Black Box Issues [Podcast]
In part three of our series on potential pitfalls in the use of artificial intelligence (or AI) when it comes to employment decisions, partner Guy Brenner and senior counsel Jonathan Slowik dive into the concept of “black box” systems—AI tools whose internal decision-making processes are not transparent. The internal workings of such systems may not be well understood, even by the developers who create them. We explore the challenges this poses for employers seeking to ensure that their use of AI in employment decisions does not inadvertently introduce bias into the process. Be sure to tune in for a closer look at the complexities of this conundrum and what it means for employers.
McDermott+ Check-Up: January 10, 2025
THIS WEEK’S DOSE
119th Congress Begins. The new Congress began with key membership announcements for relevant healthcare committees.
Cures 2.1 White Paper Published. The document outlines the 21st Century Cures 2.1 legislative proposal, focusing on advancing healthcare technologies and fostering innovation.
Senate Budget Committee Members Release Report on Private Equity. The report, released by the committee’s chair and ranking member from the 118th Congress, includes findings from an investigation into private equity’s role in healthcare.
HHS OCR Proposes Significant Updates to HIPAA Security Rule. The US Department of Health & Human Services (HHS) Office for Civil Rights (OCR) seeks to address current cybersecurity concerns.
HHS Releases AI Strategic Plan. The plan outlines how HHS will prioritize resources and coordinate efforts related to artificial intelligence (AI).
CFPB Removes Medical Debt from Consumer Credit Reports. The Consumer Financial Protection Bureau (CFPB) finalized its 2024 proposal largely as proposed.
President Biden Signs Several Public Health Bills into Law. The legislation includes the reauthorization and creation of public health programs related to cardiomyopathy, autism, and emergency medical services for children.
CONGRESS
119th Congress Begins. The 119th Congress began on January 3, 2025. Lawmakers reelected Speaker Johnson in the first round of votes and adopted the House rules package. The first full week in session was slow-moving due to a winter storm in Washington, DC; funeral proceedings for President Jimmy Carter; and the certification of electoral college votes. Committees are still getting organized, and additions to key health committees include:
House Energy & Commerce: Reps. Bentz (R-OR), Houchin (R-IN), Fry (R-SC), Lee (R-FL), Langworthy (R-NY), Kean (R-NJ), Rulli (R-OH), Evans (R-CO), Goldman (R-TX), Fedorchak (R-ND), Ocasio-Cortez (D-NY), Mullin (D-CA), Carter (D-LA), McClellan (D-VA), Landsman (D-OH), Auchincloss (D-MA), and Menendez (D-NJ).
House Ways & Means: Reps. Moran (R-TX), Yakym (R-IN), Miller (R-OH), Bean (R-FL), Boyle (D-PA), Plaskett (D-VI), and Suozzi (D-NY).
Senate Finance: Sens. Marshall (R-KS), Sanders (I-VT), Smith (D-MN), Ray Luján (D-NM), Warnick (D-GA), and Welch (D-VT).
Senate Health, Education, Labor & Pensions: Sens. Scott (R-SC), Hawley (R-MO), Banks (R-IN), Crapo (R-ID), Blackburn (R-TN), Kim (D-NJ), Blunt Rochester (D-DE), and Alsobrooks (D-MD).
Congress has a busy year ahead. The continuing resolution (CR) enacted in December 2024 included several short-term extensions of health provisions (and excluded many others that had been included in an earlier proposed bipartisan health package), and these extensions will expire on March 14, 2025. Congress will need to complete action on fiscal year (FY) 2025 appropriations by this date, whether by passing another CR through the end of the FY, or by passing a full FY 2025 appropriations package. The short-term health extenders included in the December CR could be further extended in the next appropriations bill, and Congress also has the opportunity to revisit the bipartisan, bicameral healthcare package that was unveiled in December but ultimately left out of the CR because of pushback from Republicans about the overall bill’s size.
The 119th Congress will also be focused in the coming weeks on advancing key priorities – including immigration reform, energy policy, extending the 2017 tax cuts, and raising the debt limit – through the budget reconciliation process. This procedural maneuver allows the Senate to advance legislation with a simple majority, rather than the 60 votes needed to overcome the threat of a filibuster. Discussions are underway about the scope of this package and the logistics (will there be one reconciliation bill or two?), and we expect to learn more in the days and weeks ahead. It is possible that healthcare provisions could become a part of such a reconciliation package.
Cures 2.1 White Paper Published. Rep. Diana DeGette (D-CO) and former Rep. Larry Bucshon (R-IN) released a white paper on December 24, 2024, outlining potential provisions of the 21st Century Cures 2.1 legislative proposal expected to be introduced later this year. This white paper and the anticipated legislation are informed by responses to a 2024 request for information. The white paper is broad, discussing potential Medicare reforms relating to gene therapy access, coverage determinations, and fostering innovation. With Rep. Bucshon’s retirement, all eyes are focused on who will be the Republican lead on this effort.
Senate Budget Committee Members Release Report on Private Equity. The report contains findings from an investigation into private equity’s role in healthcare led by the leaders of the committee in the 118th Congress, then-Chair Whitehouse (D-RI) and then-Ranking Member Grassley (R-IA). The report includes two case studies and states that private equity firms have become increasingly involved in US hospitals. They write that this trend impacts quality of care, patient safety, and financial stability at hospitals across the United States, and the report calls for greater oversight, transparency, and reforms of private equity’s role in healthcare. A press release that includes more documents related to the case studies can be found here.
ADMINISTRATION
HHS OCR Proposes Significant Updates to HIPAA Security Rule. HHS OCR released a proposed rule, HIPAA Security Rule to Strengthen the Cybersecurity of Electronic Protected Health Information (ePHI). HHS OCR proposes minimum cybersecurity standards that would apply to health plans, healthcare clearinghouses, most healthcare providers (including hospitals), and their business associates. Key proposals include:
Removing the distinction between “required” and “addressable” implementation specifications and making all implementation specifications required with specific, limited exceptions.
Requiring written documentation of all Security Rule policies, procedures, plans, and analyses.
Updating definitions and revising implementation specifications to reflect changes in technology and terminology.
Adding specific compliance time periods for many existing requirements.
Requiring the development and revision of a technology asset inventory and a network map that illustrates the movement of ePHI throughout the regulated entity’s electronic information system(s) on an ongoing basis, but at least once every 12 months and in response to a change in the regulated entity’s environment or operations that may affect ePHI.
Requiring notification of certain regulated entities within 24 hours when a workforce member’s access to ePHI or certain electronic information systems is changed or terminated.
Strengthening requirements for planning for contingencies and responding to security incidents.
Requiring regulated entities to conduct an audit at least once every 12 months to ensure their compliance with the Security Rule requirements.
The HHS OCR fact sheet is available here. Comments are due on March 7, 2025. Because this is a proposed rule, the incoming Administration will determine the content and next steps for the final rule.
HHS Releases AI Strategic Plan. In response to President Biden’s Executive Order on AI, HHS unveiled its AI strategic plan. The plan is organized into five primary domains:
Medical research and discovery
Medical product development, safety and effectiveness
Healthcare delivery
Human services delivery
Public health
Within each of these chapters, HHS discusses in-depth the context of AI, stakeholders engaged in the domain’s AI value chain, opportunities for the application of AI in the domain, trends in AI for the domain, potential use-cases and risks, and an action plan.
The report also highlights efforts related to cybersecurity and internal operations. Lastly, the plan outlines responsibility for AI efforts within HHS’s Office of the Chief Artificial Intelligence Officer.
CFPB Removes Medical Debt from Consumer Credit Reports. The final rule removes $49 billion in unpaid medical bills from the credit reports of 15 million Americans, building on the Biden-Harris Administration’s work with states and localities. The White House fact sheet can be found here. Whether the incoming Administration will intervene in this rulemaking remains an open question.
President Biden Signs Several Public Health Bills into Law. These bills from the 118th Congress include:
H.R. 6829, the HEARTS Act of 2024, which mandates that the HHS Secretary work with the Centers for Disease Control and Prevention, patient advocacy groups, and health professional organizations to develop and distribute educational materials on cardiomyopathy.
H.R. 6960, the Emergency Medical Services for Children Reauthorization Act of 2024, which reauthorizes through FY 2029 the Emergency Medical Services for Children State Partnership Program.
H.R. 7213, the Autism CARES Act of 2024, which reauthorizes, through FY 2029, the Developmental Disabilities Surveillance and Research Program and the Interagency Autism Coordinating Committee in HHS, among other HHS programs to support autism education, early detection, and intervention.
QUICK HITS
ACIMM Hosts Public Meeting. The HHS Advisory Committee on Infant and Maternal Mortality (ACIMM) January meeting included discussion and voting on draft recommendations related to preconception/interconception health, systems issues in rural health, and social drivers of health. The agenda can be found here.
CBO Releases Report on Gene Therapy Treatment for Sickle Cell Disease. The Congressional Budget Office (CBO) report did not estimate the federal budgetary effects of any policy, but instead discussed how CBO would assess related policies in the future.
CMS Reports Marketplace 2025 Open Enrollment Data. As of January 4, 2025, 23.6 million consumers had selected a plan for coverage in 2025, including more than three million new consumers. Read the fact sheet here.
CMS Updates Hospital Price Transparency Guidance. The agency posted updated frequently asked questions (FAQs) on hospital price transparency compliance requirements. Some of the FAQs are related to new requirements that took effect January 1, 2025, as finalized in the Calendar Year 2024 Outpatient Prospective Payment System/Ambulatory Services Center Final Rule, and others are modifications to existing requirements as detailed in previous FAQs.
GAO Releases Reports on Older Americans Act-Funded Services, ARPA-H Workforce. The US Government Accountability Office (GAO) report recommended that the Administration for Community Living develop a written plan for its work with the Interagency Coordinating Committee on Healthy Aging and Age-Friendly Communities to improve services funded under the Older Americans Act. In another report, the GAO recommended that the Advanced Research Projects Agency for Health (ARPA-H) develop a workforce planning process and assess scientific personnel data.
VA Expands Cancers Covered by PACT Act. The US Department of Veterans Affairs (VA) will add several new cancers to the list of those presumed to be related to burn pit exposure, lowering the burden of proof for veterans to receive disability benefits. Read the press release here.
HHS Announces $10M in Awards for Maternal Health. The $10 million in grants from the Substance Abuse and Mental Health Services Administration (SAMHSA) will go to a new community-based maternal behavioral health services grant program. Read the press release here.
Surgeon General Issues Advisory on Link Between Alcohol and Cancer Risk. The advisory includes a series of recommendations to increase awareness of the connection between alcohol consumption and cancer risk and update the existing Surgeon General’s health warning label on alcohol-containing beverages. Read the press release here.
SAMHSA Awards CCBHC Medicaid Demonstration Planning Grants. The grants will go to 14 states and Washington, DC, to plan a Certified Community Behavioral Health Clinic (CCBHC). Read the press release here.
HHS Announces Membership of Parkinson’s Advisory Council. The Advisory Council on Parkinson’s Research, Care, and Services will be co-chaired by Walter J. Koroshetz, MD, Director of the National Institutes of Health’s National Institute of Neurological Disorders and Stroke, and David Goldstein, MS, Associate Deputy Director for the Office of Science and Medicine for HHS’s Office of the Assistant Secretary for Health. Read the press release here.
NEXT WEEK’S DIAGNOSIS
The House and Senate are in session next week and will continue to organize for the 119th Congress. Confirmation hearings are expected to begin in the Senate for President-elect Trump’s nominees, although none in the healthcare space have been announced yet. On the regulatory front, CMS will publish the Medicare Advantage rate notice.
D.C. Circuit Court Again Addresses NEPA’s Scope
On January 7, 2025, the U.S. Court of Appeals for the D.C. Circuit, in Citizens Action Coalition of Indiana v. FERC, rejected a National Environmental Protection Act (NEPA) and Natural Gas Act (NGA) challenge to FERC’s approval of a natural gas pipeline in Indiana after an Environmental Impact Statement was issued. Plaintiffs’ central challenge was that NEPA required FERC to analyze non-gas alternatives before approving the pipeline. The D.C. Circuit disagreed.
Expressing frustration with what have become regular NEPA challenges to critical energy infrastructure projects – challenges that follow federal permitting actions “as night follows day” – the Court found that NEPA does not require FERC to consider alternatives that are outside of FERC’s jurisdiction and would fail to serve the purpose of the project.
In other words, where a project’s purpose is to support new natural gas units, NEPA requires only that the permitting agency consider alternatives that would satisfy that purpose.
Further, in defining a project’s purpose, the Court concluded that FERC may give substantial weight to the siting and design of a private developer. Here, FERC properly refused to reconsider the mix of electricity generation chosen by Indiana that the approved pipeline would support. It was not required to do so under NEPA, nor could it do so under the NGA, which does not authorize FERC to choose between electricity generation sources – that decision is left to the states.
The Court also rejected the claim that FERC’s consideration of the greenhouse gas (GHG) emissions from the project and from the downstream power plant was insufficient because FERC failed to make a significance determination, but instead chose to report those emissions in quantitative terms. Citing its recent decision in Food & Water Watch v. FERC, the Court plainly concluded “NEPA contains no such mandate.”
Importantly, on the issue of GHGs, the Court also concluded that “while NEPA requires FERC to consider environmental effects of the projects it approves, it is far from clear what statutory authority FERC has, if any, to give determinative weight to the environmental effects of projects beyond its jurisdiction.” Indeed, nothing in the NGA suggests that FERC can prioritize environmental concerns over the primary objective of natural gas market development.
Citizens Action represents a marked shift from recent law out of the D.C. Circuit, particularly the Court’s expansive approach to NEPA that is currently under review by the Supreme Court in Seven County Infrastructure Coalition v. Eagle County, Colorado. In that case, the D.C. Circuit held that the Surface Transportation Board (STB) should have considered the effect of the proposed 88-mile-long railway in Utah on increased oil refining along the Gulf coast, notwithstanding the limited authority of the STB. In Citizens Action,by contrast, the D.C. Circuit curtailed the scope of NEPA review by renewing the emphasis on the project’s purpose:
Citizens Action in effect seeks a judicial directive exhorting FERC to promote general environmental concerns. But such a directive would far exceed our review under the APA as well as FERC’s authority under the NGA and NEPA. Congress charged FERC with the development of natural gas pipelines, not with making local energy decisions or setting national environmental policy.
The volatility of the D.C. Circuit when it comes to the proper scope of federal agency review under NEPA—specifically whether NEPA requires an agency to study environmental impacts beyond the proximate effects of the action over which the agency has authority—may very well be settled by the Supreme Court in Seven County. In the interim, however, the D.C. Circuit this week rejected using NEPA to delay critical development projects.
5 Trends to Watch: 2025 EU Data Privacy & Cybersecurity
Full Steam Ahead: The European Union’s (EU) Artificial Intelligence (AI) Act in Action — As the EU’s landmark AI Act officially takes effect, 2025 will be a year of implementation challenges and enforcement. Companies deploying AI across the EU will likely navigate strict rules on data usage, transparency, and risk management, especially for high-risk AI systems. Privacy regulators are expected to play a key role in monitoring how personal data is used in AI model training, with potential penalties for noncompliance. The interplay between the AI Act and the General Data Protection Regulation (GDPR) may add complexity, particularly for multinational organizations.
Network and Information Security Directive (NIS2) Matures: A New Era of Cybersecurity Regulation — The EU’s NIS2 Directive will enter its enforcement phase, expanding cybersecurity obligations for critical infrastructure and key sectors. Companies must adapt to stricter breach notification rules, risk management requirements, and supply-chain security mandates. Regulators are expected to focus on cross-border coordination in response to major incidents, with early cases likely setting important precedents. Organizations will likely face increasing scrutiny of their cybersecurity disclosures and incident response protocols.
The Evolution of Data Transfers: Toward a Unified Framework — After years of turbulence, 2025 may mark a turning point for transatlantic and global data flows. The EU-U.S. Data Privacy Framework will face ongoing reviews by the European Data Protection Board (EDPB) and potential legal challenges, but it offers a clearer path forward. Meanwhile, the EU may continue striking adequacy agreements with key trading partners, setting the stage for a harmonized approach to cross-border data transfers. Companies will need robust mechanisms, such as Standard Contractual Clauses and emerging Transfer Impact Assessments (TIAs), to maintain compliance.
Consumer Rights Expand Under the GDPR’s Influence — The GDPR continues to set the global benchmark for privacy laws, and 2025 will see the ripple effect of its influence as EU member states refine their own data protection frameworks. Enhanced consumer rights, such as the right to explanation in algorithmic decision-making and stricter opt-in requirements for data use, are anticipated. Regulators are also likely to target dark patterns and deceptive consent mechanisms, driving companies toward greater transparency in their user interfaces and data practices.
Digital Markets Act Meets GDPR: Privacy in the Platform Economy — The Digital Markets Act (DMA), fully enforceable in 2025, will bring sweeping changes to large online platforms, or “gatekeepers.” Interoperability mandates, restrictions on data combination across services, and limits on targeted advertising will intersect with GDPR compliance. The overlap between DMA and GDPR enforcement will challenge platforms to adapt their practices while balancing privacy obligations. This regulatory synergy may reshape data monetization strategies and set a precedent for digital market governance worldwide.
NHTSA Proposes National Voluntary Framework for Autonomous Vehicle Oversight
The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) has proposed a voluntary national framework to evaluate and oversee certain vehicles equipped with automated driving systems (ADS). This proposal aims to enhance transparency and safety in autonomous vehicle (AV) operations through the ADS-Equipped Vehicle Safety, Transparency, and Evaluation Program (AV STEP).
Participation Requirements
Entities with operational control over subject ADS-equipped vehicles would be able to apply to participate in AV STEP at one of two “steps,” depending on whether their ADS requires “fallback personnel” — a human supervisor who is expected to intervene and exercise control over the vehicle in necessary circumstances. Approval would involve an evaluation of an applicant’s safety case, including a third-party independent assessment, and each step would set minimum eligibility requirements relative to the extent of ADS operations.
Ongoing Obligations
Once admitted into AV STEP, a participating entity would be required to submit periodic quarterly reports, event-triggered reports, and reports of operational changes above a certain threshold. Information required in such reports ranges from the number of vehicles operated and miles traveled to vehicle recovery events and contact events. NHTSA will also publicly publish a subset of information gathered in the application and participation process in an effort to promote transparency surrounding ADS technology.
Exemption Pathways
AV STEP would also add two exemption pathways for ADS-equipped vehicles:
A Federal Motor Vehicle Safety Standards (FMVSS) Exemption under 49 U.S.C. 30114(a); and
A Make Inoperative Exemption under 49 U.S.C. 30122.
NHTSA states these additional exemption pathways will exist alongside current exemption processes to offer more regulatory flexibility.
Building on Existing Initiatives
The AV STEP proposal builds on current NHTSA programs and actions related to AV regulation. NHTSA has encouraged AV companies to complete a Voluntary Safety Self-Assessment to demonstrate their safety approaches, testing methods and technological developments to regulators and the public. Additionally, NHTSA has issued a Standing General Order (SGO), amended in April 2023, requiring certain manufacturers and operators of ADS technology to report details of collisions involving vehicles equipped with Level 2 advanced driver assistance systems (ADAS) or higher autonomous technology.
NHTSA’s AV STEP proposal will be open for public comment for 60 days after it is published in the Federal Register and will appear on Regulations.gov as docket No. NHTSA-2024-0100. The unofficial version of the notice of proposed rulemaking (NPRM) is currently available on NHTSA’s website. The outcome of the NPRM remains unclear with the incoming administration, and industry feedback is likely to shape the proposed program.
Back to the Antitrust Basics: FTC and DOJ Call for Case-by-Case Enforcement With the Withdrawal of Longstanding Competitor Collaboration Antitrust Guidelines
With the US Department of Justice (DOJ) and Federal Trade Commission (FTC) withdrawing yet another set of antitrust compliance guidelines last month, companies that collaborate with their competitors — whether directly or through a trade association — are left without any official agency guidance regarding safe harbors, other than the murkier background of a century of antitrust cases. However, the forthcoming change in presidential administrations might provide increased clarity.
The DOJ and FTC in 2023 had earlier withdrawn the decades-old safe harbors for information sharing among competitors, which many companies and associations relied on to tailor their data analytics. Our alert regarding that withdrawal is available here.
The agencies followed up by jointly announcing on December 11, 2024, their withdrawal of the Antitrust Guidelines for Collaborations Among Competitors (Collaboration Guidelines). The FTC announced the withdrawal of the 24-year-old Collaboration Guidelines following a narrow 3-2 party-line vote. The three Democratic commissioners supported withdrawal, while the two Republican commissioners opposed it.
The Guidelines Are Gone
The Collaboration Guidelines provided detailed guidance about US federal antitrust enforcers’ advice to companies for antitrust compliance when collaborating with competitors. According to the FTC’s press release, the 2000 Collaboration Guidelines “no longer provide reliable guidance about how enforcers assess the legality of collaborations involving competitors.” Instead, the DOJ and FTC encourage businesses thinking about partnering with competitors to “review the relevant statutes and caselaw to assess whether a collaboration would violate the law.”
The Dissents May Portend a Trump Administration Action Item
The FTC’s Republican Commissioners Melissa Holyoak and Andrew Ferguson, who likely will be the next FTC chairperson, strongly criticized the withdrawal of the Collaboration Guidelines, arguing in their dissents that the decision was terribly timed and will leave companies without clear guidance:
Improper Timing
They both argued that it was inappropriate for the Commission to make this decision during the lame-duck presidential period, “a mere 40 days before the country inaugurates a new President,” “further compounding today’s poor policy decision.”
Commissioner Ferguson’s dissent indicated that although the FTC seeks to promote “transparency and predictability,” now is not the time to “withdraw existing guidance or to push through revised or new guidance.” Instead, the time left for the Biden-Harris Commission should be reserved to “facilitate an orderly transition.”
Commissioner Holyoak’s dissent conveyed her opposition to the Commission’s decision, stating “The Majority had four years to address its concerns with the Collaboration Guidelines — now is not the time.”
Unclear Guidance
Commissioner Holyoak further expressed her opposition to the withdrawal, stating that the withdrawal announcement happened “without providing any replacement guidance, or even intimating plans for future replacement.” She contended that withdrawal of the Collaboration Guidelines leaves “businesses grasping in the dark.”
Commissioner Ferguson stated the Commission should “revisit its nonbinding guidance to ensure that it properly informs the public of the Commission’s enforcement position” which may become evident with the next Administration.
In response to Commissioners Ferguson and Holyoak, Commissioner Alvaro Bedoya, writing for the majority, wrote that the FTC is “not on vacation,” emphasizing that “[t]he American people expect their government to keep working for them even in periods of transition.” Commissioner Bedoya further asserted that he looks forward to working with the incoming Trump Administration with “evolving jurisprudence on competitor collaborations and issue new guidance for the business community.”
What Is Next?
For now, companies should no longer rely on the Collaboration Guidelines and instead must look for guidance in the underlying caselaw that the DOJ and FTC’s guidelines were based upon.
Yet, given the anticipated appointment of Commissioner Ferguson as the next FTC chairperson and his dissenting comments, the incoming Trump Administration might seize the opportunity to revisit the Collaboration Guidelines.
Barring that change in position, as Commissioner Melissa Holyoak indicated, companies will need “antitrust lawyers on speed dial” to obtain specific guidance to navigate case-by-case situations and evaluate the nuances of each project’s antitrust compliance.
New Changes to ACA Reporting Requirements Offer Welcome Relief to Employers and Others
Four changes have been made to the employer reporting requirements under the Affordable Care Act (ACA) for 2025.[1] These changes aim to simplify the reporting processes for employers.
Form 1095 Distribution – Effective for the 2024 reporting year, employers are no longer required to distribute Form 1095-C to all full-time employees (and plan sponsors of self-insured plans do not have to distribute Form 1095-B to individuals[2]). Instead, these forms only need to be provided upon request. In order to avail yourself of this new rule, you must:
Post a notice of availability that is “clear, conspicuous and accessible notice (at such time and in such manner as the Secretary may provide).” While the IRS has been instructed to issue guidance as to how and when the notice must be distributed, no such guidance has been issued as of the date of this alert.
Upon receipt of an employee request, distribute the form within 30 days or, if later, by January 31. Electronic distribution is permitted if the employee consents (which is valid until withdrawn in writing).
Employers must still prepare and file Forms 1095-C and 1095-B with the IRS eachyear (generally due to be filed with the Form 1094-C/1094-B transmittal form byMarch 31).
Reporting for Self-Insured Plans – Effective for the 2024 reporting year, employers and plan sponsors issuing Form 1095-C for self-insured plan coverage of spouses and dependents can use the individual’s full name and date of birth if their social security number (SSN) or other taxpayer identification number (TIN) cannot be obtained. This change eases the burden on employers who have experienced problems obtaining the necessary TIN from nonresident aliens with no SSN or TIN. The new rule avoids the need for employers to establish reasonable cause before they are able to use a date of birth.
Longer Response Time for ACA Penalty Letters – Employers who receive a Letter 226J from the IRS proposing assessment of employer shared responsibility payments under Section 4980H of the Internal Revenue Code (“ACA Penalties”) will now have 90 days to respond. This is an increase from the prior 30-day window, which often left employers without sufficient time to review and address issues. This new time limit applies to assessment proposed in taxable years beginning after December 23, 2024 (for calendar year plans, this would be 2025).
6-Year Statute of Limitations for ACA Penalties – A new 6-year statute of limitations will apply to the IRS’ assessment of ACA Penalties. This new time limit runs from the due date for the return (or the return filing date, if later) and applies to returns due after December 31, 2024. Previously, the IRS took the position there was no statute of limitations.
It is important to note that these changes only impact employers’ reporting requirements under federal law. Several states have their own reporting requirements (e.g., CA, MA, NJ, RI, D.C.), so employers will need to continue to comply with those state laws, where applicable.
Action Steps
In light of these changes, employers and plan sponsors with ACA reporting responsibilities should consider taking the following steps:
1. Update Processes and Post Notice. If you want to take advantage of the new exemption from distributing Forms 1095-C (or Forms 1095-B, where applicable):
Draft and post your notice of availability of Form 1095-C (or Forms 1095-B, where applicable). If you wish to post a notice before the IRS guidance is issued, you should consider following prior IRS guidance that was issued to address similar notice provisions that apply to Form 1095-Cs issued by reporting entities to covered nonemployees and non-full-time employees. Under this prior guidance, the notice must be posted prominently in a location on the reporting entity’s website that is reasonably accessible to all individuals who would be entitled to receive the form and must be retained in that same location through October 15 following the calendar year for which the statement was issued (or, if October 15 is a Saturday, Sunday or legal holiday, the next business day). The notice must state that the individual may obtain a copy upon request, include an email address and physical address to which the request may be submitted, and provide a telephone number for any questions. Even if you follow this prior guidance, however, you should still stay alert for IRS guidance that specifically applies to the current rule and act quickly to make any changes to your notice or its posting to the extent necessary to achieve full compliance.
Check with any vendors that you use to prepare your ACA reporting and update any existing processes as necessary, including the need to annually post the notice and keep it posted for the required time period.
Establish a process for timely responding to requests to obtain a copy of the form and, if you want to be able to provide the form electronically, draft a valid consent form.
2. Continue to Prepare and File Forms 1095-C and 1095-B with the IRS. Remember that you still have an obligation to file these statements with the IRS, with the required transmittal form (generally due by March 31).
3. Obtain Full Names and Dates of Birth. If you sponsor a self-insured plan and anticipate that you may have covered individuals who do not have a SNN or TIN, adopt procedures to obtain full names and dates of birth.
[1] These changes were part of the recently enacted Employer Reporting Improvement Act and the Paperwork Burden Reduction Act.
[2] The exemption for Forms 1095-B already existed under IRS guidance, but is now made part of the law.
Important Update: USPTO Fee Changes Effective January 2025
Highlights
Patent fees will increase across most categories, including filing, maintenance, and excess claims, on Jan. 19, 2025
New surcharges will apply to continuations filed six or nine years after the earliest benefit date (EBD); PTAB petitions will experience increases across the board
Trademark fees also will see adjustment including a unified application fee that will replace the TEAS Plus/Standard system, as well as others. Additional surcharges will apply for missing information, custom descriptions, and lengthy filings.
The U.S. Patent and Trademark Office (USPTO) is set to increase fees beginning Jan. 19, 2025, for patent-related fees, and Jan. 18, 2025, for trademark-related fees as part of routine updates at the USPTO to maintain alignment with operational costs and resource requirements. Tables that summarize targeted fee increases for the most common types of filings with the USPTO are included below. A global 7.5 percent increase is being applied to all filings that do not have a targeted fee increase.
Patent-Related Fees
Current Fee
Fee Effective 1/19/2025
Percentage Increase
Filing Fees
Utility Patent Application Fees
$1,820
$2,000
10%
Utility patent application issue fees
$1,200
$1,290
7.5%
Design patent application fees
$1,020
$1,300
27%
Design patent issue fees
$740
$1,300
76%
Claim Fees
Each independent claim in excess of 3
$480
$600
25%
Each claim in excess of 20
$100
$200
100%
Request for Continued Examination (REC) Fees
First RCE
$1,360
$1,500
10%
Second and subsequent RCE
$2,000
$2,860
43%
New Continuing Application Surcharge
Applications filed six (6) years or more after the earliest benefit date
$2,700
Applications filed nine (9) years or more after the earliest benefit date
$4,000
Information Disclosure Statement (IDS) and IDS Size Fees**
IDS filing fee
$260
$280
8%
IDS with 51 to 100 items of information
$200
IDS with 101 to 200 items of information
$500 less any amount previously paid
IDS with more than 200 items of information
$800 less any amount previously paid
Terminal Disclaimer Fees
Filing of Terminal Disclaimer
$170
$183
8%
Maintenance Fees
Fee due at 3.5 years
$2,000
$2,150
8%
Fee due at 7.5 years
$3,760
$4,040
7%
Fee due at 11.5 years
$7,700
$8,280
8%
Patent Term Extension (PTE) Applications Fees**
Application for PTE fee
$1,180
$2,500
112%
Initial Application for interim extension fee
$440
$1,320
200%
Request of a supplemental redetermination after a notice of final PTE determination
$1,440
Petition Fees
Petition Associated with Unintentional Delay of More Than 2 Years
$2,100
$3,000
43%
Patent Trials and Appeals Board (PTAB) Fees
Request of Review of PTAB Decision by Director Fees
$452
Petition for PTAB
25% increase for all PTAB trials
*Key adjustments are shown below for undiscounted (large) entity fees; small entities generally receive a 60 percent discount and micro entities generally receive a 75 percent discount on these undiscounted fees.**Fee applies to all entities with no discounts being given to small or micro entities.
Trademark-Related Fees
Current Fee
Fee Effective 1/19/2025
Percentage Increase
Application and Registration Fees
Unified Base Application Fees, per class*
$350
Intent-to-Use Applications (Statements of Use and Amendments to Allege Use) Fees, per class
$100
$150
50%
Madrid Protocol Applications (Application fee filed with WIPO (Section 66(a))), per class
$500
$600
20%
Post-Registration Maintenance Fees
Section 8 Declarations (filed between the 5th and 6th year after registration)
$225 per class
$325 per class
45%
Section 9 Renewals (filed every 10 years)
$300 per class
$325 per class
8%
Section 15 Declarations (Declaration of Incontestability)
$200 per class
$250 per class
25%
Section 71 Declarations
$225 per class
$325 per class
45%
Renewal fee filed at WIPO
$300 per class
$325 per class
8%
Petitions
Petition to the Director Fee
$250
$400
60%
Petition to Revive an Application Fee
$150
$250
67%
Letter of Protest Fee
$50
$150
300%
*The distinction between TEAS Plus and TEAS Standard applications will be eliminated and a single base application fee of $350 per class will apply to applications under Trademark Act Sections 1 and 44.
New surcharges will also be in effect for each of:
Insufficient Information: A $100 fee per class will be charged for applications lacking required details, such as the applicant’s name, domicile address, or entity type.
Custom Identifications: Using custom descriptions for goods or services instead of selecting from the USPTO’s ID Manual will incur a $200 fee per class.
Excessive Text Length: An additional $200 fee per class will apply for each set of 1,000 characters exceeding the initial 1,000 characters in custom descriptions.
For patent applications, we suggest considering a comprehensive review of your portfolio, at least with respect to each of the following:
Continuation applications that would have benefit dates of more than six or nine years
Information Disclosure Statements with over 50 cumulative prior art listings
Second or subsequent RCEs
Design patent applications
With respect to trademarks, those looking to file new applications with long or unusual descriptions of goods and services may consider filing these applications before the fees for using free-form text boxes and additional characters go into place.
Takeaways
If you are planning to file a new patent or trademark application, submit a renewal, or pay maintenance fees in the near future, it may be advantageous to do so before Jan. 19, 2025, or Jan. 18, 2025, respectively, to take advantage of the current fee structure before the increases take effect.
OFAC Relaxes Sanctions Against Post-Assad Syria – For Now
The US government signals careful optimism with a new general license authorizing some previously prohibited transactions, including many (but not all) transactions with Syrian governing institutions, for the next six months.
After a month of speculation about how US sanctions policy will treat the new leaders of Syria who swept into power in early December and sent Bashar al-Assad into exile, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) has issued General License 24 under the Syria Sanctions Regulations (SySR), the Global Terrorism Sanctions Regulations (GTSR), and the Foreign Terrorist Organizations Sanctions Regulations (FTOSR) on January 6. With certain exceptions, the license temporarily authorizes:
Transactions with governing institutions in Syria following December 8, 2024.
Transactions in support of the sale, supply, storage, or donation of energy, including petroleum, petroleum products, natural gas, and electricity, to or within Syria.
Transactions that are ordinarily incident and necessary to processing the transfer of noncommercial, personal remittances to Syria, including through the Central Bank of Syria.
The license, which currently expires July 7, covers transactions that would otherwise be prohibited not only by the SySR, but also by the GTSR and the FTOSR, given that the new leaders of Syria are part of Hay’at Tahrir al-Sham (HTS), which currently remains a designated terrorist group under those other sanctions programs.
What Is NOT Authorized?
General License 24 does not cover:
Financial transfers to any person blocked pursuant to the GTSR, FTOSR, or SySR other than for (i) paying taxes, fees, or import duties to Syrian governing institutions; (ii) paying the wages of Syrian governing institution employees provided they are not listed on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List; or (iii) purchasing/receiving permits, licenses, public utility services, or other public services in Syria.
The unblocking of any property that has already been blocked pursuant to US sanctions regulations.
Any transactions involving military or intelligence entities, or any persons acting on their behalf.
Importation of Syrian-origin petroleum or petroleum products into the United States.
Any transactions for or on behalf of the Government of the Russian Federation or the Government of Iran or related to the transfer or provision of Iranian- or Russian-origin goods, technology, software, funds, financing, or services.
New investments in Syria (which OFAC broadly defines as a commitment or contribution of funds or other assets or a loan or extension of credit), except contributions for salaries or wages of Syrian governing institution employees who are not listed on the SDN List.
The bottom line is: except for the three specific categories of authorized activities, all previous economic sanctions concerning Syria still apply. We also think it is wise to assume that it remains prohibited to facilitate any of the activities listed above that are specifically carved out of General License 24’s authorization. Additionally, those seeking to export commodities, software, or technology to Syria must still follow the Syria-specific requirements in the Export Administration Regulations implemented by the US Department of Commerce’s Bureau of Industry and Security.
Helpful New FAQs
Along with the new general license, OFAC released several new FAQs that give some much-appreciated clarity to the state of economic sanctions against Syria. Our top takeaways from the OFAC answers are:
The purpose of General License 24 is ensuring that US sanctions “do not impede essential governance-related services in Syria following the fall of Bashar al-Assad on December 8, 2024, including for the provision of public services or certain transactions related to energy or personal remittances” (FAQ 1205).
General License 24 authorizes transactions with a governing institution (with the exceptions noted above), even if it’s operated by a sanctioned individual (FAQ 1208).
Syrian “governing institutions” are broadly defined to include “departments, agencies, and government-run public service providers (including public hospitals, schools, and utilities) at the federal, regional local level” across all of Syria. (FAQ 1206).
Previous general licenses, including those that that broadly authorize NGO operations in Syria, are still in effect, and may overlap with General License 24 (FAQs 1212 and 1209).
Conclusions
It appears OFAC will take a wait-and-see approach to decide how to deal with the new HTS-led government in the long term. But for the next six months, General License 24 offers long-awaited sanctions relief (temporary, and carefully circumscribed) for Syria’s new leaders, US persons and entities operating in Syria, and above all, the Syrian people.
FTC Imposes Record Fine on Oil Companies for Illegal Pre-Merger Conduct
On January, 7, 2025, the Federal Trade Commission (FTC) announced that crude oil producers XCL Resources Holdings, LLC (XCL), Verdun Oil Company II LLC (Verdun) and EP Energy LLC (EP) collectively will pay a $5.68 million civil penalty to resolve allegations they engaged in illegal pre-merger coordination, also known as “gun jumping,” in violation of the Hart-Scott-Rodino Act (HSR Act). This is the largest fine ever imposed for a gun jumping violation in US history.
The HSR Act requires merging parties to report transactions over certain size thresholds to the FTC and Department of Justice so that those agencies can conduct an antitrust review before closing. The agencies typically have 30 days after a transaction has been reported, which is known as the HSR waiting period, to conduct their initial assessment. The investigating agency can extend that waiting period by issuing a “second request” demand for additional information should they deem the transaction needs more in-depth review. During the HSR waiting period, the acquiror is prohibited from taking ownership or control over the target business. Such gun jumping is punishable by a civil penalty of up to $51,744 per day (the maximum penalty is adjusted annually).
On July 26, 2021, Verdun and XCL entered into a $1.45 billion agreement to acquire EP that triggered the HSR Act’s notification and waiting period requirements. During the initial 30-day HSR review period, the FTC’s investigation identified significant competitive concerns about the transaction, including that it would have eliminated head-to-head competition between two of only four significant energy producers in Utah’s Uinta Basin and would have harmed competition for the sale of Uinta Basin waxy crude oil to Salt Lake City refiners. To resolve those concerns, on March 25, 2022, the FTC entered into a consent agreement with XCL, Verdun and EP that required the divestiture of EP’s entire business and assets in Utah.
According to the FTC’s complaint, instead of observing the waiting period requirement, XCL and Verdun “jumped the gun” and assumed operational and decision-making control over significant aspects of EP’s day-to-day business operations immediately upon signing the purchase agreement. Per the complaint, the parties’ unlawful gun jumping activities during the interim period that were memorialized in the purchase agreement included:
Granting XCL and Verdun approval rights over EP’s ongoing and planned crude oil development and production activities. XCL immediately took advantage of these rights and ordered a stop to EP’s new well-drilling activities, resulting in a crude oil supply shortage for EP when the US market was facing significant supply shortages and multiyear highs in oil prices.
Providing that XCL and Verdun would bear all financial risk and liabilities associated with EP’s anticipated supply shortages, which resulted in XCL and EP working in concert to satisfy EP’s customers supply commitments, and EP employees reporting to their XCL counterparts with details on supply volumes and pricing terms. XCL engaged directly with EP’s customers and held itself out as coordinating EP’s supply and deliveries in the Uinta Basin.
Requiring EP to submit all expenditures above $250,000 to XCL or Verdun for approval. As a result, buyer approval was required before EP could perform a range of ordinary-course activities needed to conduct its business, such as purchasing supplies for its drilling operations and entering or extending contracts for drilling rigs.
Permitting XCL and Verdun to order EP to change certain ordinary-course business operations, including its well-drilling designs and leasing and renewal activities.
Allowing Verdun to review and coordinate with EP regarding prices for EP’s customers in the Eagle Ford region of Texas, with Verdun directing EP to raise prices in the next contracting period.
Providing XCL and Verdun with almost-unfettered access to EP’s competitively sensitive business information, including EP’s site design plans, customer contract and pricing information, and daily production and supply reports.
As stated in the FTC’s complaint, the waiting period obligation for this transaction began on July 26, 2021, the date the parties executed their purchase agreement. On October 27, 2021, during the course of the FTC’s investigation, XCL, Verdun and EP executed an amendment to the purchase agreement that allowed EP to resume operating independently and in the ordinary course of business, without XCL’s or Verdun’s control over its day-to-day operations, thereby ending the illegal gun jumping conduct. Thus, XCL, Verdun and EP were in violation of the HSR Act for 94 days.
This case is noteworthy not only for the magnitude of the penalty imposed on the transaction parties, but also because the violation arose both from provisions in the purchase agreement itself, as well as the parties’ conduct after they executed the purchase agreement. It serves as an important reminder that merging businesses in HSR-reportable transactions must maintain independent operations at least until expiration of the HSR waiting period and in some cases until closing (similar obligations can also apply to M&A transactions involving competitors even in non HSR-reportable deals). This independence must be reflected in both the transaction documents and the actions of the parties. Antitrust counsel can assist with drafting appropriate conduct of business covenants in the purchase agreement and properly navigating integration planning and preclosing coordination during the interim period between sign and close.
New Jersey Division of Consumer Affairs Publishes Privacy Law FAQs
On January 6, 2025, the New Jersey Division of Consumer Affairs Cyber Fraud Unit published a set of frequently asked questions and answers (“FAQs”) on the New Jersey Data Privacy Law (“NJDPL”). The FAQs are intended for the convenience of business that may be subject to the law and cover topics such as “What is ‘personal data’?” and “What rights does the NJDPL protect?”. The FAQs reiterate that small businesses and non-profits are subject to the NJDPL if they meet the law’s applicability thresholds. The FAQs also state that the Division of Consumer Affairs will issue regulations in 2025. The NJDPL becomes effective January 15, 2025.
Massachusetts Governor Maura Healey Signs into Law a Sweeping Health Care Market Oversight Bill
On January 8, 2025, Massachusetts Governor Maura Healey signed into law House Bill No. 5159, “An Act enhancing the health care market review process” (“H. 5159”), which was passed by the Massachusetts legislature in the last few days of 2024.
The bill will implement greater scrutiny of certain health care entities and affiliated companies—including private equity sponsors, significant equity investors, health care real estate investment trusts (“REITs”), and management services organizations (“MSOs”)—as well as pharmaceutical companies and pharmacy benefit management companies (“PBMs”) in the Commonwealth.
The passage of H. 5159 follows debate between the House and Senate earlier in 2024 over similar bills, which failed to pass during the summer legislative session. Notably, similar bills included debt limitations on certain private investor-backed entities and bans of certain private equity investments, as well as significant restrictions on the MSO business model. However, these restrictions (among various others) were stripped from H. 5159.
Although H. 5159 has widespread implications for health care entities in the Commonwealth, a significant portion of the bill is clearly aimed at increasing regulatory oversight of for-profit-backed health care organizations through increased regulatory oversight of certain health care transactions and expanded reporting obligations. The bill also seeks to contain health care costs, including by increasing oversight of pharmaceutical company and PBM arrangements.
Below in this alert we highlight some of the more significant provisions of H. 5159.
Health Policy Commission – Notices of Material Change
H. 5159 extends the authority of the Health Policy Commission (“HPC”) in the context of notices of material change under M.G.L. c. 6D § 13 (“Notices of Material Change”) to indirect owners and affiliates of health care providers, such as private equity companies, significant equity investors, MSOs, and health care REITs.
The bill also broadens the transactions that are subject to the HPC’s Notice of Material Change requirements to include (i) significant expansions in capacity of a provider or provider organization; (ii) transactions involving a significant equity investor resulting in a change of ownership or control of a provider or provider organization; (iii) real estate sale lease-back arrangements and other significant acquisitions, sales, or transfers of assets; and (iv) conversions of a provider or provider organization from a non-profit to a for-profit.
In the context of the HPC’s review of a Notice of Material Change, the HPC will be authorized to require the submission of documents and information from significant equity investors, such as information regarding the significant equity investor’s capital structure, financial condition, ownership and management structure, and audited financials.
H. 5159 also implements other related changes, such as reducing the market share threshold for mergers or acquisitions to be subject to the Notice of Material Change process (from “near majority” to “dominant” market share), enhancing the HPC’s authority to monitor post-transaction impacts, and expanding the review criteria for a cost and market impact review.
Health Policy Commission – Registration of Provider Organizations
Under H. 5159, the data and information collected under the HPC’s Massachusetts Registration of Provider Organizations Program (“MA-RPO Program”) will now also cover ownership, governance, and operational structure information of significant equity investors, health care REITs, and MSOs. H. 5159 also amends the MA-RPO Program reporting threshold to include revenue generated from payers other than commercial payers, such as governmental payers.
Health Policy Commission – Annual Cost Trends Hearing
As a complement to the increased authority discussed above, the list of stakeholders required to testify at the HPC’s Annual Cost Trends Hearing is expanded to include, among others, significant equity investors, health care REITs, and MSOs as well as PBMs and pharmaceutical companies.
Testimony from significant equity investors, health care REITs, and MSOs must cover topics such as health outcomes, prices, staffing levels, clinical workflow, financial stability and ownership structure of associated providers or provider organizations, dividends paid out to investors, and compensation (e.g., base salaries, incentives, bonuses, stock options, deferred compensation, benefits, and contingent payments to officers, managers, and directors of provider organizations owned or managed by the significant equity investors, health care REITs, or MSOs.
Testimony from PBMs and pharmaceutical companies must cover topics such as factors underlying drug costs and price increases as well as the impact of aggregate manufacturer rebates, discounts, and other price concessions on net pricing (provided that the testimony will not undermine the financial, competitive, or proprietary nature of the data).
H. 5159 further expands the topics covered by HPC’s Annual Cost Trends Hearings to expressly include costs, prices, and cost trends of providers, provider organizations, private and public payers, pharmaceutical companies, and PBMs as well as any impact of significant equity investors, health care REITS, or MSO on those costs, prices, and cost trends.
Health Policy Commission and CHIA – Operations Assessments
H. 5159 expands the categories of entities required to pay assessments to help fund the HPC and Center for Health Information and Analysis (“CHIA”) to include “non-hospital provider organizations,” pharmaceutical companies, and PBMs. A “non-hospital provider organization” is defined as any provider organization registered under the MA-RPO Program that is a non-hospital-based physician practice with annual gross patient service revenue of at least $500 million, a clinical laboratory, an imaging facility, or a network of affiliated urgent care centers. The methodology for calculating the amount assessed against each entity is based on entity type and the total amount appropriated by the Massachusetts legislature for the operation of HPC and CHIA.
CHIA – Reporting Requirements
Under H. 5159, CHIA will collect additional information from acute and non-acute care hospitals regarding their parent organizations and significant equity investors, health care REITs, and MSOs. Such information includes the audited financial statements of parent organizations’ out-of-state operations, significant equity investors, health care REITs, and MSOs, as well as financial data on margins, investments, and any relationships with significant equity investors, health care REITs, and MSOs.
H. 5159 also expands the scope of CHIA’s data collection under the MA-RPO Program. Notably, information subject to annual reporting will include, in relevant part, (i) comprehensive financial statements that include data on parent entities (including their out-of-state operations), corporate affiliates (including significant equity investors, health care REITs, and MSOs, as applicable), annual costs, annual receipts, realized capital gains and losses, accumulated surplus, and accumulated reserves; and (ii) information regarding other assets and liabilities that may affect the financial condition of the provider organization or the provider organization’s facilities (e.g., real estate sale-leaseback arrangements with health care REITs).
H. 5159 further provides that CHIA may require in writing, at any time, such additional information as CHIA deems reasonable and necessary to determine a registered provider organization’s organizational structure, business practices, clinical services, market share, or financial condition, including information related to its total adjusted debt and total adjusted earnings.
CHIA will also have the authority to require registered provider organizations with private equity investment to report required information on a quarterly basis and require disclosure of relevant information from any significant equity investor associated with a registered provider organization. CHIA may also assess increased penalties for non-compliance with these reporting requirements.
Acute and non-acute care hospitals and registered provider organizations should note that, pursuant to M.G.L. c. 12C § 17, the Massachusetts Attorney General (“AG”) may review and analyze any information submitted to CHIA under M.G.L. c. 12C §§ 8, 9, and 10. Thus, the AG may review and analyze all information regarding significant equity investors, health care REITs, and MSOs submitted to CHIA under H. 5159’s expanded reporting requirements.
Department of Public Health (“DPH”) – Determinations of Need
With exceptions, existing Massachusetts law forbids entities from making substantial capital expenditures for the construction of a health care facility or substantially changing the service of the facility unless DPH has approved a determination of need application (“DON”). H. 5159 expands and clarifies DPH considerations in reviewing a DON. These include (i) the state health resource plan; (ii) the Commonwealth’s cost containment goals; (iii) the impacts on the applicant’s patients, including considerations of health equity, the workforce of surrounding health care providers and on other residents of the commonwealth; and (iv) any comments and relevant data from CHIA and the HPC, and any other state agency. H. 5159 codifies a current DPH regulation allowing the period of time DPH has to review a DON to toll if an independent cost-analysis is required and clarifies the effective date of a determination of need issued to holders subject to cost and market impact reviews and/or performance improvement plans. Finally, the legislation adds that a party of record may review a DON for which it is appropriately registered and provide written comment or specific recommendations for consideration by DPH.
Department of Public Health – Licensure of Acute-Care Hospitals
H. 5159 adds provisions to the licensure process of acute-care hospitals, mandating that no original license shall be granted or renewed to establish or maintain such facilities if the main campus of the acute-care hospital is leased from a health care REIT (with an exemption for those acute-care hospitals leasing a main campus from a health care REIT as of April 1, 2024). An exempt acute-care hospital shall remain exempt “after a transfer to any transferee and subsequent transferees,” and those transferees shall be issued a license upon meeting all other requirements. “Main campus” is defined in H. 5159 as “the licensed premises within which the majority of inpatient beds are located.” Additional new licensure requirements for acute-care hospitals mandate the disclosure of documents to DPH relating to leases, licenses, or other agreements for the use, occupancy, or utilization of the premises occupied by the acute-care hospital. Acute-care hospitals also must remain in compliance with applicable reporting requirements.
Department of Public Health – Licensure of Office-Based Surgical Centers
H. 5159 mandates that DPH, in consultation with the Massachusetts Board of Registration in Medicine, establish rules, regulations, and practice standards for the licensing of office-based surgical centers by October 1, 2025. Such licensure will be effective for an initial period of two years and subject to renewal. Pursuant to H. 5159, DPH may impose a fine of up to $10,000 on (1) a person or entity advertising, announcing, establishing, or maintaining an office-based surgical center without a license and (2) a licensed office-based surgical center that violates DPH’s forthcoming rules and regulations. Each day during which a violation continues will constitute a separate offense, and DPH may conduct surveys and investigations to enforce compliance. Notwithstanding the foregoing, H. 5159 permits DPH to grant a one-time provisional license to applicant office-based surgical centers if such applicants hold a (1) current accreditation from the Accreditation Association for Ambulatory Health Care, American Association for Accreditation of Ambulatory Surgery Facilities, or the Joint Commission; or (2) current certification for participation in Medicare or Medicaid, and DPH determines that such applicants meet all other licensure requirements.
Attorney General’s Office – False Claims Statute
H. 5159 amends the Massachusetts False Claims Statute to extend potential liability to those with an “ownership or investment interest” in an entity that violates the statute, if such owner or investor knows of the violation and fails to disclose it to the Commonwealth within 60 days of identifying the violation. As a result, the AG has broadened authority to pursue actions against private equity companies and other owners or investors for not addressing a violation of the False Claims Act of which they are aware, regardless of whether the private equity company or other owner or investor caused the violation. Notably, the definition of “ownership or investment interest” captures significant equity investors, as defined elsewhere in the bill, as well as private equity companies with any investment or ownership interest in an entity that violates the statute.
Primary Care Payment and Delivery Task Force
H. 5159 also establishes a 23-member primary care payment and delivery task force (“Task Force”) charged with (i) studying primary care access, delivery, and payment; (ii) developing and issuing recommendations to stabilize and strengthen the primary care system and increase recruitment and retention of primary care workers; and (iii) increasing investment in, and patient access to, primary care in the Commonwealth.
Among other recommendations, the Task Force must create a primary care spending target for private and public payers that takes into account the cost to deliver evidence-based, equitable, and culturally competent primary care services and propose payment models to increase private and public reimbursement for primary care services.
The bill requires the Task Force to issue its first recommendations by September 15, 2025, and requires recommendations to be issued in a sequential manner thereafter, through May 15, 2026.
Takeaways
The true impact of H. 5159 will depend in large part on the regulatory bodies tasked with enforcement and implementation of its provisions. Importantly, we expect that HPC, which has been petitioning the legislature for greater oversight authority over the past several years to review private equity health care investments in Massachusetts, will play a central role in determining the level of scrutiny for-profit investors in hospital systems and provider organizations will face moving forward.
Ann W. Parks contributed to this article