CMS Proposes Medicare Payment Policies for Hospital Inpatient Services for Federal Fiscal Year 2026
The Centers for Medicare & Medicaid Services (CMS) recently published the fiscal year (“FY”) 2026 proposed rule for Hospital Inpatient Prospective Payment Systems (IPPS) (the “Proposed Rule”). Comments to the Proposed Rule must be submitted by 5 p.m. EDT on June 10, 2025.
The Proposed Rule reflects a number of broader policy changes announced by the Trump Administration through its Executive Orders and other agency actions, including an effort to de-regulate and to limit the use of notice and comment rulemaking unless it is otherwise required by statute; and removing hospital quality measures related to health equity, social drivers of health, and COVID-19 vaccination coverage among health care personnel. The Proposed Rule does not include anticipated changes to the Medicare Conditions of Participation for hospitals related to gender affirming care; those may still be forthcoming in the Medicare payment proposed rules for hospital outpatient services and physician and other health care professionals’ services that will be published in early July.
Other policy proposals of significant interest to academic medical centers and other hospitals include:
Continued implementation of the Transforming Episode Accountability Model (TEAM) with mandatory participation for hospitals in certain geographic areas, starting in January 1, 2026 — CMS is moving forward with the five-year mandatory episode-based payment model for selected acute care hospitals, with several proposed new policies to implement the model. Proposals include a limited deferment period for new hospitals and policies to account for risk adjustment and coding changes, among other things.
Codification of long-standing CMS policies for counting resident full-time equivalent (FTE) positions for purposes of calculating the enhanced Medicare payments to teaching hospitals for direct graduate medical education (DGME) and indirect medical education (IME) costs — CMS is not proposing any changes to its long-established FTE counting policy. Under existing policies, Medicare makes payments to teaching hospitals for DGME and IME, both of which are based on the number of residents (measured by FTEs) that the hospital trains during the year.
Revision to the accepted cost accounting methodology for nursing and allied health programs (which Medicare reimburses on a reasonable-cost basis) — Following a decision from the U.S. District Court for the District of Columbia in favor of hospital plaintiffs disputing the current CMS methodology, CMS proposes to clarify its regulations to explain how the net costs for approved educational activities are calculated. CMS claims that the adjusted methodology will be “more accurate, albeit less” that what the providers claimed in the lawsuit.
Discontinuation of a low-wage index hospital policy adopted during the first Trump Administration and that was declared invalid by the D.C. Circuit Court of Appeals in 2024 — In light of the court’s ruling that CMS lacked statutory authority to adopt the low-wage index hospital policy and related budget neutrality adjustment, CMS now proposes to discontinue the policy beginning in FY 2026. CMS also proposes a budget-neutral transitional exception for significantly impacted hospitals.
Continuation of long-standing CMS policies related to add-on payments for new technologies (representing approximately $234 million in payments during FY 2026) — CMS proposes to continue making new technology add-on payments for 26 products that continue to meet the newness criterion. CMS also discusses 43 additional product applications, 29 of which applied under alternative pathways for breakthrough devices and qualified infectious disease products.
Payment Update
The Proposed Rule includes a projected 2.4% increase in IPPS payment rates for eligible general acute care hospitals, which will increase Medicare hospital payments nationwide by $4 billion. Notable components of the projected expenditures include a $1.5 billion projected increase in Medicare uncompensated care payments to disproportionate share hospitals in FY 2026, as well as $234 million in additional payments for inpatient cases involving new medical technologies in FY 2026, primarily driven by continuing new technology add-on payments (NTAP) for several technologies.
Request for Information on Deregulation
Pursuant to President Trump’s January 31, 2025 Executive Order 14191, Unleashing Prosperity Through Deregulation, CMS specifically requests public input on approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries, Medicare Advantage and Part D plans, and other interested parties participating in the Medicare program. Among other things, CMS requests information about existing regulatory requirements and policy statements that could be waived or modified without compromising patient safety or the integrity of the Medicare program, changes to simplify reporting and documentation requirements without affecting program integrity, and requirements or processes that are duplicative either within the Medicare program itself or across other health care programs (including Medicaid, private insurance, and state or local requirements).
Like other agencies, CMS requests all comments related to the deregulation RFI be submitted through a program-specific weblink.
Pennsylvania Supreme Court Holds That CBD Products Can Be Reimbursable Medical Expenses Under Workers’ Compensation
In a unanimous and long-awaited decision, the Pennsylvania Supreme Court held that when a treating physician recommends an item—such as CBD oil—as part of a treatment plan for a work-related injury, that item qualifies as a reimbursable medical expense under Section 306(f.1)(1)(i) of the Pennsylvania Workers’ Compensation Act (the “Act”). The ruling is a major development not just for injured workers, but for the broader cannabis and hemp industries in Pennsylvania.
The Pennsylvania Supreme Court broadly interpreted “medicines and supplies” under the Act to cover anything that a physician, exercising professional judgment, includes in a treatment plan, not just FDA approved categories. That includes non-prescription and over-the-counter products like CBD oil.
This ruling is especially significant due to the Court’s express acknowledgment of Pennsylvania’s legal definition of hemp. In reaffirming the General Assembly’s statutory language, the Court emphasized that “hemp is legal if it has a Delta-9 THC concentration of not more than 0.3 percent on a dry weight basis.” That definition necessarily includes CBD products, removing any ambiguity that might have previously surrounded their legal status under Pennsylvania law.
The claimant in this case was an attorney who purchased CBD oil from a local health store after his doctor recommended it for treatment of a back injury. When the law firm’s insurance carrier refused to reimburse him, the plaintiff challenged the denial. The Workers’ Compensation Judge and Commonwealth Court sided with him.
Importantly, the Court also held that the reimbursement obligation applies even when the claimant purchases the item directly. If the product is medically justified and included in the treatment plan—whether through a prescription or a physician’s report—insurers are on the hook for the cost. These items are not subject to the cost containment provisions of the Act unless purchased from a provider.
This ruling opens the door for increased access to hemp-derived wellness products in medical treatment plans, including CBD oils, salves, and other cannabinoid-based therapeutics. For hemp industry stakeholders, it offers a clear signal: when hemp-derived CBD products are properly sourced and documented, they are not only lawful—they may be reimbursable medical costs.
Going forward, treating physicians should take care to document any CBD-related recommendations clearly in the treatment plan. Likewise, claimants should retain receipts and provide evidence that the item was medically directed.
This ruling reaffirms the acceptance of hemp-derived products in Pennsylvania.
IRS Announces 2026 Limits for Health Savings Accounts, High-Deductible Health Plans, and Excepted Benefit HRAs
The Internal Revenue Service (IRS) recently announced (see Revenue Procedure 2025-19) cost-of-living adjustments to the applicable dollar limits for health savings accounts (HSAs), high-deductible health plans (HDHPs), and excepted benefit health reimbursement arrangements (HRAs) for 2026. All of the dollar limits currently in effect for 2025 will change for 2026, with the exception of one limit. The HSA catch-up contribution for individuals ages 55 and older will not change as it is not subject to cost-of-living adjustments.
In Depth
The table below compares the applicable dollar limits for HSAs, HDHPs, and excepted benefit HRAs for 2025 and 2026.
HEALTH AND WELFARE PLAN LIMITS
2025
Δ
2026
HDHP – Maximum annual out-of-pocket limit (excluding premiums)
Self-only coverage
$8,300
↑
$8,500
Family coverage
$16,600
↑
$17,000
HDHP – Minimum annual deductible
Self-only coverage
$1,650
↑
$1,700
Family coverage
$3,300
↑
$3,400
HSA – Annual contribution limit
Self-only coverage
$4,300
↑
$4,400
Family coverage
$8,550
↑
$8,750
Catch-up contributions (ages 55 and older)
$1,000
=
$1,000
Excepted Benefit HRA
Annual contribution limit
$2,150
↑
$2,200
Next Steps
Plan sponsors should update payroll and plan administration systems for the 2026 cost-of-living adjustments and incorporate the new limits in relevant participant communications, such as open enrollment and communication materials, plan documents, and summary plan descriptions.
White House Budget Documents Provide Additional Insights into the Trump Administration’s Priorities for HHS
Over the past few weeks, we have been closely following the Trump administration’s restructuring of the Department of Health and Human Services (HHS), the major reduction in the department’s workforce (RIF), and its broader deregulation strategy. A recently leaked Office of Management and Budget (OMB) Budget “passback” memorandum to HHS, which outlines proposed amounts for the President’s HHS budget request for fiscal year (FY) 2026 (the “Leaked Budget”) as well as departmental restructuring plans, provides additional insights into the administration’s priorities for HHS and the agencies under its purview. In addition, on May 2, 2025, the administration submitted to the Senate Committee on Appropriations the President’s “skinny” FY 2026 budget request (the “Skinny Budget”), which will be followed in the coming weeks by a more complete FY 2026 federal budget request.
This blog post will provide an overview of the major provisions of the Leaked and Skinny Budgets (including key differences between the two), what they may say about the administration’s policy priorities, and their potential impact on key stakeholders, including insurance plans, health care providers, hospitals, and medical product manufacturers. We focus more on the Leaked Budget in this blog post, as the Leaked Budget includes additional detail compared to the Skinny Budget.
What Is the Leaked Budget?
The Leaked Budget represents OMB’s budget numbers that were submitted to HHS to allow the department to provide feedback and to potentially appeal or negotiate some of the figures before preparing a final budget proposal for inclusion in the President’s final budget request that will be submitted to Congress. Similarly, once those processes are completed, the President’s budget request will not reflect the final federal budget for FY 2026, as it still must undergo congressional approval and enactment. Accordingly, the Leaked Budget represents a relatively early node in this multi-step, intricate process. It is also likely to be an incomplete picture of what President Trump and his OMB may end up asking for from Congress, as it is focused on discretionary spending and doesn’t include potential legislative proposals for HHS that the White House may also want to submit for congressional consideration.
Historically, presidential budget requests have been messaging documents that often are largely ignored by the Congress. In the present political climate and under the current administration, it is difficult to predict how Republicans in Congress will respond to the White House’s budget priorities and what elements of that upcoming request will be incorporated into congressional appropriations bills later this year (although notably, as reflected in our previous blog post about the HHS restructuring and RIF, many of the planned changes have already been, or are being implemented, irrespective of congressional involvement).
Key Provisions of the Leaked and Skinny Budgets
The Leaked Budget and Skinny Budget each provide an agency-by-agency breakdown of budget reductions, including programs the Trump administration is seeking to eliminate. The Skinny Budget includes far less detail than the Leaked Budget, with only a short narrative of the eliminated programs by federal department or agency. For example, the Skinny Budget document doesn’t include key agencies, such as the Food & Drug Administration (FDA). Key provisions from these documents relevant to HHS and its stakeholders are summarized below.
Administration for a Healthy America. The Leaked Budget provides our first insight into the administration’s plans for a new agency called the Administration for a Healthy America (AHA). HHS announced the development of this agency in March 2025 and stated that it will be created as a result of consolidating multiple existing HHS agencies – the most notable of which being the Office of the Assistant Secretary for Health (OASH), the Health Resources and Services Administration (HRSA), and the Substance Abuse and Mental Health Services Administration (SAMHSA). As a consequence of their consolidation into the new AHA, the Administration also appears to be eliminating multiple programs previously operated by HRSA and SAHMSA that primarily supported provider entities, including rural hospitals. Under the proposal, key eliminated programs would include:
Rural Health Programs, including (1) Rural Hospital Flexibility Grants, (2) State Offices of Rural Health, (3) Rural Residency Development Program, and (4) At-Risk Rural Hospital Program Grants
HIV/AIDS Programs including Ending the HIV Epidemic, which President Trump began during his first administration, and Minority AIDS Initiatives
Title V Block Grants (Maternal and Child Health Block Grants)
Certified Community Behavioral Health Clinics (CCBHCs)
Notably, although the Skinny Budget does not specifically discuss AHA, it shows the cuts to HRSA, SAMHSA, and other agencies that will be consolidated per the previously announced HHS restructuring plan. The Skinny Budget also is silent around the cuts to the Rural Health Programs noted above. It is unclear whether that silence indicates that those programs are back in the administration’s budget request or if the Skinny Budget document simply left these out.
With the consolidation of HRSA into the AHA, the Leaked Budget also proposes that the 340B Drug Pricing Program – which is currently administered by HRSA – be moved over to the Centers for Medicare & Medicaid Services (CMS).
Make America Healthy Again (MAHA) Commission. Both the Leaked Budget and the Skinny Budget propose the addition of $500 million to the HHS budget specifically for the Make America Healthy Again (MAHA) Commission, which was established via an executive order in February 2025. Secretary Kennedy appears to be given complete discretion to set the agenda for the MAHA Commission and its priorities for spending that $500 million, and the work of the Commission is expected to further drive policy and programmatic priorities for the new AHA entity. Whether Congress approves the administration’s request to create the AHA, as well as to eliminate so many critical rural health care programs, remains to be seen. This particular line item for HHS is the only one where funding is being added rather than taken away.
Centers for Medicare & Medicaid Services. The Skinny Budget states that the planned smaller budget for HHS would not impact the provision of “benefits to Medicare and Medicaid Beneficiaries.” In addition to having the 340B Drug Pricing Program moved to CMS, the Leaked Budget includes eliminating discretionary funding for implementation of the Inflation Reduction Act (IRA) and eliminating the National Medicare Education Program (NMEP) Targeted Outreach, which aims to educate enrollees about their Medicare options. The Skinny Budget does not articulate these two items separately; rather the Skinny Budget indicates that the administration would “eliminate health equity-focused activities and IRA-related outreach and education activities.”
The Leaked Budget also assumes that Congress will not extend the enhanced premium tax credits available to individuals under the Affordable Care Act Exchanges.
FDA and the National Institutes of Health (NIH). Both FDA and the NIH would receive smaller discretionary budgets in FY 2026 if the Trump administration’s proposals are adopted, with the NIH being hit the hardest of the two medical innovation-focused agencies. Although there has been significant public concern about harming what has historically been bipartisan support for the NIH and government-funded research enterprises following release of the Leaked Budget, the Skinny Budget document continues to propose a nearly $18 billion reduction for the NIH when compared to fiscal year 2025 – representing approximately 40% less than last year and the NIH’s lowest budget allocation in recent memory.
In addition, out of the NIH’s existing 27 institutes and centers, the Leaked Budget would eliminate the National Institute for Nursing Research, the National Center for Complementary and Integrative Health, the Fogarty International Center, and the National Institute on Minority Health and Health Disparities. Eliminating these entities comprises nearly $1 billion of the overall NIH discretionary budget reduction. Remaining NIH entities would then be moved around and reorganized into a final “8-institute structure” that retains the National Cancer Institute (NCI), the National Institute on Aging, and the National Institute of Allergy and Infectious Disease (NIAID), but also creates new consolidated entities that would subsume the other institutes and centers depending upon their primary missions. Those new proposed institutes would comprise (1) a National Institute on Body Systems; (2) a National Institute on Neuroscience and Brain Research; (3) a National Institute of Disability Research; (4) a National Institute of Behavioral Health; and (5) a National Institute of General Medical Sciences. The proposal to completely revamp the NIH’s structure and function is reiterated in the Skinny Budget, and if implemented is likely to significantly disrupt the U.S. biomedical research enterprise (for example, see this research advocacy group statement). Indeed, the Skinny Budget contends that NIH research, under this new 8-institute structure, would “align with the President’s priorities of addressing chronic disease and other epidemics, implementing all executive orders, and eliminating research on climate change radical gender ideology, and divisive racialism.”
With respect to FDA, while the Leaked Budget proposes a discretionary funding decrease, it only suggests structural changes to the agency’s food-related inspection activities and its food budget. The Skinny Budget document does not mention FDA at all, although the more fleshed-out, final request that the President sends to Congress later this month will certainly capture his plans for FDA. Accordingly, whether and how FDA’s medical product centers may be reorganized or whether certain agency programs will be eliminated is unclear at this time. However, in light of the prevailing view among industry stakeholders that FDA needed more resources rather than less, a significant cut in discretionary spending – even without major structural changes – is likely to create new delays, uncertainties, and bottlenecks in the agency’s ability to engage with medical product developers, review submissions, and complete inspections (including post-enforcement action follow-up inspections necessary to get off an import alert or have a warning letter closed out, for example).
Centers for Disease Control & Prevention (CDC). Like the NIH, CDC would be hit with a 40% or more decrease in its current budget if the White House’s proposal for reducing CDC’s discretionary budget by $3.6 billion is adopted by Congress. Certain agencies and offices within CDC, including the National Center for Chronic Diseases Prevention and Health Promotion; the National Center for Environmental Health; the National Center for Injury Prevention and Control; the Global Health Center; Public Health Preparedness and Response; and the Preventive Health and Human Services Block Grant would be eliminated, with the Skinny Budget’s reasoning being that these programs could be conducted more efficiently at the state level. The Skinny Budget also details a proposed merger of certain CDC grant programs; specifically, consolidating funding for Infectious Disease and Opioids, Viral Hepatitis, Sexually Transmitted Infections, and Tuberculosis programs into a $300 million dollar grant program.
MAHA Initiatives Outside of HHS. The Trump administration’s goal of “Making America Healthy Again” is also expressed in other proposed funding cuts to other administrative agencies outside of the HHS departmental umbrella. For instance, the Skinny Budget details a $235 million cut to the Environmental Protection Agency’s Office of Research and Development (EPA ORD). The Skinny Budget states that the framework for the EPA ORD would ensure that American people have clean air and water and that investments would benefit human health. There are also proposals to increase funding to the Department of Veteran Affairs for medical care for American veterans by $3.3 billion and to provide nearly $2.2 billion toward an electronic health record system rollout for veterans. Further, the Skinny Budget discusses a reduction of funding to the Department of Agriculture’s Commodity Supplemental Food Program (CSFP), which provides meals to low-income senior citizens. CSFP would be discontinued and replaced with “MAHA food boxes” to provide “higher-quality food” that would be sourced from U.S.-based farmers.
Potential Policy Insight and Impacts on Plans, Providers, and Manufacturers
Although the Leaked Budget and Skinny Budget are far from final, these documents provide certain insight into the Trump administration’s priorities for federal health and health-related agencies. To the extent that certain provisions are ultimately finalized and then adopted by Congress for FY 2026, they will have significant impacts on health plans, health care providers, and medical product manufacturers. We consider some of these potential effects below.
Impact on the Medicare Drug Price Negotiation Program. The Leaked Budget proposes to eliminate all discretionary funding related to IRA implementation. It appears that this early proposal was refined in the Skinny Budget, which states that only funding to “outreach and education activities” will be eliminated. Under the IRA, CMS is required to conduct outreach to beneficiaries on various IRA programs, most notable of which is the Medicare Prescription Payment Plan (MPPP). These planned funding cuts would likely eliminate outreach activities to beneficiaries informing them of the MPPP.
If the cuts are broader than “outreach and education activities,” as discussed in the Leaked Budget, this could directly impact the implementation of the Medicare Drug Price Negotiation Program. We anticipate that the majority of discretionary funding for IRA implementation for the coming federal fiscal year is tied to the Medicare Drug Price Negotiation Program. Discretionary funding is used to pay for staff and contractors, among other things. Such cuts in discretionary spending by CMS could impact the viability of the Medicare Drug Price Negotiation Program and the agency’s ability to implement it for future years in Medicare Part D and Part B. It’s unclear how such an outcome may affect prescription drug manufacturers’ abilities to participate in those programs in the future.
Impact to Rural Hospitals. As discussed above, it is unclear if the Skinny Budget’s failure to mention various rural hospital programs means that they are “saved.” However, if the details included in the Leaked Budget are accurate and the Trump administration cuts these core programs supporting rural hospitals, there may be significant adverse impacts to rural hospitals.
Academic Medical Centers (AMCs). AMCs have already felt the impact of the administration’s cuts and policies that were rolled out during the first four months of 2025. Many AMCs have lost NIH grants and are cutting research labs as a result of the loss of NIH grants and the short-lived caps on indirect costs (even though the courts placed a temporary, and then permanent, injunction on these actions by the federal government). Further, and likely deep, cuts to the NIH will continue to impact AMCs, as such cuts would likely result in substantially less grant funding for research and delays in issuing grant awards.
Impact to Health Plans Operating on the Exchanges. Proposals in the Leaked Budget, if implemented, would have two significant impacts on health plans. As discussed in our previous blog post on the 2025 Marketplace Integrity and Affordability Proposed Rule, expiration of the premium tax credits could have significant negative effects on plans operating on the Exchange, as the changes could result in over 2 million individuals losing coverage and an increase in premiums for members that remain. This combination could threaten the risk pools and stability of the Exchanges. However, the decision to extend the premium tax credits remains solely with Congress and stakeholders should continue to pursue legislative advocacy around these critical issues. FY 2026 does not begin until October 1, 2025, so there is still time on the calendar to shape the outcome of this year’s unprecedented HHS budgetary negotiations and its future programmatic priorities.
Healthcare Preview for the Week of: May 5, 2025
Reconciliation Hits a Speedbump
This week will not be what was anticipated on Capitol Hill. Multiple committees, including the House Energy and Commerce Committee, reportedly had planned to spend this week marking up their reconciliation packages. However, after internal meetings with moderate Republicans and President Trump last week, it became clear that Speaker Johnson and Energy and Commerce leaders were facing speedbumps on the road to enacting the Medicaid reforms at the savings levels they had developed. Their markup has been delayed, and the new plan is for it to occur the week of May 12. Internal conversations will continue this week among Republicans on what the Energy and Commerce reconciliation package should include, with continued debate on Medicaid taking center stage, although energy and spectrum auction policies within the committee’s jurisdiction are also in the mix. Republicans may also turn to healthcare policies besides Medicaid to address concerns within the party and by President Trump surrounding Medicaid. Of course, the House could also choose to adjust the target of $880 billion in savings for the Energy and Commerce Committee, but they’re trying to avoid that.
The Agriculture Committee postponed its reconciliation markup of policy changes to the Supplemental Nutrition Assistance Program (SNAP) until next week. The proposals were designed to shift some of the SNAP costs to states – hitting state budgets and the same population as the proposed Medicaid policies. The Ways and Means Committee also delayed its markup until at least next week, as it seeks to obtain the scoring necessary to complete its policies and faces ongoing differences on key provisions. These delays may complicate Speaker Johnson’s plan to complete reconciliation in the House and Senate before the Memorial Day holiday. There is no magic around a Memorial Day deadline, however; if it slips, the work will move into June. The real deadline won’t be known until the US Department of the Treasury releases its estimate for when the federal government will hit the debt limit ceiling. If Republicans want to address the debt limit in reconciliation, that date will become the hard deadline. Current estimates indicate that the date will be in late summer or early fall.
Meanwhile in the Senate, health committees will focus on additional US Department of Health and Human Services (HHS) nomination hearings. The Senate Finance Committee will hold a hearing for James O’Neill, nominated for deputy HHS secretary, and Gary Andres, nominated for HHS assistant secretary for legislation. Later this week, the Senate Health, Education, Labor, and Pensions (HELP) Committee will consider Janette Nesheiwat, MD, nominated for surgeon general, along with O’Neill’s nomination.
On Friday, President Trump released his “skinny” budget proposal for fiscal year 2026. It includes a 26% cut in discretionary funding for HHS, including a $18 billion cut from the National Institutes of Health and a $3.6 billion cut from the Centers for Disease Control and Prevention. Congressional hearings with agency leaders on the budget proposal begin this week, and Secretary Kennedy is scheduled to testify about the budget proposal at the Senate HELP Committee on May 14. It will be his first appearance before Congress as secretary. Additional focus will likely be on the agency’s response to the measles outbreak and more broadly on vaccine development. There may also be significant questioning regarding HHS restructuring and its impact on health programs that individual senators may be concerned about.
Today’s Podcast
In this week’s Healthcare Preview, Debbie Curtis and Rodney Whitlock join Maddie News to discuss the delay of key reconciliation markups, including at the House Energy and Commerce Committee, and what comes next.
Physician and Health Care Noncompete Law: New Legislation in 2025
It has been a busy year for health care noncompete legislation. Multiple states have enacted legislation, set to take effect in 2025, banning or limiting noncompete agreements for physicians and other health care workers. Although this post only covers enacted legislation, many other states have proposed legislation pending.
Arkansas: On March 4, 2025, Arkansas enacted a law amending the state’s noncompete statute to ban physician noncompetition agreements. The term “physician” is defined to include any person authorized or licensed to practice medicine under the Arkansas Medical Practice Act and any person licensed to practice osteopathy in Arkansas. The law takes effect in the summer of 2025.
Louisiana: Louisiana enacted a law, effective January 1, 2025, limiting noncompetition agreements for physicians. Effectively, employers cannot have a noncompetition agreement with primary care physicians once they have been employed for three years or with any other type of physician after they have been employed for five years.
The law defines primary care physicians as those who predominantly practice “general family medicine, general internal medicine, general pediatrics, general obstetrics, or general gynecology.” For primary care physicians, the law prohibits a noncompetition provision longer than three years “from the effective date of the initial contract or agreement.” It also prohibits employers from including a noncompetition provision in “[a]ny subsequent contract or agreement between the employer and primary care physician executed after the initial three-year terms.” In the event a primary care physician terminates their employment during the initial three-year term, an employer may enforce a noncompete covenant that prevents the physician from carrying on or engaging in a business similar to that of the employer in the parish in which the primary care physician’s principal practice is located and no more than two contiguous parishes in which the employer carries on a like business. The parishes must be specified in the agreement, and the agreement cannot exceed a period of two years from the date of the physician’s termination.
The same limitations apply for all other types of physicians, except an employer may enforce a noncompetition agreement against a non-primary care physician if the employer terminates the physician’s employment within the first five years (as opposed to three for primary care physicians).
The law explicitly excludes certain physicians: specifically, physicians employed or under contract with a rural hospital or physicians employed or under contract with a federally qualified health care center. Furthermore, the law only applies to employment-based agreements. Louisiana’s statute specifically permits noncompetition and nonsolicitation agreements in the sale-of-business context. Louisiana Rev. Stat. § 23:921(C).
Maryland: Maryland enacted a law, which takes effect July 1, 2025, limiting noncompetition agreements for employees who (1) earn less than $350,000 per year, and (2) are either (i) required to be licensed under Maryland’s Health Occupations Article or (ii) are employed in a position that provides direct patient care. For such employees, a noncompete agreement must be limited to one year and cannot exceed ten miles from the primary place of employment.
Pennsylvania: Last summer, Pennsylvania enacted the Fair Contracting for Health Care Practitioners Act (the “Act”), which became effective January 1, 2025. The Act, which is not retroactive, limits certain noncompetition provisions entered by licensed medical doctors, osteopaths, nurse anesthetists, registered nurse practitioners, and physician assistants. Specifically, outside the sale-of-business context, the Act only permits noncompete provisions for health care practitioners if (1) the provision does not exceed one-year post-employment, and (2) the employer seeking to enforce the provision notifies certain patients within 90 days of the health care practitioner’s termination.
Utah: Utah passed a law on March 26, 2025, effective May 7, 2025, that prohibits a “health care services platform” from requiring a health care worker to enter into a noncompetition agreement. The law defines “health care services platform” as “a person that operates or offers for use” an “electronic program, system, or application through which a health care worker may accept a shift to perform a health care service or role, as an independent contractor, at a health care facility.”
Arkansas, Louisiana, Maryland, Pennsylvania, and Utah are not the only states that impose heath care-specific limitations on noncompetition agreements. For instance, Texas, Florida, Colorado, Tennessee, and Washington, D.C., among other states, have long-standing limitations on physician-based noncompetition agreements. Most states impose some form of restrictions, ranging from very minor limitations to outright bans. Employers expecting to enter noncompetition agreements with health care employees should work with counsel to understand the state-specific limitations and requirements. We will continue to monitor and report on developments in this highly dynamic area of law.
Illinois Broadens Scope of Whistleblower Act, Strengthening Protections for Whistleblowers in the State
The Illinois Whistleblower Act (the “Act”) provides protections to employees who make reports of certain fraudulent and illegal conduct occurring in their workplaces. In the past legislative session, the Illinois General Assembly broadened and expanded these protections with the enactment of Public Act 103-0687 (the “Amendments”). The Amendments, which became effective on January 1, 2025, redefine key terms in the Act, expand the scope of conduct that is protected, and enhance the penalties and enforcement actions available for violations of the Act.
Redefinition of Employee
Most notably, the Amendments clarify the definition of an “employee” to which the Act applies. Specifically, “employees” covered by the Act exclude independent contractors. The Amendments adopt the stringent ABC test to determine whether a worker is an employee covered by the Act or is an independent contractor who is not covered.
The ABC test looks to whether (1) the worker is free from the control of the employer; (2) the worker performs work in the usual course of business of the employer; and (3) the worker is in an independently established trade or occupation.
The Amendments also redefine “employee” to include licensed physicians working at facilities that receive state funds.
Increased Scope of Protections
The Amendments increase protections related to employee disclosures. Employers may not take retaliatory action against an employee who discloses or threatens to disclose:
During an investigation, court proceeding, or an administrative proceeding, information related to the conduct of the employer if the employee has a good faith belief the employer has violated a law or regulation or poses a substantial and specific danger to employees, public health, or safety;
To a government or law enforcement agency, information related to the conduct of the employer if the employee had a good faith belief the employer has violated a law or regulation or poses a substantial and specific danger to employees, health, or safety; and
To a supervisor, principal officer, board member, or supervisor in an organization with a contractual relationship with the employer, information related to the conduct of the employer if the employee has a good faith belief that the employer has violated a law or regulation or poses a substantial and specific danger to employees, public health, or safety.
The Amendments similarly increase protections for employee refusals. To that end, employers may not take retaliatory action against an employee for refusing to participate in an activity that the employee has a good faith belief would result in a violation of law or regulations.
The Amendments further clarify what constitutes retaliatory action by an employer. Retaliatory action is defined as adverse action by an employer that would dissuade a reasonable worker from making a protected disclosure or refusal under the Act. Retaliatory action specifically includes, but is not limited to, action that would interfere with the employee’s future employment or action that constitutes an immigration-related practice prohibited by the Illinois Human Rights Act, as well as contacting or threatening to contact immigration authorities.
Heightened Penalties and Additional Enforcement
The Amendments impose heightened penalties for violations of the Act.
Specific additional penalties include the ability for employees to obtain injunctive relief; 9% yearly interest on their back pay; front pay; liquidated damages of up to $10,000; and a civil penalty of $10,000 payable to the employee. The Amendments also include a provision that allows the Illinois Attorney General to initiate civil actions against employers for violations of the Act.
Conclusion
Following enactment of these Amendments, employers who operate in Illinois must now navigate a broader scope of protected activities and ensure compliance with these enhanced protections against retaliation.
Illinois employers would be wise to review and revise their internal policies, training programs, and reporting mechanisms to align with these new protections. Employers should consult with counsel if they have questions as to the implications of these Amendments as well as their compliance with the Illinois Whistleblower Act.
The Northern District of Illinois Endorses “But For” Causation Standard for AKS-Premised False Claims Act Cases
A circuit split over the causation standard under the federal Anti-Kickback Statute (AKS) could grow wider after a recent Northern District of Illinois (NDIL) decision. In United States ex rel. Jeffrey Wilkerson & Larry Jackson v. Allergan Ltd., Case No. 22-CV-30130, Judge Lindsay C. Jenkins weighed in on the standard, ruling that “resulting from” in a 2010 amendment to the AKS requires “but for” causation in AKS-False Claims Act (FCA) cases. This opinion aligns with the First (2025), Sixth (2023), and Eighth (2022) Circuits, which deviated from the Third Circuit’s (2018) interpretation that “resulting from” requires some “link” between a kickback and the false claim short of but-for causation.
The Allergan opinion highlights circuit court disagreement regarding the AKS “but for” causation standard and the potential expansion of that split. The opinion also underscores the importance of this issue, as the Court provided detailed guidance as to the types of allegations it viewed as sufficient to show causation.
But-For Causation in the Seventh Circuit
In 2010, Congress amended the AKS to provide that “a claim that includes items or services resulting from [an AKS violation] constitutes a false or fraudulent claim for purposes of [the FCA].” The meaning of that simple phrase, “resulting from,” remains a divisive issue in courts across the country. While the Seventh Circuit has yet to address the 2010 amendment with respect to FCA cases, in 2024 the Court opined on the meaning of “resulting from” in Stop Illinois Health Care Fraud, LLC v. Sayeed. The Court concluded it requires “some causal nexus between the allegedly false claims and the underlying kickback violation.” Although the Seventh Circuit did not rule on what specific level of causation the AKS requires — whether “but-for causality or something less” — Sayeed proved instructive to Judge Jenkins’ decision in Allergan.
Holding in Allergan
The Relators in Allergan are former employees who allege that, during their employment at Allergan, the company “devised a scheme” to provide illegal kickbacks. These kickbacks, according to the Relators, were payments made to physicians across the country, who were hired to educate others about Allergan pharmaceutical products.
The Relators argued that because the physicians were being paid to speak about Allergan products, subsequent claims paid for those prescriptions violated the FCA. The court disagreed, noting the argument “is nothing more than the causation-less temporal standard rejected by the Seventh Circuit in Sayeed.” The court further ruled that “all that matters” for an AKS violation is a defendant’s “intent in paying the kickbacks,” not “whether any prescriptions were written as [a] result of the kickbacks.” Further referencing Sayeed, the court noted the Seventh Circuit was clear that “resulting from” requires some level of “actual causality” and agreed with the First, Sixth, and Eighth Circuits that it requires but-for causation rather than a mere link between payments and claims (as endorsed by the Third Circuit).
The court also explicitly discounted a differing Third Circuit opinion, Greenfield v. Medco Health Solutions, finding the concerns “animating the Greenfield court decision … not persuasive.” In doing so, the court highlighted that “all the other Circuits to directly address the question point in one direction — holding that ‘resulting from’ requires but-for causation for claims made under the 2010 Amendment.” After examining the text of the statute and the Seventh Circuit’s guidance in Sayeed, the Court agreed that but-for causation is the appropriate standard.
Applying that standard, the Court held that for all but a few physicians, the Relators’ claims failed because the Relators alleged only a mere correlation of “an uptick in prescriptions” and the speaker program payments. The Court explained that “Relators should present data that controls for other variables such that an increased number of prescriptions by” physicians who participated in the program “is likely attributable to Allergan’s payments.” The Court gave examples of allegations that would suffice, such as “identifying specific quid pro quos” or “comparing Speaker Bureau physicians’ prescription rates against prescription rates of doctors not receiving” Allegan payments.
Looking Ahead
Because some of the Relators’ allegations in Allergan survived the motion to dismiss, the case likely will not yet be appealed to the Seventh Circuit. However, Allergan provides a potential roadmap for arguments in the NDIL and sets the stage for another appellate decision on this issue. While Allergan falls in line with other circuit courts ruling in favor of but-for causation for AKS-premised FCA cases, a circuit split remains.
The Supreme Court declined to review the issue in 2023, but as more cases like Allergan progress, lower courts are likely to reach differing conclusions until the Supreme Court weighs in. Foley will continue to monitor developing case law and provide updates on this issue.
Ethylene Oxide Verdict in Georgia – $20 Million
Ethylene Oxide (EtO) is an industrial solvent widely used as a sterilizing agent for medical and other equipment that cannot otherwise be sterilized by heat/steam. EtO may also be used as a component for producing other chemicals, including glycol and polyglycol ethers, emulsifiers, detergents, and solvents. Allegations that exposure to EtO increases the risk of certain cancers has led to governmental regulation as well as private tort actions against companies that operate sterilization facilities that utilize EtO. The most recent example of the latter is a plaintiff verdict for $20 million handed down last Friday in Georgia.
Ethylene Oxide Trial History
The first ethylene oxide case to go to trial was the Kamuda matter, in which an Illinois jury awarded $263 million in September of 2022 against Sterigenics for ethylene oxide exposure from that company’s Willowbrook facility. A subsequent trial in the same jurisdiction against the same defendant resulted in a defense verdict. Ultimately, Sterigenics resolved its pending claims involving the Willowbrook plant in the amount of $408 million. In December of 2024, a Philadelphia Court of Common Pleas jury found the defendant B. Braun Manufacturing Inc. not liable on all counts. The plaintiff had alleged that her husband developed leukemia as a result of working at the defendant’s sterilization plant in Allentown, Pennsylvania for seven years. Notably, unlike the Illinois trials, the Philadelphia trial involved an employee at the sterilization facility as opposed to the Illinois plaintiffs who did not work at the Willowbrook plant but resided nearby.
In March of this year, a Colorado jury rendered a verdict in favor of defendant Terumo BCT Inc. (Isaacks et al. v. Terumo BCT Sterilization Services Inc. et al. in the First Judicial District of Colorado (docket number 2022CV031124). The plaintiffs are appealing. This was a bellwether trial that lasted six weeks, and involved four female plaintiffs. The jury determined that the defendant was not negligent in its handling of emissions from its Lakewood plant. The plaintiffs had sought $217 million in damages for their alleged physical impairment and also $7.5 million for past and future medical expenses as well as punitive damages. In light of the fact that the six person jury found the defendant Terumo not negligent, it did not need to consider damages or causation. All of the plaintiffs alleged that they had developed cancer as a result of ethylene oxide emissions from the Terumo facility. One plaintiff alleged breast cancer as a result of 23 years of exposure from the plant, while another alleged breast cancer after almost 35 years of exposure (these two plaintiffs were neighbors). Another plaintiff alleged multiple myeloma while the fourth plaintiff alleged Hodgkin’s lymphoma.
Notably, there remain hundreds more pending claims against Terumo in Colorado. In fact, plaintiffs’ counsel filed almost 25 more cases while the trial was in progress
Georgia Verdict
An EtO trial commenced against C.R. Bard in Georgia last month in the Walker case. On May 2nd, the jury awarded $20 million in compensatory damages. A second phase of the trial will begin today to determine punitive damages. At issue was the company’s medical equipment sterilization plant in Covington, Georgia. The plaintiff, who had been a truck driver, alleged that he would make pickups at the plant on a regular basis, and, coupled with the fact that he resided one and half miles from the plant, was exposed to EtO and developed non-Hodgkin lymphoma necessitating 10 rounds of chemotherapy and a stem-cell transplant after being diagnosed in June 2017 when he was 68 years old. The plaintiff alleged that the company failed to take appropriate steps to protect he and the community from EtO.
We expect more EtO cases to go to trial in Georgia as there are hundreds of such claims pending in that jurisdiction against multiple companies including C.R. Bard (Sterigenics settled 80 cases in 2023 but still must contend with more claims).
Analysis
Recently, we’ve seen increased trial activity with respect to EtO trials. As set out above, there have now been cases taken to verdict in Illinois, Pennsylvania, Colorado and Georgia. There is also EtO litigation activity in California, though those cases are still in the discovery phase. As noted in previous postings, we expect that plaintiff firms will recruit new clients who allege some type of cancer as a result of residing in the vicinity of an ethylene oxide plant, particularly given this $20 million verdict in Georgia (and that’s before punitive damages are assessed). How long will it be until we see television advertisements run by plaintiff firms seeking new plaintiffs? We’ve seen this in asbestos, talc, contaminated water, firefighting foam, defective earplugs, and other types of litigation. It is not out of the realm of possibility to think that we will see this with ethylene oxide litigation at some point in the near future.
Navigating the Regulatory Crossroads: Chemical Policy in Trump’s First 100 Days
President Donald Trump’s initial 100 days in office during his second term have marked a significant shift in the United States’ approach to chemical regulation, emphasizing deregulation and industry facilitation over more traditional environmental and public health safeguards. President Trump’s actions, inactions, and policy choices during his first 100 days seem to have come at a cost, as polls show his approval rating has decreased to 39 percent, an 80-year low for a President’s first 100 days in office.
Deregulatory Initiatives and Industry Impact
Central to the Administration’s agenda is an aggressive deregulatory policy, notably the Executive Order (EO) requiring “that for each new regulation issued, at least 10 prior regulations be identified for elimination.” EO No. 14192, 90 Fed. Reg. 9065. This approach has led to considerable confusion and commercial uncertainty, neither of which appeals to the business sector. Regarding chemical regulation, what has been announced are reviews of Biden Administration work on chemical risk assessments and intended review actions, including extensions of comment periods on chemical assessments.
In March 2025, the U.S. Environmental Protection Agency (EPA) announced its decision to reconsider the regulation governing the review of chemicals already in commerce by initiating a rulemaking “that will ensure the agency can efficiently and effectively protect human health and the environment and follow the law.” This signals a plan that may result in changes to foundational assumptions in the risk assessment methods used in the previous four years.
The Department of Government Efficiency (DOGE) has not been as efficient in its first 100 days as it promised. Rather than saving the taxpayers a trillion dollars, as DOGE initially pledged to the American people, government spending is increasing. Spending increases are due in part to the haphazard way in which DOGE went about cutting whole departments before realizing who they were firing and what programs they were gutting, only to have to rehire employees back again — if they could figure out how to contact them at all, since they had already cut off employee access to federal e-mail accounts. DOGE’s February 2025 cuts to the National Nuclear Security Administration (NNSA) within the Department of Energy (DOE) made headlines, as the hundreds of locked-out employees included those undertaking some of the most sensitive jobs within the U.S. nuclear weapons enterprise.
As far as chemicals go, the premanufacture notice (PMN) review program delays and foundational review policies are under review. Given that the law requires a pre-market review, any program cuts would likely lead to even further decision delays. As a result, notwithstanding industry criticism of the program, there is broad support for adequate budget resources as part of the effort to increase the timeliness and predictability of program decisions.
PFAS Regulation: A Plan for Regulatory Reversal?
Per- and polyfluoroalkyl substances (PFAS), often referred to as “forever chemicals,” have been a focal point in discussions about chemical safety for some time now. The Trump Administration faces a pivotal decision on whether to uphold strict federal drinking water limits for PFAS established during the previous Administration. On April 28, 2025, EPA announced policy updates, including how it plans to “[i]mplement TSCA [Toxic Substances Control Act] Section 8(a)7 ‘to smartly collect necessary information, as Congress envisioned and consistent with TSCA, without overburdening small businesses and article importers’.” In the meantime, many states, most notably Maine, Minnesota, and New Mexico, have introduced robust PFAS restrictions and reporting requirements of their own in an effort to ensure that PFAS are not unnecessarily released into the environment, or found in high-contact products, regardless of federal decisions. While at this point any announcement regarding the fast-approaching July 11, 2025, start of the reporting cycle is welcome, the official update was short on detail.
Environmental Justice and Community Health Concerns
One program area that has so far seen significant and impactful change under this Administration are environmental justice (EJ) measures, such as former President Biden’s Environmental Justice 40 Initiative. The Administration has issued directives across all agencies, including EPA, eliminating Diversity, Equity, and Inclusion (DEI) and other programs and staff deemed “woke.” On President Trump’s first day, he issued the EO Ending Radical And Wasteful Government DEI Programs And Preferencing to begin this effort. EO No. 14151, 90 Fed. Reg. 8339.
Elimination of EJ programs will disproportionately affect minority communities. The termination of programs aimed at protecting these populations from pollution exposure can be expected to increase (or at least not reduce) health risks in areas like Louisiana’s “Cancer Alley,” where industrial emissions have long been a concern. At the same time, reducing and eliminating much of EPA’s climate action programs, designed to reduce the impacts and uncertainties of climate change, will hurt key industries such as agriculture and food production, while more intense storms could adversely affect chemical production facilities along the U.S. coast.
The first 100 days of President Trump’s tenure have ushered in a new era of chemical regulation, characterized by a strong emphasis on deregulation and a leaner federal infrastructure. While proponents argue this fosters economic growth and innovation, critics highlight the potential risks to environmental integrity, public health, and institutional knowledge. As the Administration continues to redefine regulatory frameworks, stakeholders must navigate this evolving landscape with vigilance and adaptability.
2026 Inflation-Adjusted Health and Welfare Plan Limits
On May 1, 2025, the IRS released Rev Proc 2025-19 which updated for 2026 the limits applicable to certain health and welfare plans, including the following key limits:
2026 Limit
2025 Limit
Health FSA – Maximum contributions
$4,400 (self-only)
$8,750 (family)
$4,300 (self-only)
$8,550 (family)
HDHP – Minimum Deductible
$1,700 (self-only)
$3,400 (family)
$1,650 (self-only)
$3,300 (family)
HDHP – Maximum Out of Pocket
$8,500 (self-only)
$17,000 (family)
$8,300 (self-only)
$16,600 (family)
Maximum employer excepted benefit HRA contribution
$2,200
$2,150
These 2026 limits are effective for HSAs for calendar year 2026, and for excepted benefit HRAs for plan years beginning in 2026.
Similar Language But a Different Outcome: Medicare DSH Payments after Advocate Christ Medical Center v. Kennedy
Hospitals that serve a high number of indigent patients are faced with a dilemma: they must provide high-quality care but fixed Medicare reimbursement rates often do not take into account the higher operating costs that they incur when treating certain low-income patients.
That problem was made more difficult when the Supreme Court ruled 7-2 in favor of the Secretary of HHS in an appeal brought by over 200 hospitals that depend on disproportionate share hospital (“DSH”) payments. Advocate Christ Medical Center v. Kennedy, No. 23-715 (Apr. 29, 2025).
Congress recognized that hospitals that serve a high number of low-income or indigent patients may incur additional costs that are not captured in the regular Medicare inpatient prospective payments. Congress provided a remedy for these hospitals in the form of a complex formula that sums two fractions. The first fraction, known as the Medicare fraction, is the total of all of the hospital’s inpatient days attributable to “patients who (for such days) were entitled to benefits under part A of [Medicare] and were entitled to supplementary security income [SSI] benefits[under Title XVI of the Social Security Act]” and the denominator is the number of all inpatient days attributable to all Medicare beneficiaries. The DSH payment is made as a supplement to the Medicare DRG bundled payment for each discharge. The larger the numerator of the fraction, the larger the DSH payment.
These two elements use similar language, but what it means to be entitled to Medicare Part A or SSI for purposes of the DSH statute has generated considerable litigation. In Becerra v. Empire Health Foundation, 597 U.S. 424 (2022), the Supreme Court ruled that the phrase “entitled to [Medicare Part A] benefits” meant all Medicare Part A beneficiaries who were inpatients at a hospital, whether or not the Medicare program paid the hospital for that inpatient discharge. The Court did not address the second element in the numerator at that time.
The second element of the numerator did reach the Supreme Court in Advocate Christ. The Court found that the entitlement language did not have a single meaning; it agreed with the Secretary of HHS and lower courts that the Medicare Part A and SSI programs were distinct. Although Medicare Part A is an insurance program where eligibility is continuous once an individual is over age 65, blind, or disabled, SSI is a supplemental income program where an individual is eligible for a cash payment only during those months when their income and resources fall below a threshold. As a result, the Court ruled that SSI days that can be included in the numerator of the Medicare fraction are limited to those days during a month in which an individual received a SSI payment. The Court rejected the hospitals’ arguments that all inpatient days attributable to individuals entitled to SSI benefits should be counted, just like all of the Medicare Part A beneficiary days.
The Advocate Christ decision does not come as welcome news to hospitals that depend on DSH funds to close the gap between the cost of caring for patients without regard to their resources and the revenue that they receive from third parties. In many cases, it will result in a smaller numerator in the Medicare fraction and therefore smaller DSH payments. For some hospitals, the DSH payments are needed to avoid a negative operating margin based on the mix of payors.
The Court’s decision was rooted in a close textual reading of the DSH statute. Nevertheless, the decision highlights a tension between the text as interpreted by the Court and Congress’s intent to compensate hospitals that serve a high number of low-income patients. This was noted by the majority, but they concluded that they do not have the authority to amend the DSH statute. The remedy will lie with Congress.