Health Law & Managed Care – Page 15

Ninth Circuit Affirms ERISA Plan Administrator’s Decision, Validates Use of Industry Guidelines and Medical Evidence

On March 5, 2019, Magistrate Judge Joseph C. Spero of the U.S. District Court for the Northern District of California issued his opinion in Wit v. United Behavioral Health, in which he attempted to significantly change how Employee Retirement Income Security Act (ERISA)–governed health plans were administered, particularly third-party administrators’ reliance on medical necessity guidelines and the application of the abuse of discretion standard. The Ninth Circuit ultimately reversed the portions of the decision that were the most troublesome for ERISA plans and third-party administrators.
In K.K.; I.B. v. Premera Blue Cross, issued on February 6, 2025, the Ninth Circuit provided another indication that the approach taken by the district court in the Wit matter is in the past. There, the Ninth Circuit affirmed the district court’s grant of summary judgment in favor of the ERISA plan administrator and the self-funded plan.
Quick Hits

On February 6, 2025, the Ninth Circuit affirmed a lower court’s grant of summary judgment in favor of an ERISA health benefits plan administrator and the plan, concluding that the denial of benefits for a plaintiff’s treatment was reasonable and based on credible, contemporaneous medical evidence.
The Ninth Circuit’s decision underscores the importance of using validated medical necessity guidelines and supports plan administrators’ discretion in making benefits determinations under ERISA.
The Ninth Circuit emphasized that ambiguity and procedural irregularity in denying a claim do not alone constitute an abuse of discretion unless it affects a claimant’s ability to submit responsive evidence, reinforcing the principle that decisions must be based on reasonable application of plan criteria.

Background
K.K. and I.B., K.K.’s daughter, sued the plan and Premera under ERISA to recover benefits for treatment provided to I.B. at the Eva Carlston Academy (ECA) psychiatric residential treatment center. Premera concluded that the treatment was not medically necessary within the meaning of the plan.
I.B. was admitted to ECA shortly after completing a two-month stay at Pacific Quest, another in-patient treatment facility that provides a combination of therapeutic wilderness programs and residential treatment. Jason Adams, a Pacific Quest therapist, performed a psychological evaluation of I.B. and diagnosed her with nonverbal learning disorder, generalized anxiety disorder with obsessive-compulsive features, major depressive disorder, mild alcohol use disorder, and parent-child relational problems. He concluded that despite I.B.’s progress at Pacific Quest, it would be in her best interest upon discharge to enroll in a therapeutic residential treatment program. Tom Jameson, I.B.’s therapist at Pacific Quest, agreed with this assessment. Based on these recommendations, I.B. enrolled at ECA, where she remained for approximately one year.
K.K. did not seek pre-authorization for I.B.’s treatment at ECA and, in fact, only submitted her first claim for benefits under the plan in October 2017, more than nine months after I.B.’s admission to ECA. Premera denied this claim based on the conclusion that another round of residential treatment was not medically necessary under the terms of the plan. Premera concluded that after discharge from Pacific Quest, I.B. could have been effectively treated at a lower level of care, such as intensive outpatient or partial hospitalization.
The plaintiffs appealed this determination, which resulted in an independent medical review and an external review, as required under Washington State law. Those appeals upheld Premera’s denial determination. The district court concluded that Premera and the plan did not abuse their discretion in concluding that the treatment at ECA was not medically necessary under the terms of the plan. In other words, Premera’s decisions were reasonable.
The Ninth Circuit’s Analysis
In affirming this decision, the Ninth Circuit found that under the plan’s definition, treatment was medically necessary only if it was, among other things, “[i]n accordance with generally accepted standards of medical practice.” The plan provided a description of generally accepted standards, such as standards based on credible scientific evidence published in peer-reviewed medical literature generally recognized by the relevant medical community, physician specialty society recommendations and the views of physicians practicing in relevant clinical areas and any other relevant factors. The plan also provided that Premera had “adopted guidelines and medical policies that outline clinical criteria used to make medical necessity determinations.”
Pursuant to this provision, Premera used the InterQual guidelines—widely accepted guidelines for clinical decision support—which, according to the court, was reasonable, not an abuse of discretion, based on the credibility and validity of the criteria.
Quoting Winter ex rel. United States v. Gardens Regional Hospital & Medical Center, Inc., the court found that the InterQual criteria were “‘reviewed and validated by a national panel of clinicians and medical experts, and represent[ed] a synthesis of evidence-based standards of care, current practices, and consensus from licensed specialists and/or primary care physicians.’”
The court also relied on Norfolk County Retirement System v. Community Health Systems, Inc., where the court found that these criteria “‘were developed by independent companies with no financial interest in admitting more inpatients than outpatients’”; “‘were written by a panel of 1,100 doctors and reference 16,000 medical sources’”; and were used by “‘[a]bout 3,700 hospitals.’”
Having validated these criteria, the court then found that Premera’s decision that I.B.’s residential treatment was not medically necessary under these criteria also was reasonable. Premera concluded that I.B.’s condition had improved enough during her time at Pacific Quest that she no longer met the InterQual criteria for residential treatment when she entered ECA. Significantly, the court recognized that Premera’s decision was based on the “most contemporaneous assessments” of I.B.’s condition, assessments that took place a few weeks before I.B. was discharged from Pacific Quest and a psychiatric evaluation that took place within two weeks of I.B.’s admission to ECA.
Premera’s reliance on contemporaneous medical evidence was critical to rebut the plaintiffs’ argument that Premera had failed to specifically address letters of medical necessity from I.B.’s treating providers. Quoting the Supreme Court of the United States’ opinion in Black & Decker Disability Plan v. Nord, the court concluded that “‘courts have no warrant to require administrators automatically to accord special weight to the opinions of a claimant’s physician; nor may courts impose on plan administrators a discrete burden of explanation when they credit reliable evidence that conflicts with a treating physician’s evaluation.’”
The court went on to state that “[b]ecause I.B.’s treating providers wrote their letters of medical necessity one year after I.B.’s admission to Eva Carlston Academy and did not base them on firsthand evaluations of I.B. around the time of her admission, Premera did not abuse its discretion by rejecting their conclusions and instead reaching a contrary conclusion supported by the more contemporaneous, firsthand assessments of Dr. Adams and Dr. Simon.” In other words, even though Adams had recommended further treatment at ECA, Premera was not unreasonable in its conclusion that his clinical notes did not support medical necessity as that term was defined in the plan.
The plaintiffs also argued that Premera abused its discretion because it “failed to engage in a meaningful dialogue and instead only provided vague reasons for denying their claim.” In rejecting this argument, the court concluded that ambiguity alone was not enough to establish an abuse of discretion in this instance. The plaintiffs must also show that the ambiguities affected their ability to submit responsive evidence to perfect their claim, and, if the record were reopened, they could introduce favorable evidence that would call for a different result.
Conclusion
It is not possible to read an opinion addressing the mental health struggles of a child without empathy for the child and the parents who are seeking what they believe is appropriate care. Certainly, it is understandable that parents will want to provide residential treatment in which the child is supervised constantly.
At the same time, I.B. was in residential care for fourteen months. The court noted that the issue was whether I.B. could be treated at a lower level of care after leaving Pacific Quest. Typically, plan administrators offer intensive outpatient or partial hospitalization level of care for a child leaving residential treatment. The issue is not residential treatment or nothing; the issue typically is residential treatment, partial hospitalization, or intensive outpatient.
ERISA does not mandate the extent of the plans that employers can offer. Employers design plans that fit their needs, which often include discretionary language. Employers have to be able to enforce the terms of plans and make medical necessity decisions concerning the level of care to ensure the viability of the plans. The court’s recognition of the reasonableness of the application of the InterQual criteria is an important tool to help plans make this type of decision. After Wit, the finding that the application of such guidelines was reasonable is a welcome result.
In addition, the court’s willingness to uphold the decision based on contemporaneous clinical evidence affirms the importance of clinical facts and the reasonableness of relying on those facts rather than having to follow the opinion of the treating physician when the contemporaneous evidence does not support medical necessity, as defined in the plan.
Finally, the conclusion that an ambiguity alone is not enough—and that the ambiguity must be tied to the outcome of the claim—is significant because it ties the analysis back to where it should be: determining whether the decision was reasonable.

First Circuit Joins Sixth and Eighth Circuits in Adopting “But-For” Causation Standard Under the Federal Anti-Kickback Statute for False Claims Act Liability

In 2010, as part of the Affordable Care Act, Congress resolved a highly litigated issue about whether a violation of the Anti-Kickback Statute (AKS) can serve as a basis for liability under the federal False Claims Act (FCA).
Specifically, Congress amended the AKS to state that a “claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of the [FCA].”
This amendment, however, did not end the debate over the relationship between the AKS and the FCA. Over the last several years, multiple courts have been called upon to interpret what it means for a claim to “result from” a violation of the AKS. Courts across the country are split on the correct standard. On February 18, 2025, the U.S. Court of Appeals for the First Circuit joined the Sixth and Eight Circuits in adopting a stricter “but-for” standard of causation—while the Third Circuit has previously declared that the government must merely prove a causal connection between an illegal kickback and a claim being submitted for reimbursement.
In United States v. Regeneron Pharmaceuticals, the First Circuit acknowledges that while the Supreme Court has held that a phrase like “resulting from“ imposes a requirement of actual causality (i.e., meaning that the harm would not have occurred but for the conduct), this “reading serves as a default assumption, not an immutable rule.” At the same time, the First Circuit found that nothing in the 2010 amendment contradicts the notion that “resulting from” required proof of but-for causation.
The First Circuit agreed that the criminal provisions of the AKS do not include a causation requirement but observed that different evidentiary burdens can exist for claims being brought for purposes of criminal versus civil liability. The First Circuit concluded that while the AKS may criminalize kickbacks that do not ultimately cause a referral, a different evidentiary burden can and should be applied when the FCA is triggered. As a result, the First Circuit affirmed the lower court’s decision that “to demonstrate falsity under the 2010 amendment, the government must show that an illicit kickback was the but-for cause of a submitted claim.”
Although the U.S. Supreme Court denied a petition to review this specific issue in 2023, it may once again be called upon to weigh in on this issue, as there inevitably will continue to be a division in how the courts interpret this “resulting from” language. Look for our upcoming Insight, where we explore the First Circuit’s decision in detail.
Epstein Becker Green Attorney Ann W. Parks contributed to the preparation of this post.

Health-e Law Episode 16: Crossroads of Care: Navigating Executive Orders with Jonathan Meyer, former DHS GC and Partner at Sheppard Mullin [Podcast]

Welcome to Health-e Law, Sheppard Mullin’s podcast exploring the fascinating health tech topics and trends of the day. In this episode, Jonathan Meyer, a partner at Sheppard Mullin and Leader of the firm’s National Security Team, joins us again to discuss the early days of the new Trump administration and what might be on the horizon in terms of cybersecurity and data privacy.
What We Discussed in This Episode:

What can we expect from the new administration in relation to cybersecurity and data protection?
How do these concerns translate to healthcare, both in terms of managing our care and protecting our data?
What is Sheppard Mullin’s executive actions tracker, why it matters, and how can listeners use it?
How is healthcare struggling with privacy and immigration, and how does this impact national security?

Click Here to Read Transcript

Michigan Legislature Passes Last-Minute Amendments to Earned Sick Time Act, Minimum Wage Laws

Highlights

The Michigan Legislature recently made amendments to the state’s Earned Sick Time Act, which became effective Feb. 21, 2025
Large employers have until March 23, 2025, to comply with the statute’s notice requirements
The legislature also amended the states minimum wage laws, increasing from $10.56 to $12.48. However, the amendment salvages the tipped minimum wage, though it will increase to 50 percent of the minimum wage rate by 2031

The Michigan Legislature recently passed amendments to the Earned Sick Time Act and those amendments were signed into law by Gov. Gretchen Whitmer. Except for delays regarding notice requirements and the application of the law on certain small employers and some other minor changes, the amendments became effective Feb. 21, 2025. Required accruals of earned sick leave for large employers begin on that date. Large employers otherwise now have until March 23, 2025, to comply with the statute’s notice requirements.
Earned Sick Time
Sometimes procrastination pays. In the latest example, many employers across Michigan spent the last several months drafting policies and preparing for the Earned Sick Time Act (ESTA) to become effective following last summer’s Michigan Supreme Court decision in Mothering Justice v. Attorney General, only to wake up on Feb. 21 this year, the planned effective date, to learn many requirements of the law had changed. While the changes are not everything the employer community hoped for, the changes did offer some improvement.
The amendments eliminated some of the most problematic provisions of ESTA, including those creating presumptions of guilt and providing individual rights to bring a lawsuit and recover attorney fees if successful. However, ESTA remains one of the most aggressive paid leave statutes in the country and continues to contain unclarified ambiguities, and the amendments still are applicable (without delay) to most Michigan employers despite only a few hours’ notice.
As a result, despite the amendments effective Feb. 21, 2025, most employers in Michigan still are required to begin accruing for and provide their employees one hour of paid time off, which can be used for ESTA required purposes, for every 30 hours they worked. Salaried staff are still assumed to work 40 hours each week unless their normal workweek is less, in which case they are presumed to accrue time based on their normal workweek. However, the amendments revised the definition of who is an employee to confirm the following individuals are outside ESTA’s requirements:

Those employed by the U.S. government
Unpaid trainees and interns (under a rather strict and ambiguous definition)
Individuals employed in accordance with the Youth Employee Standards Act
An individual who works in accordance with a “self-scheduling policy” if both of the following conditions are met:

The policy allows the individual to schedule the individual’s own working hours and
The policy prohibits the employer from taking adverse personnel action against the individual if the individual does not schedule a minimum number of working hours

The state’s updated FAQs also confirm that, generally, elected public officials, members of public boards and commissions, and other similar holders of public office are not considered employees for ESTA purposes unless the entity treats those individuals as employees.
Small businesses (i.e., those who average 10 or fewer, previously was defined as fewer than 10, employees over any 20 or more calendar weeks in a calendar year) were likely the biggest beneficiaries of the recent amendments. For them, the application of ESTA is postponed until at least Oct. 1, 2025, and the amendments also limit their leave obligations to 40 hours of paid leave in a 12-month period, eliminating the prior requirement that they provide 32 hours of unpaid leave in addition to the paid leave requirements.
Lastly, for small employers who did not employ an employee before Feb. 21, 2022, they are not required to comply with ESTA until three years after the date the employer employs their first employee, which means that some small businesses will not be subject to ESTA until well after the Oct. 1, 2025 deadlines, and new small businesses will have the benefit of a three year grace period before ESTA applies.
In addition to these changes, the amendments also provided the following:

Confirms that all employers may frontload benefits to satisfy ESTA requirements and doing so removes any carryover obligations.

Employers can frontload time for part-time staff based on the hours they are expected to work so long as if the individual works more than the hours expected, they provide additional leave in an amount no less than they would have earned under the normal ESTA accrual rates.

Confirms that an employer is not required to include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips or gratuities in the normal hourly wage or base wage upon which paid earned sick time compensation is based.
Caps carryover requirements at 72 hours (40 for small businesses) annually and allows an employer to avoid carryover obligations by paying the employee the value of any unused accrued paid sick time at the end of the year in which it was earned.
Maintains the ability for unforeseeable absences an employer can require employees to provide notice of an absence immediately after the employee becomes aware of the need for paid sick time so long as the employer:

Provides employees with a written copy of the policy requiring notice and setting for the procedures for providing notice of the need for leave (and any changes thereto within five days)
The notice requirement allows the employee to provide notice after they become aware of the need for ESTA qualifying leave

Absent satisfaction of these two requirements, ESTA continues to limit an employer’s ability to require notice of an absence to “as soon as practicable” and:

Allows an employer to require employees to return reasonably required documentation related to absences of more than three consecutive days within 15 days of the employer’s request.
Provides special rules for employers who are subject to a collective bargaining agreement that requires contributions to a multi-employer plan.
Allows an employer to require employees hired after Feb. 21, 2025, to wait up to 120 calendar days to use accrued benefits.
Reduces the period of time an employee can leave and be re-hired without obligating an employer to honor previously accrued benefits from six months to three months, and confirms that it is not required at all if an individual is paid the value of their accrued but unused benefits at the time of transfer or separation.
While employers are still prohibited from awarding attendance points for ESTA related absences, they can now undisputedly discipline employee who uses paid time for purposes other than those provided by ESTA. Not only does this change better allow employers to use a single bank of time, but it opens the door to allow employers to discipline staff who might be tempted to use paid leave fraudulently subject to adequate employer proof.
Confirms that employees covered by a collective bargaining agreement are only exempt from ESTA to the extent the collective bargaining agreement “conflicts with” the statute.
Maintains the requirement that successor employers honor the benefits accrued under predecessor employers, but removes that requirement if employees are paid the value of their accrued but unused benefits at the time of succession.
Confirms that individuals covered by an employment agreement (contract) that conflicts with ESTA and was in place before Dec. 31, 2024, are not subject to ESTA for the period of the agreement (up to three years) so long as the employer notifies the Department of Labor and Economic Opportunity of the existence of the agreement.
Gives employers the option to require employees use paid time off in one-hour increments or smaller increments used by the employer to account for absences.
Confirms that the state is solely responsible for enforcement and that employees must pursue complaints within three years from when they know of an alleged violation.
In addition to the prior civil remedies and fines provided, provides additional liability for civil remedies for any employer failing to provide earned sick time to an employee in an amount not more than eight times the employee’s normal hourly rate.

Minimum Wage and Tip Credit
The Michigan Department of Labor and Economic Opportunity has already updated the English version of the required notice postings, which can also be used for the individual notice required for all employees and new hires. However, the department has not yet completed the Spanish version or other documents related to ESTA. Employers subject to the act must post these notices and provide notice to employees and new hires, in both English and Spanish (as well as any other language spoken by 10 percent or more of its workforce), by March 23, 2025.
In addition to the ESTA amendments, the legislature also passed an amendment to Michigan’s Improved Workforce Opportunity Wage Act. In doing so, the minimum wage still increased from $10.56 an hour to $12.48 an hour on Feb. 21, 2025. However, the tipped minimum wage was retained, though it will increase by 2 percent each year beginning in 2026 until it hits 50 percent of the minimum wage in 2031.
The amendments also added a $2,500 fine for employers who fail to ensure tipped workers get paid at least minimum wages and increases the minimum wage to $13.73 effective Jan. 1, 2026, and $15 effective Jan. 1, 2027. Thereafter, annual increases to the minimum wage rate will occur based on inflation.
Takeaways
While these amendments would appear to finally put an end to the disputes related to ESTA which have occurred since signatures were initially submitted to put the provision on the ballot in 2018, we may not be done yet. Groups supporting the original ballot proposals have already announced plans for statewide referendums restoring the amendments. However, such an effort would require they gather signatures from over 223,000 Michigan voters to qualify for a spot on a future ballot.

Delays Ahead: Maryland DOL Proposes Pushing Back FAMLI Program Implementation by 18 Months

Takeaway

Payroll deductions for the state’s Family and Medical Leave Insurance program would begin on 1/1/27 and benefits would become available on 1/1/28 under the Maryland Department of Labor’s proposal.

Lawsuit Alleges FDA Has Unduly Delayed Response to PFAS Petition

Last month a lawsuit filed by plaintiffs including the Tucson Environmental Justice Task Force (TEJTF) filed suit against FDA and now former FDA commissioner Robert Califf alleging that FDA had unduly delayed in responding to a petition filed by TEJTF in 2023 which had requested that FDA set tolerances for 30 types of PFAS in lettuce and blueberries and 26 types of PFAS in bread, milk, eggs, salmon, clams, and corn silage.
The lawsuit argues that FDA has unduly delayed because it has not acted consistent with its statutory mandate to “promote public health by promptly and efficiently reviewing clinical research and taking appropriate action on the marketing of regulated products in a timely manner” (21 USC § 393) and the delay allegedly is to the determinant of the public health. The lawsuit argues that prior decisions holding that courts should defer to FDA on whether to promulgate tolerances is no longer good law post-Chevron and that the “only discretion FDA may exercise for such chemicals [harmful substances] is the level of tolerance to be set.”
We will continue to monitor and report on the regulation of PFAS and other chemicals, including any changes in approach that may be implemented by the new administration.

Key Changes in the Revised Earned Sick Time Act for Michigan Employers

Just as the Michigan Earned Sick Time Act was set to go into effect on February 21, 2025, the Michigan Legislature came to an agreement to revise the Act. The Bill (HB 4002) was promptly signed by Governor Whitmer and became effective February 21. The Act still provides guarantees to Michigan workers for paid sick time while also providing employers with improved flexibility in implementing their paid sick time policies. There are, however, several changes in the revised Act compared to its prior iteration of which employers should be aware.
One notable change is to the definition of covered “employee,” which now includes several exclusions. Specifically, the following individuals are now expressly excluded from the Act’s coverage:

an individual employed by the federal government;
an individual who works under a policy where both of the following conditions are met: (a) the policy allows the individual to schedule the individual’s own working hours; and (B) the policy prohibits the employer from taking an adverse employment action if the individual does not schedule a minimum number of hours;
an unpaid trainee or intern; and
an individual employed under the youth employment standards act.

The definition of covered “employer” was also revised and no longer includes in its definition the term “nonprofit agency.” However, nonprofit agencies are not expressly excluded from the definition, creating an ambiguity as to whether they are subject to the Act.
Small businesses, which continue to be defined as an employer with less than 10 individuals working for compensation in a given week, have until October 1, 2025, to comply with the Act’s requirements. Additionally, newer small businesses which did not employ any employees prior to February 21, 2022, are not required to comply with the Act until 3 years after the first employee is hired.
The revised Act presumes that employers who provide employees with 72 hours of paid earned sick time at the beginning of the employer’s chosen benefit year to be compliant with the minimum sick time accrual requirements. Otherwise, covered employees are entitled to accrue paid earned sick time at the rate of one hour for every 30 hours worked. The revised Act does not require an employer that frontloads sick leave at the beginning of the year to: (1) allow an employee to carry over any used paid sick time from one year to the next; (2) calculate and track accrual of paid sick time; or (3) pay the employee the value of unused accrued paid sick time at the end of the year. For employers that choose to use the calendar year as their 12-month period, the Act does not expressly state whether the frontloaded amount can be prorated for 2025 (starting February 21) or whether employers who choose to frontload are required to provide the full 72 hours for 2025.
When the new changes are effective, small businesses are permitted to frontload a minimum of 40 hours of paid earned sick time at the beginning of the year without having to track the employee’s accrual of earned sick time. The revised Act removes the requirement for small businesses to allow employees to use up to an additional 32 hours of unpaid leave that was afforded in the previous version of the Act.
Additionally, the revised Act allows employers who employ part-time employees to provide their yearly balance of paid earned sick time at the beginning of the employer’s year so long as: (1) they also provide written notice of the employee’s anticipated hours worked for the given year; (2) the amount of earned sick time to be provided for that year is proportionate to the amount of sick time that the employee would accrue if they worked all the anticipated hours; and (3) the employer provides additional paid earned sick time hours should the employee work more hours than anticipated.
The medical documentation requirements had only minor changes, while there are additional provisions to the notice requirements. Specifically, employers may request reasonable documentation within 15 days but can only require it when an employee takes more than three (3) consecutive days of sick leave. The documentation should only require a signature by a health care professional confirming the use of sick time was for a purpose listed under the Act. If an employer requires documentation, the employer must pay “all out-of-pocket expenses the employee incurs in obtaining the documentation.” The employer is also responsible for paying “any costs charged to the employee by the health care provider for providing the specific documentation required.” The revised Act, however, does not explain what is included in either “out-of-pocket expenses” or “costs.”
For notice purposes, when the use of sick leave is not foreseeable, an employee only needs to give notice as soon as practicable or in accordance with the employer’s written policy related the request to use sick time. When the use of sick is foreseeable, an employer can require notice of the use of sick leave up to seven (7) days before the employee intends on initiating sick leave.
The Act prohibits an employer from treating an employee’s use of earned sick time as an absence that may lead to adverse employment actions. Thus, employers should be careful when enforcing their time and attendance policies to avoid any potential conflicts with the Earned Sick Time Act.
Employees who believe their employer violated the Act may file a claim with the Department of Labor and Economic Opportunity within three years. The revised Act, however, no longer permits an employee to directly file a lawsuit.

Value-Based Care at a Crossroads: What’s Next and How To Prepare

The Trump administration will have its own vision on value-based care, creating specific priorities for the Center for Medicare & Medicaid Innovation (CMMI), the federal government’s primary testing ground for payment and service delivery model innovation in Medicare, Medicaid, and the Children’s Health Insurance Program. Republican political leadership may leverage CMMI’s $10 billion budget and sweeping waiver authorities to design and implement value-based care models that reflect the Trump administration’s goals. While specific actions remain unknown, the potential overall direction and key focus areas of CMMI can be forecast based on the work of the first Trump administration and incoming leadership.
This +Insight examines the current value-based care landscape and explores the potential changes on the horizon that are likely to bring both opportunities and challenges.
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GLP-1 Receptor Agonists: New Frontiers and Challenges

Obesity and diabetes have been two of the greatest public health challenges for decades. Many different diets and fads have promised the public a quick fix and a path to losing excess weight or resolving their diabetic issues.
Recently, a new class of drugs, based on GLP-1, are revolutionizing medicine and the treatment of patients with diabetes, obesity, and other disorders associated with obesity. GLP-1 is a short-acting hormone that is released after eating. This hormone helps regulate glucose levels in the body by causing the pancreas to release insulin, which lowers sugar levels in the blood. Furthermore, the hormone causes individuals to feel full by both causing the gut to reduce how quickly it processes food and acting on different parts of the brain which control hunger and satiety.
GLP-1 receptor agonists are a new class of drugs which mimic the activity of GLP-1 and maintain the benefits of the GLP-1 hormone in patients. The U.S. Food & Drug Administration (FDA) has approved many drugs in this class over the past couple of years including Ozempic, Wegovy, Mounjaro, and Zepbound to name a few. These drugs are approved to treat different conditions, including obesity and type 2 diabetes, and are now being tested for treatments far beyond obesity and diabetes. Studies to treat cardiovascular disease, addictive behavior, and rheumatologic diseases are just a few of the ongoing trials. Together, this new class of drugs could lead to sales in the tens of billions of dollars in the upcoming years.
The rapid expansion of this area of technology raises many business and legal questions. We will explore many of these throughout the upcoming articles in this series. These topics include:

Issues related to deals and licensing for GLP-1 therapeutics
Patent/IP challenges to consider for GLP-1 therapeutics
Clinical trial issues for GLP-1 therapeutics
FDA/regulatory issues for GLP-1 therapeutics
Litigation issues for GLP-1 therapeutics

For additional resources on GLP-1 Drugs and how they will change the health care & life sciences and technology industries, click here to read the other articles in our series.

First Circuit Clarifies FCA Liability Standard for AKS Violations, Deepening Circuit Split

The First Circuit has issued its long-anticipated opinion in United States v. Regeneron Pharmaceuticals, Inc., clarifying the standard for establishing False Claims Act (“FCA”) liability based on Anti-Kickback Statute (“AKS”) violations. The First Circuit held that an AKS violation must be the “but-for” cause of a claim for it to be considered “false” under the FCA. In reaching this conclusion, the First Circuit sided with the Sixth and Eighth Circuits, positioning all three courts against the Third Circuit, which has held that a mere link between an AKS violation and a claim is sufficient to establish falsity under the FCA.
A copy of the opinion can be found here.
The First Circuit’s Opinion
Regeneron Pharmaceuticals, Inc. manufactures Eylea, a drug used to treat neovascular age-related macular degeneration (a/k/a, wet AMD). Regeneron allegedly donated over $60 million to an independent charity, the Chronic Disease Fund (“CDF”), which provides financial assistance to patients who need Eylea. Regeneron’s contributions to the CDF were allegedly intended to function as an indirect co-pay subsidy for patients, effectively inducing Medicare reimbursements for Eylea prescriptions and thereby violating the AKS.
On summary judgment, the government disputed the need to establish but-for causation between the alleged kickback and the submitted claim. Instead, it maintained that any claim involving a patient who benefited from an illegal payment or referral was tainted and should be considered false for purposes of the FCA. The First Circuit disagreed, relying on Supreme Court precedent interpreting the term “resulting from” as implying a presumptive but-for causation standard. In reaching its conclusion, the First Circuit rejected the government’s arguments in support of the lower “link” standard of causation.
The First Circuit rejected each of the government’s core contentions. First, the government contended that because the AKS imposes criminal liability without requiring proof that a claim was, in fact, influenced by a kickback, the same standard should apply in the civil FCA context. The First Circuit rejected this position, reasoning that FCA liability fundamentally differs from criminal liability and that the 2010 amendment to the AKS explicitly introduced a causation element that the government must meet. The First Circuit emphasized that while criminal liability under the AKS aims to prevent corruption in medical decision-making, the FCA’s focus is on financial recovery for false claims, requiring a more direct causal link. Thus, by requiring but-for causation, the First Circuit aimed to ensure that claims brought under the FCA are truly the product of illegal inducements rather than merely associated with them.
Second, the government contended that Congress enacted the 2010 amendment against a backdrop of case law that had linked AKS violations to FCA liability without requiring proof of but-for causation. The First Circuit, however, found no indication that Congress intended to eliminate the need for causation, concluding that the amendment merely established a new pathway for proving falsity without overriding existing legal principles regarding causation. Absent explicit language in the amendment removing the requirement of causation, the First Circuit declared, the default presumption of but-for causation should apply. It further noted that previous case law interpreting similar statutory language has consistently required a direct causal link, reinforcing the assumption that Congress intended the same standard to govern FCA claims predicated on AKS violations.
Finally, the government attempted to rely on legislative history, pointing to statements made by the sponsor of the 2010 amendment suggesting that the amendment was designed to ensure that all claims “resulting from” AKS violations were false. The First Circuit rejected this argument as well, noting that legislative history cannot override the plain meaning of statutory text. Rather, the First Circuit held, the phrase “resulting from” necessarily implies a but-for causation standard unless Congress explicitly provides otherwise. Here, the First Circuit reasoned that while legislative history can offer insight into congressional intent, it cannot contradict clear statutory language. Additionally, it underscored that a broad interpretation of “resulting from” would risk imposing liability even where an AKS violation had no actual influence on a submitted claim, a result inconsistent with the FCA’s purpose of targeting fraudulent claims.
What’s Next? Deepening Circuit Splits, Potential Supreme Court Intervention, and Lingering Constitutional Questions
As a threshold matter, this opinion raises the bar for the government to establish FCA liability in AKS-related cases, as it now must demonstrate that an illegal kickback was the direct cause of a false claim rather than merely showing an association between the two. Additionally, the ruling deepens an existing circuit split. With the First Circuit joining the Sixth and Eighth Circuits in requiring but-for causation, only the Third Circuit maintains the broader “link” standard. This divergence increases the likelihood that the Supreme Court will take up this issue to resolve the inconsistency among the Circuits. The potential for Supreme Court review and the deepening circuit split highlight just one of the many ways in which the FCA has recently taken on new prominence. This case unfolds against the backdrop of other developments, including the Trump administration’s stated intent to use the FCA to challenge DEI initiatives among government contractors and ongoing constitutional challenges to the FCA’s qui tam provisions. These developments will shape the future landscape of FCA litigation and compliance. Stakeholders should, accordingly, continue to monitor how courts and regulators navigate these evolving issues.

OSH Law Primer, Part XI (Continued): Understanding and Contesting OSHA Citations—The Whys and Hows

This is a continuation of the eleventh installment in a series of articles intended to provide the reader with a very high-level overview of the Occupational Safety and Health (OSH) Act of 1970 and the Occupational Safety and Health Administration (OSHA) and how both influence workplaces in the United States.
By the time this series is complete, the reader should be conversant in the subjects covered and have developed a deeper understanding of how the OSH Act and OSHA work. The series is not—not can it be, of course—a comprehensive study of the OSH Act or OSHA capable of equipping the reader to address every issue that might arise.

Quick Hits

If an employer decides to contest a citation, the employer must serve OSHA with a notice of contest within fifteen working days of receiving the citation. A failure to resolve a case through an informal settlement conference or file a notice of contest within fifteen working days will result in the citation becoming a final order of the Occupational Safety and Health Review Commission (OSHRC).
Employers may have multiple reasons for contesting citations, including the high cost of abatement, the risk of a citation being used by OSHA as the basis for a repeat violation, the risk of a citation being used in a civil lawsuit under state law, and potential impacts on business reputation and competitiveness.
Once a notice of contest is filed, OSHA forwards the citation and contest to OSHRC, which follows a litigation-like process involving hearings and evidence presentation before an ALJ. The ALJ’s decision can be appealed to the Review Commission and federal circuit courts. State plan states may have different procedures and deadlines.

The first article in this series provided a general overview of the OSH Act and OSHA; the second article examined OSHA’s rulemaking process; the third article reviewed an employer’s duty to comply with standards; the fourth article discussed the general duty clause; the fifth article addressed OSHA’s recordkeeping requirements; the sixth article covered employees’ and employers’ respective rights; the seventh article addressed whistleblower issues; the eighth article covered the intersection of employment law and safety issues; the ninth article discussed OSHA’s Hazard Communication Standard (HCS); the tenth article in the series examined voluntary safety and health self-audits; and the previous article reviewed OSHA’s citation process. In this article, we continue our discussion of the process for contesting OSHA citations.
Contesting OSHA Citations
If the employer decides to contest the citation, it must serve a notice of contest on the OSHA office that issued the citation within fifteen working days of receipt of the citation. Failure to either (a) settle a case through an informal settlement conference or (b) file a notice of contest within fifteen working days will result in the citation becoming a final order of the Occupational Safety and Health Review Commission (OSHRC).
Why Do Employers Contest Citations?

While the penalty amount may be minor, abatement can become cost-prohibitive. OSHA officials are typically not experts in the employer’s industry. The abatement methods they may request can oftentimes be broad and burdensome. Abatement may require, for example, substantial changes to manufacturing equipment, the purchase of new, expensive equipment, or change processes affecting the employer’s other facilities or ability to compete against others in the industry. These costs may quickly spiral an employer into competitive disadvantage.
Any citation on an employer’s record may be used by OSHA as the basis for a repeat violation. Repeat violations will typically subject an employer to a multiple of five or ten times the previous citation.
If an employer has multiple citations and violations in a brief amount of time, the odds increase that, for subsequent inspections and citations, an OSHA inspector will conclude the company is willfully or intentionally violating the OSH Act.
Depending on state law, OSHA citations may be used in a variety of ways in civil lawsuits, such as wrongful death or personal injury actions. For example, in some states, violations of safety standards can be introduced to prove that the employer was negligent per se. In other states, violations may be used as evidence of the employer’s gross negligence.
When soliciting business and new contracts, prospective customers are more frequently scrutinizing vendors’ safety records, including a review of OSHA citations issued to the employer. Citations cannot be concealed; each one is published on OSHA’s website, dating all the way back to 1971. Vendors with certain violations or several violations may be disqualified from soliciting business.
In addition, each citation on an employer’s record increases the likelihood of damage to the employer’s goodwill and business reputation. The more violations on an employer’s record, the more likely it is for the employer to be perceived as an unsafe company, scaring away business, lowering morale, inviting organized labor to recruit employees to a union for protection, and increasing additional scrutiny from OSHA.

The Process of an OSHA Contest
The notice of contest must be in writing. Federal OSHA has no form for a notice of contest. While there are no formalities or magic words to intone, an employer must adequately identify all aspects of the citation that it wishes to contest—the alleged violation, the characterization of the violation, the penalty, the abatement, the abatement date, or all the above. The notice must be adequate to put OSHA on notice that the employer is contesting either all or at least some part of the citation.
The notice of contest must be served on OSHA within fifteen working days of receipt of the citation. With very few exceptions, a citation not timely contested becomes a final order of the Occupational Safety and Health Review Commission (OSHRC) (known also as “the Review Commission”), and the order may not be reviewed by any court or agency.
OSHA starts counting the fifteen-day clock on the day when the citation is received by any agent of the employer. The agency typically sends the citation via certified mail to the closest local office where the alleged violation occurred, but sometimes OSHA will serve citations in person. In large companies, this can create confusion as to when a citation was received, as the citation moves from local offices to the legal and health, safety, and environment (HSE) departments. Rather than waste time guessing when the citation was received by the company, the safest practice is to assume OSHA hand-served the citation on the company on the date of issuance listed on the citation and count fifteen working days from then.
Engaging in settlement discussions with OSHA does not stop the clock on the contest period. In many employers’ minds, the contest period creates a way-too-short deadline to negotiate a settlement with OSHA. But keep in mind settlement talks can always continue after an employer submits its Notice of Contest.
Once OSHA receives an employer’s notice of contest, the agency must immediately forward the citation and contest to the Occupational Safety and Health Review Commission in Washington, D.C. The Review Commission is frequently mistaken as being part of OSHA. It is an independent federal agency tasked by the U.S. Congress to resolve contested OSHA citations. Upon receipt of the contest materials, an OSHRC clerk will docket the matter and pass the case on to the Chief Administrative Law Judge (ALJ). The chief ALJ will then assign the case to one of the Review Commission’s ALJs in the District of Columbia, Atlanta, or Denver.
The Review Commission will send the employer a two-part docketing card with the case number. The employer must detach and post the half of the card that contains a notice to employees informing them that the citation is under contest and of their rights to participate in the proceedings. The employer must then date and sign the other half of the card and mail it back to the Review Commission. This second half of the card notifies the Review Commission of the posting. If the employer fails to return the card, the Review Commission will send a reminder. If OSHRC receives no card back from the employer, it reserves the right to dismiss the employer’s contest.
Once docketed with the Review Commission, the case will follow certain procedures that appear very similar to a normal litigation track in state or federal courts. Ultimately, the ALJ will schedule a hearing to hear witnesses and receive evidence from all parties. OSHA will proceed first, and typically call the compliance officer who conducted the inspection as its first witness. The employer/respondent will have the opportunity to cross-examine any of OSHA’s witnesses, just as OSHA will have an opportunity to cross-examine the respondent’s witnesses. The hearing can continue for days or weeks, until both sides have presented their full cases to the ALJ. Thereafter, the ALJ will issue a decision that can be appealed by either party to the Review Commission, and thereafter, federal circuit courts.
State Plan States
Currently, there are twenty-two state plan states. State plan states maintain their own state OSH Act and have some subtle differences in the manner they handle citations and deadlines for appeal. Typically, the specific jurisdictional requirements are included in the citation packet the state plan sends to the employer. An employer seeking to appeal a state citation may want to carefully review the expectations outlined in the specific jurisdiction.

California Bill Seeks to Expand Scope of OHCA’s Review to Private Equity, Management Service Organizations and Others

California is considering an expansion of the types of entities that would comprise “health care entities” as defined by and subject to the review of the Office of Health Care Affordability (OHCA). AB 1415 would require private equity groups, hedge funds and their respective affiliates (including newly created entities) entering into material change transactions with health care entities to provide notice of the transactions to OHCA. Current law only requires the health care entities themselves to provide such notice. The bill would also add certain management services organizations, health systems and entities that “own, operate or control” providers (as defined by OHCA) to the list of health care entities that are subject to OHCA’s review. Further, the bill would change the definition of “provider” to “a private or public health care provider” with an expanded list of entity types. The proposed revisions are detailed below:
1. Private Equity Groups, Hedge Funds and Entities Newly Formed to Contract with Health Care Entities Would Be Subject to OHCA’s Notice Requirements
AB 1415 would require private equity groups, hedge funds and newly created business entities created for the purpose of entering into agreements or transactions with a health care entity to provide notice to OHCA of transactions or agreements that would transfer ownership or control over a material amount of the assets or operations of the health care entity. While health care entities party to material change transactions are already subject to OHCA’s notice requirements, the bill would expand the required disclosures to the private equity groups and hedge funds themselves. The definitions of “private equity group” and “hedge fund” generally include the investment entities managed by fund managers for their investors but exclude the individual investors themselves if they do not participate in the management of the funds. The definition of “hedge fund” specifically excludes entities that solely provide or manage debt financing secured in whole or in part by the assets of a health care facility, including, but not limited to, banks and credit unions, commercial real estate lenders, bond underwriters and trustees. AB 1415’s definitions of “private equity group” and “hedge fund” largely mirror the definitions included in last year’s AB 3129, which would have required prior notice to and approval of the California Attorney General for certain health care investments by private equity groups and hedge funds. 1
The proposed expansion of OHCA’s jurisdiction to private equity groups and hedge funds is likely a response to Governor Newson’s veto of AB 3129 last year, in which the Governor reasoned that it was OHCA’s role to review certain health care transactions and that additional, separate processes like those in AB 3129 appeared to be unnecessary and duplicative. Instead of attempting another run at a separate review process aimed at private equity and hedge funds (among others), this time the approach is to expand OHCA itself. Unlike the Attorney General under AB 3129, OHCA does not and still would not have the authority to block transactions, but transactions subject to OHCA’s review are not permitted to close until the completion of OHCA’s review process, which can be burdensome and lengthy.
2. “Provider” Would Be Defined as a “Private or Public Health Care Provider” and Include a Potentially Non-Exclusive List of Entity Types
OHCA’s governing statute defines “provider,” one of the sub-categories of “health care entity,” with an exhaustive list of entity types. AB 1415 would change the definition to “a private or public health care provider” and states that the definition includes the list of entity types from the original definition (with some additions, described below).
If passed as drafted, the language may create ambiguity over whether certain entities are captured under the definition of “provider.” First, the definition does not define the difference between a “private” or “public” provider. Second, it is unclear whether the list of entities is exhaustive. If the list is non-exhaustive, members of the health care industry would have little guidance on whether they constitute a health are entity. This definition would benefit from clarifications in revisions to the bill or OHCA’s implementing regulations.
3. Management Services Organizations Would Become Health Care Entities Subject to OHCA’s Review
AB 1415 would add management services organizations (MSOs) to the definition of health care entity. MSOs would include any entity that provides administrative services or support for a provider (as defined by statute), not including the direct provision of health care services. Administrative services or support would include, but not be limited to, utilization management, billing and collections, customer service, provider rate negotiation and network development.
This addition could include many types of management arrangements that were previously excluded from OHCA’s statute and governing arrangement. The legislature may be targeting “friendly PC” arrangements where MSOs operate all non-clinical business operations of a health care practice, but the addition could also capture arrangements that manage smaller portions of practice operations. For example, the addition may capture arrangements that outsource billing and collections or customer service functions to vendors that otherwise have no influence over the health care operations of their clients.
4. Entities that Own, Operate or Control Entities Listed Under the Definition of “Provider” Would Be Health Care Entities Subject to OHCA’s Review
Under AB 1415, entities that own, operate or control the entities listed under the definition of “provider” would become health care entities subject to OHCA’s notice and review “regardless of whether it is currently operating, providing health care services, or has a pending or suspended license.” This addition would expand the notice requirements to a broad range of owners and operators over health care entities that have not otherwise been captured by the current law.
Like the changes to the definition of “provider,” this language creates ambiguities that will benefit from further revision to the bill or OHCA’s regulations. For example, holding companies that own provider entities would become health care entities subject to notice even if they held other assets unrelated to the provision of health care services in California and or included other assets and services lines that do are not health care entity services. The legislature may have intended to capture transactions that occur at a holding company level that do not include the health care entities themselves. If that is the case, arguably some these types of transactions are already captured by OHCA’s regulations, which apply to health care entities that are a “subject of” a material change transaction.
5. Health Systems Would Be Included as Health Care Entities Subject to OHCA’s Review
AB 1415 would add health systems to the enumerated list of providers. “Health system” would mean (1) a hospital system, as defined in subdivision (e) of Section 127371; (2) a combination of one or more hospitals and one or more physician organizations; or (3) a combination of one or more hospitals, one or more physician organizations, or one or more health care service plans or health insurers.
Health systems were likely already captured by current law, which includes health facilities like acute care hospitals. However, the addition of “health system” as a type of health care entity could create further ambiguity. For example, the bill does not define the word “combination” as used in the definition of “health system” and does not appear to apply to a specific legal entity. It may be uncertain whether the definition of health care entity would capture an entity that is a subsidiary of a health system that would not otherwise be considered a health care entity but for its affiliation with the health system. The addition could also expand OHCA’s jurisdiction by potentially pulling in holding companies up the corporate chain from health care entities that do not directly own or operate any health care entity services solely by virtue of its inclusion in the overall “health system.”
Takeaways
AB 1415 demonstrates that California’s interest in reviewing private equity and hedge fund investments as well as MSOs in health care did not end with AB 3129.2 It also shows a continued appetite to expand OHCA’s jurisdiction less than a year after its review process has begun. It remains to be seen how the bill may be amended in the legislature to further expand its scope or clarify ambiguities in the current language. If passed, AB 1415 would also require OHCA to revise its implementing regulations. Members of the California health care industry should monitor the developments of AB 1415 to determine if their current operations and anticipated transactions may be subject to OHCA’s expanded jurisdiction and strategize early.
[1] Our prior discussions of AB 3129 can be found here:
https://natlawreview.com/article/californias-ab-3129-continues-national-trend-scrutinizing-private-equity
https://natlawreview.com/article/california-considers-revisions-legislation-health-care-investments-and-regulations
https://natlawreview.com/article/california-legislators-pass-ab-3129-require-notice-and-consent-private-equity-and
https://natlawreview.com/article/governor-newsom-vetoes-ab-3129-addressing-private-equity-california-health-care
[2] The California Senate is currently considering SB 351, which would revive some of AB 3129’s corporate practice of medicine-related restrictions on private equity affiliates providing management services to physicians and dentists. Our analysis of SB 351 can be found here: https://natlawreview.com/article/california-reintroduces-legislation-restrict-private-equity-management-health-care