We recently participated in what the New Jersey Law Journal called the “first complex civil jury trial to be conducted in person since the COVID-19 pandemic.” Although the case settled shortly after opening statements, this experience taught us that New Jersey courts are ready to try complex civil cases safely and responsibly with new COVID protocols that may force trial attorneys to depart from their usual practices. We published an article in the New Jersey Law Journal about this experience that may be of interest to our readers.
While this post is not going to be of profound interest to most practitioners, it serves at least two purposes. First, it marks the new flow of formal opinions of the Court for the current term, and second, it is a reminder that there is a small category of cases that proceed to the Court in its original jurisdiction—one that includes suits between states.
Article III, section 2, of the Constitution provides that “In all Cases affecting Ambassadors, other public Ministers and Consuls, and those in which a State shall be Party, the supreme Court shall have original Jurisdiction. In all the other Cases before mentioned, the supreme Court have appellate Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations as the Congress shall make.”
Today’s case is that of Mississippi v. Tennessee, an original action brought by Mississippi, seeking damages related to the pumping of groundwater by the City of Memphis from a source known as the Middle Claiborne Aquifer. Mississippi claimed an exclusive right to the water at issue, notwithstanding the facts that the aquifer lies below no fewer than eight states and the wells from which Memphis was pumping are all in Tennessee.
Applying the doctrine of equitable apportionment—which aims to produce a fair allocation of a shared water resource between two or more states, based on the principle that states have an equal right to reasonable use of shared water resources—the Court held in favor of Tennessee and dismissed Mississippi’s claim with prejudice.
One suggests that as the nation has begun to experience the effects of climate change and population shifts, disputes like this are going to increase. In thinking about equitable apportionment of a resource among the states, Ben Franklin’s famous statement, uttered in an entirely different context—that “we must, indeed, all hang together …”—comes to mind.
When hospitals and doctors treat patients who are injured in car accidents, the health care providers reasonably expect that their rights to be compensated for the care they provide will not be conditioned upon their willingness to participate in their patients’ personal injury lawsuits against allegedly negligent drivers. A common pleas Court in Ohio applied this sensible reasoning in a recent decision, dismissing a car-accident plaintiff’s attempts to force the hospital that treated her to participate in her lawsuit against the driver who allegedly caused the injuries that led her to seek care at the hospital.
In Cheadle, et al., v. Goode, et al., Franklin County Court of Common Pleas Case No. 21 CV 003794, Marietta Memorial Hospital (“MMH”) treated a patient for injuries following a motor vehicle accident. That patient and her husband later sued the driver for negligence. They included a claim against MMH, alleging that it should “assert, prosecute and pursue any subrogation, reimbursement, collections, lien and/or other claim they might have, or be deemed to have waived any such claims.” (Complaint at ¶ 19.)
In granting MMH’s motion to dismiss, the court held that it was “not a necessary party under Civ.R. 19 because its presence in th[e] case has no bearing on Plaintiff’s tort claim, and complete relief can be accorded in MMH’s absence as a party in th[e] case.” (Decision at 3.) Further, the Court held that MMH was not a permissive party under Civ.R. 20 to its patient’s lawsuit against the driver because “any claim that MMH may have for reimbursement arises from a separate transaction or occurrence than the incident at issue and involves separate questions of law and fact.” (Id. at 4.)
The court relied on decisions from several other jurisdictions that have reached the same result. Most notably, the West Virginia Supreme Court has held that:
[A] hospital’s claim for payment of services arises from a debtor-creditor relationship and not subrogation. Accordingly, we hold, . . . a medical provider’s right to be compensated by a patient is not dependent upon the patient’s ability to obtain a recovery for such medical expenses from a tortfeasor. Instead, a medical provider’s claim generally rests upon a debtor-creditor relationship, and such a claim cannot be extinguished or bared by the doctrine of subrogation.
Porter v. McPherson, 198 W.Va. 158, 164–165 (1996).
The court further relied on decisions from Montana, Illinois, and California that reach the same conclusion:
- Sisters of Charity of Providence v. Nichols, 157 Mont. 106, 112, 483 P.2d 279 (1971) (“[T]he hospital’s claim and lien is based upon a debt owed the hospital by its patient in whose shoes it does not stand for any purpose, the debt being owed to it by its patient irrespective of the patient’s rights against a third party wrongdoer.”).
- Maynard v. Parker, 54 Ill.App.3d 141, 145, 369 N.E.2d 352, 355 (Ill.App.1977) (“[T]he hospital’s right to payment of its claim is not dependent upon plaintiff’s recovery against a third party but rather involves an ordinary debtor-creditor relationship.”).
- City & Cty. of San Francisco v. Sweet, 12 Cal.4th 105, 117, 906 P.2d 1196, 1203 (1995) (“The plaintiff’s creditors do not have an interest in the recovery in common with the plaintiff. That the creditors may benefit from any recovery is an incidental, not an intended, benefit of the litigation.”)
Referring to these other states’ decisions, the Ohio court agreed: a medical provider’s right to reimbursement does not arise from, or turn upon, the success or failure of the provider’s patient’s entirely separate lawsuit against an alleged tortfeasor. Moreover, because health care providers in these instances have not paid their patient’s debts, they are not subrogated parties, and—contrary to the plaintiff’s suggestion in Cheadle—the doctrine of subrogation is not implicated just because a hospital expects to be paid for the care that it provides to a patient, if a different negligent party caused the patient’s injuries.
Plaintiffs’ attempts to haul healthcare providers into personal injury actions have been on the rise recently. Although plaintiffs may choose to name their medical providers as defendants for various reasons, one reason is to renegotiate any debts the plaintiffs owe their providers for services rendered. This practice has deeply troubling policy implications for medical providers, because a provider’s right to reimbursement for services provided to their patients does not hinge on that patient’s potential recovery for their injuries in a tort action. Moreover, the costs of participating in a patient’s personal injury action could erode the amount of compensation the provider might reasonably expect to receive for the care it provided to the patient.
The court’s decision provides helpful clarity that should help arm hospitals and other healthcare providers seeking to resist efforts by personal injury plaintiffs to compel healthcare providers to risk losing reimbursement if they elect not to join in their patients’ tort suits.
As we previously reported, Judge Bough of the U.S. District Court for the Western District of Missouri denied an insurance carrier’s motion for summary judgment in K.C. Hopps Ltd. v. The Cincinnati Ins. Co. Inc., No. 20-cv-00437-SRB (W.D. Mo. Sept. 21, 2021) and sent the case to trial.
On October 28, after a three day trial, the jury returned a verdict in favor of the insurer. The case involved claims by a group of restaurants under their insurance policies’ business income (and extra expense) coverage form. Under that coverage, the insurer is obligated to pay for the insured’s actual loss of business income when it must suspend operations due to physical loss or damage to the insured’s property. Of note, the Court previously ruled that “proof of physical contamination is sufficient to meet the Policy’s requirement for physical loss or damage.”
At the close of the case, the insurer made a motion for a judgment as a matter of law on the grounds that the policyholder had failed to show its properties were physically damaged by COVID-19 and needed to be restored before operations could resume. Although the Court denied the motion, it provides a window into some of the key testimony that may have swayed the jury.
According to the motion, plaintiff admitted that it never tried to determine whether COVID-19 was on its premises and one of its experts, a molecular epidemiologist, testified that there was no testing for the presence of COVID-19 at any of the policyholder’s nine restaurant locations. Similarly, a chemical enzymology expert, testified that COVID-19 can be removed and inactivated by cleaning, and also can decay on its own, the insurer said. As a result, the insurer argued that the policyholder did not present any evidence that COVID-19 was present on its premises and thus could not establish physical contamination.
Additionally, the restaurant group’s owner testified that the restaurants did not shut down in February despite knowledge of COVID-19. Instead, the restaurants only closed after government orders required it to do so, and reopened once the orders became less restrictive. Accordingly, the insurer argued in its motion that “[e]ven if plaintiff’s evidence showed physical contamination at any of its properties, which it does not, the evidence introduced by plaintiff demonstrates that its alleged loss was not caused by any physical loss, physical damage or physical contamination caused by the virus, but was instead caused solely and completely by plaintiff’s compliance with governmental orders that impacted its operation of its premises.”
The verdict form did not indicate the reason for the verdict so we do not know whether one or both of the insurer’s arguments were persuasive. But, the trial again highlights the evidence that policyholders will need to develop – at a minimum, proof of physical contamination of the property by COVID-19 – in order to establish coverage for business interruption from COVID-19.
Last week, the U.S. Department of Justice’s Deputy Attorney General Lisa Monaco announced plans to increase its enforcement of white collar crimes against individuals and corporations. Monaco made the announcement speaking at the American Bar Association’s While Collar Crime Conference. She made clear to “those of you who are counselors and voices in the C-Suite and Boardroom” that DOJ “will not hesitate to take action when necessary to combat corporate wrongdoing.”
Monaco, DOJ’s second in command, is no stranger to prosecuting corporate crimes having participated in the Enron investigation. Unveiling an ambitious plan for prosecutors to hold accountable those who engage in criminal conduct, Monaco noted that, going forward, federal prosecutors will have a mandate to “enforce the criminal laws that govern corporations, executives, officers and others, in order to protect jobs, guard savings and maintain our collective faith in the economic engine that fuels this country.”
Additionally, Monaco informed the audience that Attorney General Merrick Garland “has made clear it is unambiguously this department’s first priority in corporate criminal matters to prosecute the individuals who commit and profit from corporate malfeasance.” This directive comes on top of DOJ’s continued and public focus on criminal and civil investigations on COVID-19 related enforcement.
According to Monaco, the impetus for this new focus on corporate wrongdoing arose from the changing nature of corporate crime: corporate crimes increasingly have a national security implication; investigators are able to use more sophisticated data analytics to track criminal conduct; and emerging technological and financial industries, such as cryptocurrency, are leading to new frontiers in criminal schemes.
Monaco acknowledged that cases against corporate executives are “some of the most difficult” that DOJ brings, but she pledged that prosecutors will not be deterred by the prospect of losing cases. She urged prosecutors to be “bold” in bringing cases against executives in order to hold accountable those who committed crimes. And, significantly, Monaco noted that DOJ intends to provide substantial resources for its prosecutors to initiate these kinds of enforcement actions.
Specifically, Monaco detailed three new DOJ initiatives that will guide federal prosecutors—though she cautioned these policies would just be a “first step” in ramped up DOJ investigations into corporate crimes. These initiatives come on the heels of DOJ’s 2020 release of its revisions to the “Evaluation of Corporate Programs” guidance, which focused on more individualized evaluations for corporations caught in DOJ’s crosshairs.
- First, DOJ will mandate more disclosures from corporations regarding misconduct. “It will no longer be sufficient for companies to limit disclosures to those they assess to be ‘substantially involved’ in the misconduct.” Instead, in a restoration of prior principles detailed in the Yates memo, to receive credit for cooperation with prosecutors, corporations must disclose “all non-privileged information about individual wrongdoing.” This puts federal prosecutors—and not corporations and executives themselves—in the position to assess the relevance and culpability of any individuals involved with the misconduct.
- Second, when evaluating resolutions, DOJ will now not just consider a corporation’s past similar misconduct, but, instead, DOJ will take into account the entirety of a corporation’s past misconduct. Currently, for example, in a tax matter, DOJ would only consider the corporation’s prior tax misconduct (if any) in reaching a resolution to that tax matter. Now, going forward, DOJ will consider any prior misconduct, whether related to violations of the tax code, the Foreign Corrupt Practices Act, the anti-money laundering provisions, False Claims Act, or any other federal or state Of note, Monaco made it clear that federal prosecutors will not ignore a corporation’s past state-based misconduct. Monaco directed prosecutors “to start by assuming all prior misconduct is potentially relevant.” Monaco questioned whether pre-trial diversion, such as non-prosecution or deferred prosecution agreements, is appropriate for recidivist corporations.
- Third, DOJ will seek to impose independent monitors to oversee a corporation’s compliance and disclosure obligations. This last initiative marks a distinct break from recent years, when independent monitors were the exception and not the rule and a return to prior DOJ policies.
Additionally, Monaco also announced the formation of Corporate Crime Advisory Group. This new group will propose new policies and procedures for corporate crime enforcement within DOJ. The group will consider issues such as repeated corporate offenders, non-compliance with deferred prosecution agreements, selection of monitors, and resource allocation for investigating corporate crimes, and also develop benchmarks by which a corporation’s cooperation can be measured.
Echoing recent statements regarding the importance of compliance, Monaco closed by cautioning companies “to actively review their compliance programs to ensure they adequately monitor for and remediate misconduct — or else it’s going to cost them down the line.”
Corporations should heed this advice. Indeed, when it comes to avoiding government investigations, there are substantial benefits for corporations to be proactive about reviewing and updating their compliance programs and procedures. The applicability of Benjamin Franklin’s old adage— an ounce of prevention is worth a pound of cure—cannot be overstated. Corporations will be better served by conducting an assessment of their actions today, rather than have DOJ investigate their actions tomorrow in the wake of a planned increase in white collar investigations and prosecutions.
We recently wrote about the pros and cons of the virtual deposition, a mechanism which saw its use burgeon during the pandemic. Epstein Becker & Green’s Managing Director, James P. Flynn, has taken the virtual experience to the next level having recently participated in a virtual bench trial. I asked Jim about his experience, and also received some of his big-picture thoughts on this medium.
Q: Were any aspects of the trial easier, or more streamlined, because it was being conducted virtually?
A: Dealing with individual documents, and going from one document to the next, is very efficient, especially where parties have the foresight to cooperate. We split the cost for a third party document custodian who acted like combined court clerk and trial tech. The tech simply called up noted documents, and could enlarge and highlight on command. This worked well in letting counsel, witnesses, and the court follow along and focus. On the other hand, objections were harder to handle, as we did not have or use a breakout room function. This meant that we did not have any sort of sidebar to resolve objections, and unlike an in-person trial, witnesses could hear our colloquies with the judge.
Q: Even in bench trials, many trial attorneys thrive by being on their feet, actively engaging with the witness they are questioning. That obviously is not an option during a virtual trial. Does the lack of “showmanship” in a virtual trial take away from an attorney’s overall effectiveness?
A: Good trial attorneys adapt to their setting, and find ways to be effective. I don’t think the medium reduces a good attorney’s effectiveness, but I do think that the virtual trial eliminates certain opportunities that trial attorneys have to distinguish themselves from litigators who may not be as experienced, skilled or confident in the trial setting. But, in end, I believe that is a minor, marginal matter. Like in-person trials, the best way to put on a good show is to ask the right question at the right time, especially in a bench trial where you’re going to do a written post trial brief with record citations. In a virtual trial, because you don’t necessarily have to rely on the jurors’ recall of some moment, you can weave your proofs more subtly, and in some sense, the virtual bench trial may let you score points that other side doesn’t realize are going up on scoreboard until it’s too late.
Q: One of the concerns we voiced in our blog about virtual depositions was the inability for a questioner to accurately gauge a witness’s credibility and overall body language from a broadcast over a computer monitor. Is this concern in any way minimized during a virtual bench trial since it is the judge who is making such determinations rather than a jury?
A: You are right on point: In many ways, this is the biggest downside of the virtual trial. This is especially so during examinations when you also have documents on screen—at that point, even the witness’s face is pretty small. On the other hand, in a virtual trial, everybody is right in front of you, and you see everybody’s face simultaneously—the judge, opposing counsel, witness, other side’s client representative. In a court room, the best trial lawyers find ways to have that 360⁰ vision, but in the virtual trial you don’t need those eyes in the back of your head, the head swivel, or that sixth sense because everybody is always in front of you, unlike the courtroom where they are sometimes beside or behind you.
Q: Depending on the nature and complexity of the circumstances at issue, bench trials can be spread out over multiple, non-contiguous sessions, separated by weeks, if not months. Will virtual bench trials in any way promote a more efficient conclusion to the presentation of evidence?
A: For the most part, virtual bench trials are more efficient. There’s no need to physically pass exhibits to a witness, an adversary, and the judge, or to cart them in and out of your car in boxes. And, when there is no need for you or witnesses to travel, you can make trial days or half days easier to schedule despite conflicting and overlapping commitments, so the virtual trial can help shorten the intervening gaps. Yet, the benefit of that efficiency isn’t worth the tradeoffs, as I much prefer to conduct in-person trials. You just can’t replace that emotion and adrenalin that you get in an in-person trial for anybody involved. I once sat in the third row as James Earl Jones played the lead in Othello, and, sorry, but there is no way me, anybody else in the audience, him, the other actors, the director, or the crew would have felt that we had the same experience if we were each in separate boxes for a livestream/Zoom.
Q: Do you see any circumstances where virtual bench trials could be a useful addition to the post-pandemic practice of law?
A: I do. There are some cases, especially those involving commercial contracts, where the issues are narrow but they probably technically present issues of fact precluding summary judgment. When courts and parties only need limited factual testimony, virtual bench trials may just be more efficient on cost, travel, and time basis. As a result, we will learn to live with them—just like we occasionally watch great plays on PBS or Netflix. Those broadcasts don’t replace live theater; rather, they complement it, and sometimes partially sate the desire to experience it until our next chance to sit in a theater for a live performance. During the pandemic, we found ways to experience theater remotely, but everybody is very happy that Broadway has reopened. I feel exactly the same way about trial courts.
Although insurers largely have continued to have success in federal court defeating COVID-19 business interruption lawsuits, one judge – Judge Stephen Bough of the United States District Court for the Western District of Missouri – continues to be pro-policyholder. As we previously reported, last year he refused to dismiss several suits brought by policyholders seeking business interruption coverage for COVID-19 related losses.
Last week, in K.C. Hopps Ltd. v. The Cincinnati Ins. Co. Inc., No. 20-cv-00437-SRB (W.D. Mo. Sept. 21, 2021), Judge Bough gave policyholders seeking COVID-19 related business interruption coverage a significant victory by denying the majority of the insurance carrier’s motion for summary judgment and sending the case to trial.
In rejecting the insurer’s motion, the Court ruled that the policyholder “has sufficient evidence by which a reasonable juror could conclude the virus was present and rendered its property unsafe.” Id. at 18. In reaching that conclusion, the court relied on the policyholder’s expert and factual evidence supporting the conclusion that COVID-19 was present on its premises. Additionally, the Court relied on the policyholder’s expert evidence that COVID-19 “can physically contaminate property causing ‘physical loss,’ but also the virus creates an actual, tangible alteration to the property.” Id. at 17. The Court also provided further help to policyholders by stating that they do not need definitive proof that COVID-19 was present on its premises, but instead they must only prove that it was more likely than not that the virus physically contaminated the premises.
The Court provided insureds with further ammunition in their quest to capture coverage when it rejected the insurer’s other arguments. For example, the Court disregarded the insurer’s argument that the policyholder did not sustain a physical loss or physical damage because the premises were used during the relevant time period. In rejecting that argument, the court held that the policyholder could recover under the policy even if it used its property in a limited capacity.
Further, the Court rejected a new argument by the insurer that the policyholder had no damages because it received more in COVID-19 relief, including PPP loans, than it claimed in damages. The Court held that because the PPP loans were intended to keep workers employed, and to pay not to compensate owners for lost income, the policyholder had demonstrated a genuine dispute regarding its lost business income.
Importantly, the Court also distinguished this case from the Eighth Circuit’s recent holding in Oral Surgeons, P.C. v. The Cincinnati Ins. Co., 2 F.4th 1141 (8th Cir. 2021) that upheld the denial of coverage under a similar policy. As the Court explained, “[u]nlike the plaintiff in Oral Surgeons, Plaintiff submits evidence supporting the inference that [COVID-19] is physical, contaminated its premise, and made Plaintiff’s property unsafe.” K.C. Hopps at 11. Thus, COVID-19 business interruption claims likely will continue to turn on the nature of the specific allegations and terms of the operative policies, and plaintiffs must plead and establish that COVID-19 was physically present on its property in order to survive motions to dismiss or for summary judgment.
The Court’s decision is particularly noteworthy because it is in contrast to many other federal courts that have dismissed COVID-19 business interruption actions at the motion to dismiss stage. Those other courts have routinely refused to accept the factual and scientific allegations in policyholders’ COVID-19 business interruption complaints as true and have granted insurer motions to dismiss on the grounds that COVID-19 cannot cause physical loss or damage. Essentially, those judges have been making their own factual determinations about whether COVID-19 was on the premises and how it impacted the usability of the property. Not only does this decision remind judges that they should not be so quick to dismiss well-pleaded allegations, but also provides a roadmap for the type of evidence that policyholders may need to present in order to assert viable claims.
Judge Bough’s ruling confirms that, although insurance companies have won many early battles, the war is not over.
Medical providers preparing to engage in arbitration with payors pursuant to the just-announced No Surprises Act dispute rules should be prepared to counter some tough tactics from payors. For health care providers, the first Interim Final Rule represents a reasonable solution against arbitrary rates for out-of-network services, but raises concerns that certain policies may result in a financial windfall for insurers at the expense of providers and consumers.
On July 1, 2021, the Departments of Treasury, Labor, and Health and Human Services issued “Requirements Related to Surprise Billing; Part I”, the first in a series of regulations implementing the “No Surprises Act,” which was signed into law in December 2020 as part of the Consolidated Appropriations Act of 2021 (H.R. 133). Effective January 1, 2022, the Act purports to: (i) protect patients from unexpected medical bills arising from emergency care and certain non-emergency care provided by an out-of-network provider at an in-network facility, including for air ambulance services; and (ii) allow out-of-network providers and insurers to use an independent dispute resolution (“IDR”) process if, after a 30-day negotiation period, the parties are unable to agree to reimbursement amounts for services subject to the Act.
The IDR process follows “baseball-style” arbitration rules, where each party submits an offer for reimbursement (along with any supporting materials) and the arbitrator selects one of the offers—without modification—as the final payment amount. Notably, the Act requires the losing party to pay for the administrative costs of the IDR process, and provides that the party initiating arbitration is “locked out” from bringing another case against the same party for the same item or service for 90 days following the decision. Once the 90-day “cooling off” period has ended, however, the initiating party is free to submit such claims within four days.
The Rules provide a payment methodology for determining a patient’s cost-sharing amount for covered services and for calculating the so-called qualifying payment amount (“QPA”), which, as discussed below, are key factors in IDR proceedings. Despite the comprehensive approach outlined in the proposed Rules, several policies require further clarification and, as currently drafted, are poised to be hotly-contested issues in future arbitrations. Specifically, providers should be wary of the following three areas of concern:
- The relative weight of the QPA for IDR Purposes. The Act requires the arbitrator in an IDR proceeding to “consider” the following factors when deciding on a payment amount: the QPA and, upon request by the IDR entity or either party, the provider’s training and experience, the complexity of the procedure or medical decision-making, the patient’s acuity, the market share of the insurer and provider, teaching status of the facility, scope of services, any demonstrations of good faith efforts to agree on a payment amount, and contracted rates from the prior year. The Rules do not indicate, however, the relative importance of each factor or whether any one factor should or should not be given preferential weight, leaving open the possibility that arbitrators may either directly or indirectly consider the QPA as the predominant factor. Such reliance on the QPA as the benchmark rate could hinder a provider’s ability to utilize the other factors in good faith negotiations with the insurer.
- The definition and calculation of the QPA. This is an issue of significant importance to insurers and providers as it determines patients’ cost liability, influences the financial stability of providers, and must be considered by arbitrators if the provider and payor cannot agree on a payment amount. QPA is defined in the Rules as the median of the contracted rates recognized by the health plan in 2019 for the same or similar item or service provided by a similar provider in the same geographic region (indexed for inflation). To ensure adequate reimbursement for out-of-network services, providers should push for the arbitrator to also consider the weighted average of contracted rates for all providers of that type that are in-network with the insurer in that particular geographic area, rather than a median of contracted rates at the group level, regardless of practice size. For instance, if an insurer has five group contracts in a particular region, the QPA should be the weighted average of the individual rates of all relevant providers from those five groups (and not the median of the five group rates). In addition, given the acceleration of payor-controlled medical service providers, independent providers should advocate that any weighted averages exclude the rates of providers acquired by or in partnership with major payors.
- Initial Payment Based on Insurer’s Reasonable Belief. The Act directs insurers to send an “initial payment” (or notice of denial of payment) within 30 days after the provider submits a claim for services subject to the Act. The Rules clarify that the initial payment should represent an amount that the insurer reasonably intends to be payment in full, and that the payment should not be used as a first installment. The Rules do not, however, establish a minimum initial payment amount or an objective methodology for determining that amount. Instead, the insurer can rely on what it subjectively believes to be payment in full. In addition, the Rules fail to expressly require insurers to take definitive action within the 30-day period, instead reiterating one of the Act’s requirements that disputes be resolved “in a timely fashion.” The lack of such safeguards creates loopholes that insurers can exploit to disrupt the financial stability of providers through systemic underpayment and prolonged “good-faith” negotiations.
The Act, together with the Rules, provides mechanisms that promote network contracting, good-faith negotiations between insurers and providers, and ultimately broader access to quality care. A number of gaps and ambiguities in the proposed regulations, however, create yet another opportunity for insurers to engage in self-dealing by financially destabilizing providers and thus restricting patient access to medical care—without any guarantee that insurers’ savings will pass on to consumers. Providers should closely monitor these issues during the rulemaking process and advocate for greater protections to ensure a balanced method of resolving payment disputes.
On June 30, 2021, the Financial Crimes Enforcement Network (“FinCEN”), issued the first government-wide Priorities for anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) policy (the “Priorities”). In accordance with the Anti-Money Laundering Act of 2020 (“AMLA 2020”), FinCEN established the Priorities, after consulting with the Attorney General, and various Federal regulators, to assist covered financial institutions, (which include, banks, brokers-dealers, mutual funds, insurance companies, commodities dealers, precious metal and stone dealers, credit card companies, loan or finance companies, money services businesses, and housing government sponsored entities) with meeting their AML and CFT obligations, including maintaining an AML program that combats money laundering and terrorism financing.
The Priorities identified: (1) corruption; (2) cybercrime, including relevant cybersecurity and virtual currency considerations; (3) foreign and domestic terrorist financing; (4) fraud; (5) transnational criminal organization activity; (6) drug trafficking organization activity; (7) human trafficking and human smuggling; and (8) weapons proliferation financing as the most significant “threats to the U.S. financial system and national security.” These Priorities build upon traditional AML/CFT concerns, such as combating cybercrime, including ransomware and phishing schemes, as well as the evolving use of convertible virtual currency by “criminals and other bad actors.”
Covered financial institutions are not required to take any immediate action in response to the Priorities. Indeed, FinCEN, in consultation with the relevant Federal and State regulators, contemporaneously issued statements for banks and non-bank financial institutions, which recognize that the Priorities “do not create an immediate change” in Bank Secrecy Act (“BSA”) requirements or supervisory expectations. FinCEN also indicated that it will not examine banks or non-bank financial institutions for compliance with the Priorities at this time. Instead, FinCEN and the relevant Federal and State regulators intend to issue regulations to implement the Priorities in 180 days. Covered financial institutions will have no obligation to incorporate the Priorities into their risk-based BSA/AML compliance programs until the effective date of the forthcoming regulations. However, FinCEN suggested that covered financial institutions “may wish to start considering how they will incorporate” the Priorities into their compliance programs by “assessing the potential risks associated with” their particular products and services, customer base, and the geographic area of operation.
Although no immediate action is required, covered financial institutions should review the Priorities to evaluate the need to modify their BSA/AML programs and related policies and procedures. Indeed, the forthcoming regulations, which will likely be issued by the end of 2021, will create new opportunities for regulatory scrutiny. Notably, the AMLA 2020 significantly increased penalties for BSA violations. In addition, the AMLA 2020 expanded whistleblower rewards and protections. Thus, now more than ever, an ounce of prevention may be worth several pounds of cure.
Our colleague Lauren Petrin of Epstein Becker Green has a new post on Health Law Advisor that will be of interest to our readers: “DOJ’s Recent Telehealth Enforcement Action Highlights Increased Abuse of COVID-19 Waivers.”
The following is an excerpt:
On May 26, 2021, the Department of Justice (“DOJ”) announced a coordinated law enforcement action against 14 telehealth executives, physicians, marketers, and healthcare business owners for their alleged fraudulent COVID-19 related Medicare claims resulting in over $143 million in false billing. This coordinated effort highlights the increased scrutiny telehealth providers are facing as rapid expansion efforts due to COVID-19 shape industry standards.
Since the outset of the COVID-19 pandemic, the DOJ has prioritized identifying and prosecuting COVID-19 related fraudulent conduct, particularly in regards to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act financial assistance programs. However, before this latest health care fraud takedown, the DOJ announced relatively little enforcement activity specific to federal healthcare programs. This renewed enforcement action may spark an increased effort by the DOJ to manage pandemic-related fraud as it relates to healthcare programs.
Click here to read the full post and more on Health Law Advisor.