharma, fining the drugmaker and three of its executives a record $634 million for misbranding its blockbuster OxyContin pill as safer and less addictive than other painkillers.

Plaintiff attorneys argue that drug manufacturers continued the aggressive marketing even after the Purdue fine. New details about the marketing campaigns are revealed in the corporate documents and internal emails unsealed in the Cleveland case after a year-long legal fight by The Washington Post and the owner of the Gazette-Mail in Charleston, W.Va.

Drug manufacturers paid doctors and movie stars to promote more aggressive pain treatment. The companies also created campaigns for their sales forces, tying bonuses to opioid sales and holding contests to reward top earners.

As the marketing campaigns unfolded, representatives from industry-funded groups that advocate for pain patients fanned out across the country to speak on TV shows, at conferences and dinners and to doctors at continuing medical education seminars, the court documents show. The groups included the American Pain Foundation and the American Pain Society, which have since gone out of business.

Drug manufacturers have rejected the plaintiffs’ arguments. They said that their sales and marketing teams did not misrepresent the safety of opioids.

But, last August, a judge in a lawsuit in Oklahoma ruled that Johnson & Johnson and its subsidiary Janssen had engaged in “false, misleading, and dangerous marketing campaigns.” The company also provided incentives for its sales force. The company produced a PowerPoint presentation that promised prizes for those who sold the highest amounts of Nucynta, an extended-release opioid. The prizes included a Caribbean cruise, “His and Hers” Tourneau watches and a Sony home theater system.

In its statement, Johnson & Johnson said, “In the Oklahoma trial, the State did not produce a single doctor who testified that they were misled by a Janssen marketing communication.”

Oklahoma Judge Thad Balkman ultimately ordered Johnson & Johnson to pay $465 million to abate one year’s worth of damage done by opioids in the state. The company is appealing.

The first case in the Ohio lawsuit, involving Summit and Cuyahoga counties, was recently settled for more than $325 million by multiple drug companies, including McKesson Corp., Cardinal Health, AmerisourceBergen, Johnson & Johnson, Mallinckrodt and Teva Pharmaceutical Industries. The remaining 2,500 cases, as well as lawsuits filed by most of the state attorneys general, are still pending.

In the Ohio case, the newly unsealed documents delve deep into the marketing strategies of the companies.

Former FDA commissioner David A. Kessler, a paid expert for the plaintiffs, said in a recently unsealed deposition in the Cleveland case that this “highly sophisticated” and overwhelming marketing of opioids “changed American medicine.”

The efforts “range from regional advisory boards to the speaker’s bureaus, to the e-marketing to doctors, to the alternative channels, to the advocacy groups, to the unbranded publication plans,” Kessler said, referring to materials that did not disclose they were funded by drug companies.

Kessler said that the paid appearances on television and at conferences usually featured the highest-prescribing doctors and were meant to transform the public perception of opioids and encourage other doctors to prescribe them more freely.

Access to Care Threatened by Rural Hospital Closings

Access to care is a major concern in all healthcare systems, as well as workers’ compensation programs that are mandated to provide local care under MPN rules. Although hospitals can improve financially when they join larger health systems, the merger may also reduce access to services for patients in rural areas, according to a new RAND study reported in a story by Reuters Health.

After an affiliation, rural hospitals are more likely to lose onsite imaging and obstetric and primary care services, researchers report in a special issue of the journal Health Affairs devoted to rural health issues in the United States.

“The major concern when you think about health and healthcare in rural America is access,” said lead study author Claire O’Hanlon of the RAND Corporation in Santa Monica, California.

More than 100 rural hospitals in the U.S. have closed since 2010, the study authors write.

Hospitals in rural areas are struggling to stay open for a lot of different reasons, but many are looking to health-system affiliation as a way to keep the doors open,” she told Reuters Health by email. “But when you give up local control of your hospital to a health system, a lot of things can change that may or may not be good for the hospital or its patients.”

Using annual surveys by the American Hospital Association, O’Hanlon and colleagues compared 306 rural hospitals that affiliated during 2008-2017 with 994 nonaffiliated rural hospitals on 12 measures, including quality, service utilization and financial performance. The study team also looked at emergency department and nonemergency visits, long-term debt, operating margins, patient experience scores and hospital readmissions.

They found that rural hospitals that affiliated had a significant reduction in outpatient non-emergency visits, onsite diagnostic imaging technologies such as MRI machines, and availability of obstetric and primary care services. For instance, obstetric services dropped by 7-14% annually in the five years following affiliation.

At the same time, the affiliated hospitals also experienced an increase in operating margins, from an average baseline of -1.6%, typical increases were 1.6 to 3.6 percentage points, the authors note. The better financial performance appeared to be driven largely by decreased operating costs.

Overall, patient experience scores, long-term debt ratios, hospital readmissions and emergency department visits were similar for affiliating and non-affiliating hospitals.

“Research on these mergers has been mixed, with some suggestions they are beneficial for the community (access to capital, more specialty services, keep the hospital open) and other evidence that there are costs (employment reductions, loss of local control, increase in prices),” said Mark Holmes of the University of North Carolina at Chapel Hill, who wasn’t involved in the study.

Healthcare Spending Increasing After Recent Declines

Total national healthcare spending in 2018 grew 4.6 percent, which was slower than the 5.4 percent overall economic growth as measured by Gross Domestic Product (GDP), according to a study conducted by the Centers for Medicare & Medicaid Services (CMS).

As a result, the share of the economy devoted to health spending decreased from 17.9 percent in 2017 to 17.7 percent in 2018. Growth in overall healthcare spending has averaged 4.5 percent for 2016-2018, slower than the 5.5 percent average growth for 2014-2015. The growth in total national healthcare expenditures was approximately 0.4 percentage point higher than the rate in 2017 and reached $3.6 trillion in 2018, or $11,172 per person.

According to the report, private health insurance, Medicare, and Medicaid experienced faster growth in 2018. The faster growth for these payers was influenced by the reinstatement of the health insurance tax which was applied to private health insurance, Medicare Advantage, and Medicaid Managed care plans.

Private health insurance spending (34 percent of total health care spending) increased 5.8 percent to $1.2 trillion in 2018, which was faster than the 4.9 percent growth in 2017. The acceleration was driven in part by an increase in the net cost of private health insurance.
— Medicare spending (21 percent of total health care spending) grew 6.4 percent to $750.2 billion in 2018, which was faster than the 4.2 percent growth in 2017.
— Medicaid spending (16 percent of total health care spending) increased 3.0 percent to $597.4 billion in 2018. This was faster than the rate of growth in 2017 of 2.6 percent.
Out-of-pocket spending (10 percent of total health care spending) grew 2.8 percent to $375.6 billion in 2018, which was faster than the 2.2 percent growth in 2017.

Health care spending growth was mixed in 2018 for the three largest goods and service categories – hospital care, physician and clinical services, and retail prescription drugs.

Hospital spending (33 percent of total healthcare spending) increased at about the same rate in 2018 as in 2017, growing 4.5 percent and 4.7 percent, respectively, to reach $1.2 trillion in 2018.
— Physician and clinical services spending (20 percent of total healthcare spending) increased 4.1 percent to reach $725.6 billion in 2018. This was slower than the rate of growth in 2017 of 4.7 percent.
— Retail prescription drug spending (9 percent of total healthcare spending) grew 2.5 percent in 2018 to $335.0 billion following slower growth of 1.4 percent in 2017.

The 2018 National Health Expenditures data and supporting information will appear on the CMS website.

Hospital Groups Sue to Stop Price Transparency Rule

Hospital groups on Wednesday filed a lawsuit to stop the Trump administration’s price transparency rule that requires hospitals to disclose negotiated rates with insurers.

The suit, filed by the American Hospital Association (AHA), among other hospital groups, argues that the Centers for Medicare and Medicaid Services (CMS) rule violates the First Amendment by provoking compelled speech and reaches beyond the intended meaning of “standard charges” transparency in the Affordable Care Act.

The groups filed the suit in the U.S. District Court in Washington and are asking for an expedited decision to prevent hospitals from needing to prepare for the rule if it is ultimately ruled unconstitutional.

The hospitals argue that the efforts and cost required to follow the rule are overreaching as they would be required to release massive spreadsheets with data on negotiated drugs, supplies, facility and physician care prices. The estimated cost to hospitals to follow the rule is between $38.7 million to $39.4 million.

“The burden of compliance with the rule is enormous, and way out of line with any projected benefits associated with the rule,” according to the suit.

The suit also alleges the Department of Health and Human Services (HHS) does not have the authority to enforce the rule, according to a release from the AHA.

“Instead of giving patients relevant information about costs, this rule will lead to widespread confusion and even more consolidation in the commercial health insurance industry,” Rick Pollack, president and CEO of AHA, said in the release. “We stand ready to work with CMS and other stakeholders to advance real solutions for patients.”

The rule, which was finished last month, is part of the Trump administration’s efforts to increase price transparency and to develop more competition within the health care industry, moves which they say would help lower medical costs.

White House officials have said that a lack of cooperation from hospitals on the regulation indicates they are prioritizing themselves over consumers.

“Hospitals should be ashamed that they aren’t willing to provide American patients the cost of a service before they purchase it,” HHS spokeswoman Caitlin Oakley said. “President Trump and Secretary Azar are committed to providing patients the information they need to make their own informed health care decisions and will continue to fight for transparency in America’s health care system.”

The hospitals say the rule will have the opposite of the intended effect and cause competitors to increase prices to match their rivals to a point where consumers will decide against receiving care.

The Association of American Medical Colleges, the Children’s Hospital Association and the Federation of American Hospitals also signed onto the suit.

Jury Verdict May Bankrupt Strongest Longshore Union

A recent $93.6 million verdict from an Oregon jury has the potential to bankrupt a union that some describe as one of the strongest and most militant in the United States – the International Longshore and Warehouse Union (ILWU).

The November 4 federal jury award in favor of ICTSI Oregon Inc., the former operator of a Port of Portland terminal, was handed down after allegations of unlawful boycotts carried out by the ILWU-backed dock workers, which caused significant damages to ICTSI’s business.

The employment firm of Fisher Phillips reports that the lawsuit was the last remaining active case out of six separate actions filed in 2012 arising from a labor dispute at Terminal T6 in Portland, Oregon.

The dispute concerned which union was entitled to perform the job of plugging, unplugging, and monitoring refrigerated shipping containers (referred to as the “reefer” jobs) at T6. The ILWU and its local chapter, Local 8, alleged that their collective bargaining agreement required ICTSI to assign the reefer jobs to ILWU members. Conversely, the International Brotherhood of Electrical Workers (IBEW) argued that other contracts required the reefer jobs to be assigned to IBEW members.

In August 2012, the National Labor Relations Board (NLRB) issued a decision awarding the reefer work to IBEW-represented employees. That did not sit well with the Longshore union.

According to ICTSI, the ILWU and Local 8 responded by engaging in unlawful secondary boycott activity, including inciting or encouraging unlawful slowdowns. By “inducing and encouraging” longshoremen “to unnecessarily operate cranes and drive trucks in a slow and nonproductive manner, refuse to hoist cranes in bypass mode, and refuse to move two 20-foot containers at a time on older carts, in order to force or require ICTSI and carriers who call at terminal 6 to cease doing business with the Port,”

ICTSI alleged that the union’s campaign led to the loss of its service contracts with two major shipping companies – which was approximately 98% of its business. The company further alleged that the union’s actions caused it to suffer in excess of $101 million in damages. The former operator filed a civil claim and took the Longshoremen’s union to federal court in Oregon to recover these damages.

After a 10-day trial, the jury unanimously found that both the ILWU and Local 8 engaged in unlawful labor practices for a several-year period. The jury further found that the unlawful labor practices were a substantial factor in causing damages to ICTSI and that at no time during the period on question did either the ILWU or Local 8 engage in lawful, primary labor practices. On November 4, the jury awarded ICTSI $93,635,000 due to the ILWU’s and Local 8’s actions.

The jury’s verdict has the potential to bankrupt the ILWU. Each year, unions like the ILWU file must file a form with the Department of Labor called an LM-2 which lists various financial information about the union. The 2018 LM-2 filed by the ILWU national headquarters lists the total assets of the union as just over $8 million – $85 million less than necessary to satisfy the judgment against them.

The union has already said that it intends to oppose the judgment and take legal steps to set aside the judgment. It is also likely that the ILWU will appeal the final ruling. Thus, any bankruptcy filing could be years from now, but it is certainly a realistic possibility.