CMS Publishes Final Rule, Effective January 1, 2025, Addressing the Requirements for Reporting and Returning Overpayments
The standard for an “identified overpayment” under Medicare Parts A–D now aligns with section 1128J(d)(4)(A) of the Social Security Act, which incorporates by reference the Federal False Claim Act’s (the “FCA”) “knowledge” standard. The previous “reasonable diligence” standard, which, as it related to Part C, had been struck down by a Federal court, no longer applies. Under the new standard, a provider, supplier, or Medicare Advantage Organization (“MAO”) has knowledge of an overpayment when it has been identified.
Additionally, the deadline for reporting and returning identified overpayments has also been finalized. An overpayment must be reported and returned by the later of:
The date which is 60 days after the date on which the overpayment was identified, or
The date any corresponding cost report is due, if applicable.
Any identified overpayment retained after the deadline to report and return may create FCA liability.
The foregoing was finalized, as proposed in 2022, pursuant to the Calendar Year 2025 Physician Fee Schedule (the “2025 PFS”). With respect to the timeframe to report and return overpayments, the 2025 PFS suspends a person’s 60-day obligation to report and return overpayments for up to 180 days if the person, after having identified an overpayment, conducts a timely, good-faith investigation to determine whether related overpayments exist. While the 2025 PFS did not expressly define the term “good-faith investigation”, persons “can rely upon [its] plain meaning.” See 2025 PFS at 98338.
Takeaways
This legal change creates new risks for providers who fail to investigate credible information about a potential overpayment. However, this should come as no surprise, as it aligns with what the U.S. Department of Justice may already pursue against a person under the FCA—a reverse false claim. As noted in the commentary of the 2025 PFS, the FCA, from which the “knowledge” qualifier originates, contains an existing body of case law and examples to guide stakeholders and their counsel regarding if a person has the requisite knowledge to have identified an overpayment based on the facts and circumstances presented. See 2025 PFS at 98335–8.
Additionally, once a person has identified an overpayment, the 60-day obligation to report and return such overpayment begins to run. And, that deadline exists regardless of whether the overpayment has been quantified. But, because quantification takes time, the 60-day deadline may be suspended if the person needs to dive deeper into its investigation to determine if related overpayments exist. The timeline to do so, however, is only 180 days. Thus, providers should make every effort to act with “all deliberate speed”, which, in turn, may require providers with fewer resources and expertise to expend a disproportionately high amount of effort. These rules apply across all of Medicare and, thus, are applicable to all providers, suppliers, and MAOs.
Updates for Employers Using Private Plans to Comply with Minnesota’s Paid Leave Law
Minnesota is one of a dozen states that have enacted a statewide program providing compensation to employees during family and medical leaves. Minnesota’s law provides job protection and payment of benefits through a state-run insurance program to qualifying employees to take up to 12 weeks of leave for family and/or medical reasons (or a combined total of up to 20 weeks of leave if the employee qualifies for both types of leave in one benefit year) (“the Paid Leave Law”). The insurance program will be funded through employer and employee contributions beginning on January 1, 2026. Employees can also begin applying for compensation beginning on January 1, 2026.
Recently, the Division outlined how employers can use self-insured plans or plans from an insurance carrier to comply with the Paid Leave Law. The Division refers to insurance plans providing coverage for Minnesota’s Paid Leave law as “Equivalent Plans.”
Equivalent Plans must allow for the same, or more comprehensive, coverage than is expressly required by the Paid Leave Law. The Division details the conditions that an Equivalent Plan must meet to comply with the Paid Leave Law. As explained by the Division, employers can choose to use an Equivalent Plan to cover one leave category (family or medical) and can participate in Minnesota’s Paid Leave program to cover the other leave category (family or medical). The Minnesota Department of Commerce will begin accepting applications from employers to use Equivalent Plans “in the spring of 2025” according to the Division. The Minnesota Department of Commerce recently published a checklist for employers to submit along with their Equivalent Plan application.
The Division is set to provide more information about Equivalent Plans soon. According to the Division, the information is likely to include a cost estimation calculator for employers and employees, and more details about the application process employers must follow to secure an approved Equivalent Plan.
Minnesota’s Paid Leave Division published final proposed rules in December, that, if adopted, will regulate the state’s Paid leave Law. We are monitoring these developments and will continue to provide updates as we approach the January 2026 rollout.
Hadley M. Simonett contributed to this article.
EPA Proposes Risk Management Rule to Protect Workers from Inhalation Exposure to PV29
On January 14, 2025, the U.S. Environmental Protection Agency (EPA) issued a proposed rule to address the unreasonable risk of injury to human health presented by Color Index (C.I.) Pigment Violet 29 (PV29) under its conditions of use (COU) as documented in EPA’s January 2021 risk evaluation and September 2022 revised risk determination. 90 Fed. Reg. 3107. The proposed rule states that the Toxic Substances Control Act (TSCA) requires that EPA address by rule any unreasonable risk of injury to health or the environment identified in a TSCA risk evaluation and apply requirements to the extent necessary so the chemical no longer presents unreasonable risk. To address the identified unreasonable risk, EPA proposes requirements to protect workers during manufacturing and processing, certain industrial and commercial uses of PV29, and disposal, while also allowing for a reasonable transition period prior to enforcement of said requirements. Comments are due February 28, 2025. EPA notes that under the Paperwork Reduction Act (PRA), comments on the information collection provisions are best assured of consideration if the Office of Management and Budget (OMB) receives comments on or before February 13, 2025.
As reported in our January 25, 2021, memorandum, pursuant to TSCA Section 6(b), EPA determined that PV29 presents an unreasonable risk of injury to health, without consideration of costs or other nonrisk factors, including an unreasonable risk to potentially exposed or susceptible subpopulations (PESS) identified as relevant to the 2021 risk evaluation for PV29 under the COUs. EPA notes that the term “conditions of use” is defined in TSCA Section 3(4) to mean the circumstances under which a chemical substance is intended, known, or reasonably foreseen to be manufactured, processed, distributed in commerce, used, or disposed of. To address the unreasonable risk, EPA proposes, under TSCA Section 6(a), to:
Require use of assigned protection factor (APF) 50 respirators and equipment and area cleaning to address the risk from inhalation exposure to dry powder PV29 (also referred to as regulated PV29), where dry powder PV29 is expected to be present, for the following COUs:
Domestic manufacture;
Import;
Incorporation into formulation, mixture, or reaction products in paints and coatings;
Incorporation into formulation, mixture, or reaction products in plastic and rubber products;
Intermediate in the creation or adjustment of color of other perylene pigments;
Recycling;
Industrial and commercial use in automobile (original equipment manufacturer (OEM) and refinishing) paints and coatings;
Industrial and commercial use in coatings and basecoats paints and coatings;
Industrial and commercial use in merchant ink for commercial printing; and
Disposal.
Require manufacturers (including importers), processors, and distributors in commerce of regulated PV29 to provide downstream notification of the requirements.
Require recordkeeping.
EPA notes that not all TSCA COUs of PV29 are subject to the proposed rule. As described in the 2021 risk evaluation and the September 2022 revised unreasonable risk determination, four COUs do not contribute to the unreasonable risk: distribution in commerce; industrial/commercial use in plastic and rubber products — automobile plastics; industrial/commercial use in plastic and rubber products — industrial carpeting; and consumer use in professional quality watercolor and acrylic artist paint. Consumer use in professional quality watercolor and acrylic artist paint was the only consumer COU evaluated as part of the 2021 risk evaluation. More information on EPA’s September 2022 revised unreasonable risk determination is available in our September 9, 2022, memorandum.
EPA requests public comment on all aspects of the proposed rule. According to EPA’s December 20, 2024, press release, EPA “is especially interested in hearing perspectives from the public on the feasibility and effectiveness of the proposed requirements for worker protections, including from workers and entities that would be required to implement the workplace protections.”
Commentary
EPA’s evaluation of PV29 was expected to be “easy” when it was identified as one of the first ten chemicals selected for risk evaluation. PV29 is a poorly soluble, low toxicity (PSLT) particle. EPA’s approach to PSLTs has been evolving over the years and has been the subject of controversy, including whether carcinogenicity in rats from “kinetic lung overload…[where the] dust overwhelms the lung clearance mechanisms over time” is relevant to humans.
Since EPA first issued its 1994 document titled “Methods for Derivation of Inhalation Reference Concentrations (RfCs) and Application of Inhalation Dosimetry,” scientific advances in mechanistic modeling of inhalation dosimetry have matured. The scientific understanding of the most appropriate dose metric for PSLTs (i.e., retained dose, not deposited dose) has also evolved. In 1994, EPA developed the regional deposited dose ratio (RDDR) model, an empirical model that provides predictions of deposited dose. In 2021, EPA developed an update to the multiple-path particle dosimetry (MPPD) model (i.e., MPPD EPA 2021 v.1.01). This model is an improvement over the RDDR model because it incorporates the best available science, including “some dose metric predictions…based on mechanistic descriptions instead of empirical fitting…[and] providing prediction of retained mass….” Prior to this update, MPPD was already recognized as a superior model versus RDDR for inhalation dosimetry. For example, EPA’s Integrated Risk Information System used MPPD when developing an inhalation reference concentration for benzo[a]pyrene in January 2017; the National Institute for Occupational Safety and Health also used MPPD for developing its recommended exposure limit for carbon nanotubes in April 2013.
EPA used the MPPD model in the revised draft risk evaluation for PV29. EPA subsequently used the RDDR model in the Final PV29 risk evaluation. EPA stated that “The change in model [i.e., RDDR rather than MPPD] resulted in unreasonable risk determinations for all [occupational nonusers] ONUs and industrial and commercial use in automobile paint [original equipment manufacturer] OEM and refinishing condition of use” (emphasis added). EPA justified this change by stating “The MPPD model was not thought to be appropriate because the particle size data was not robust enough and the MPPD model cannot calculate [human equivalent concentrations] HECs for the hamster data…, while the RDDR model can accept hamster data input.” We find this justification hollow. EPA did not state why the particle size data were robust enough for the RDDR model but not the MPPD model. Further, EPA did not use the hamster data as the basis for its point of departure (POD) in the Final PV29 risk evaluation. We suspect this change was based on a preferred outcome (i.e., unreasonable risks), rather than an objective scientific evaluation to determine if there is unreasonable risk.
Interestingly, EPA calculated an existing chemical exposure limit (ECEL) of 0.014 mg/m3 for PV29, but it did not provide the underlying documentation for this value. Instead, EPA only stated that it chose not to propose an ECEL for PV29 because EPA was unable to identify a “method with a limit of detection lower than the calculated ECEL….” Without the underlying documentation, it is impossible to determine if EPA’s proposed regulatory action is based on the best available science or if the protective measures meet the requirement to protect workers “to the extent necessary” to mitigate the risk identified.
EPA derived PODs based on the HEC of 0.28 mg/m3 derived from rats and the HEC of 0.16 mg/m3 that it derived from hamsters, but these PODs are based on a dose metric (i.e., deposited dose) that does not represent the best available science (i.e., retained dose). EPA should have used the results of the rat inhalation study (the most sensitive species) and calculated the HEC based on the retained dose. That would provide a POD that would be both health protective and based on the best available science. Without that POD and an appropriate benchmark margin of exposure (MOE), EPA cannot justify its proposed regulatory action.
The proposed PV29 risk management rule has the potential to be more impactful than other EPA risk management rules because of the thousands of PSLTs listed on the TSCA Inventory. If either of EPA’s proposed risk management options is issued in final, it will set a bad precedent by serving as the basis for all of EPA’s risk evaluations for PSLTs when respirable particles are formed. Stakeholders need to be aware and be engaged. It is critically important that the rule be based on the best available science. This is a good opportunity for EPA to work with the U.S. Occupational Safety and Health Administration (OSHA) to revise the permissible exposure limit (PEL) for particulates not otherwise regulated (PNOR) (PSLTs fall into this category), given the immense number of opportunities for exposure to PSLT dust in the workplace, many of which are not under TSCA authority.
ECHA Adds Five Chemicals to the Candidate List and Updates One Entry
The European Chemicals Agency (ECHA) announced on January 21, 2025, that it added five chemicals to the Candidate List of substances of very high concern (SVHC) and updated one entry:
Substance Name
Reason for Inclusion
Examples of Uses
6-[(C10-C13)-alkyl-(branched, unsaturated)-2,5-dioxopyrrolidin-1-yl]hexanoic acid
Toxic for reproduction (Article 57(c))
Lubricants, greases, release products, and metal working fluids
O,O,O-triphenyl phosphorothioate
Persistent, bioaccumulative, and toxic (PBT) (Article 57(d))
Lubricants and greases
Octamethyltrisiloxane
Very persistent, very bioaccumulative (vPvB) (Article 57(e))
Manufacture and/or formulation of: cosmetics, personal/health care products, pharmaceuticals, washing and cleaning products, coating and non-metal surface treatment, and in sealants and adhesives
Perfluamine
vPvB (Article 57(e))
Manufacture of electrical, electronic, and optical equipment and machinery and vehicles
Reaction mass of: triphenylthiophosphate and tertiary butylated phenyl derivatives
PBT (Article 57(d))
No active registrations
Updated entry
Tris(4-nonylphenyl, branched and linear) phosphite
Endocrine disrupting properties (Article 57(f) — environment)
Polymers, adhesives, sealants, and coatings
ECHA states that its Member State Committee confirmed the addition of these chemicals to the Candidate List, which now has 247 entries. ECHA notes that some entries are groups of chemicals, so the overall number of impacted chemicals is higher. Candidate List chemicals may be placed on the Authorization List in the future. If a substance is on that list, its use will be prohibited unless companies apply for authorization and the European Commission (EC) authorizes them to continue its use.
Under the Registration, Evaluation, Authorisation and Restriction of Chemicals Regulation (REACH), companies have legal obligations when their substance is included — either on its own, in mixtures, or in articles — on the Candidate List. Suppliers of articles containing a Candidate List substance above a concentration of 0.1 percent (weight by weight) must provide their customers and consumers information on how to use the article safely. ECHA notes that consumers have the right to ask suppliers whether the products they buy contain SVHCs. Importers and producers of articles must notify ECHA if their article contains a Candidate List substance within six months from the date it has been included on the list (January 21, 2025). European Union (EU) and European Economic Area (EEA) suppliers of substances on the Candidate List, supplied either on their own or in mixtures, must update the safety data sheet (SDS) provided to customers.
Under the Waste Framework Directive, companies also have to notify ECHA if the articles they produce contain SVHCs in a concentration above 0.1 percent (weight by weight). ECHA will publish this notification in its database of substances of concern in products (SCIP). Under the EU Ecolabel Regulation, products containing SVHCs cannot have the ecolabel award.
The DOL Issues New Guidance On The Relationship Between The FMLA and State Paid Family Medical Leave Programs
Employers face a complicated patchwork of state, local and federal laws governing time off for family and medical reasons. The intersection of these often-overlapping laws creates numerous issues including how to handle time off that qualifies under both state paid family medical leave (PFML) laws and the federal Family and Medical Leave Act (FMLA). On January 14, 2025, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) issued an opinion letter stating that employers cannot require employees to use their employer-provided paid time off such as vacation time while the employee is taking leave under the FMLA and receiving pay under a state or local PFML program. The WHD explained that the DOL’s FMLA regulations on substitution of paid leave apply to leave taken under a PFML program in the same way they apply when an employee is on FMLA leave and receiving benefits under a paid disability plan.
Background
Thirteen states and the District of Columbia have adopted mandatory PFML programs, and more states are considering similar legislation. Each state program is unique, but generally PFML programs provide income replacement for a certain number of weeks from a state fund for employees who are absent from work for specified family reasons, such as the birth of a child, and/or medical reasons, such as the employee’s own serious health condition. State and local PFML laws vary widely in their payment and eligibility structures but often employees who are eligible for leave and benefits under a state program are also eligible for unpaid leave under the FMLA.
Substitution of Paid Leave
When an employee takes job-protected leave under the FMLA, the regulations state that an employee may elect, or an employer may require an employee, to “substitute” accrued employer-provided paid leave (i.e., paid vacation, paid sick leave) for any part of the unpaid FMLA entitlement period. However, if an employee taking FMLA receives payments under a disability plan or worker’s compensation program, the employer cannot unilaterally require the employee to use accrued employer-provided paid time off.
DOL’s Guidance
Against this backdrop, the DOL opined that while state and local PFML programs are not directly addressed in the FMLA regulations, the same principles apply to such programs as those that apply to employees that receive payments on FMLA from workers’ compensation insurance programs or disability plans. These principles include:
Where an employee takes leave under a state or local PFML program, if the leave is covered by the FMLA, it must be designated as FMLA leave and the employee must be given notice of the designation, including the amount of leave to be counted against the employee’s FMLA leave entitlement.
Where an employee, during leave covered by the FMLA, receives compensation from a state or local PFML program, the FMLA substitution provision does not apply to the portion of leave that is compensated. This means that an employee or employer cannot unilaterally require the concurrent use of employer-provided paid leave for leave that is already compensated by the PFML program.
Where an employee is receiving compensation through the state or local PFML program that does not fully compensate the employee for their FMLA covered leave, the employer and employee may agree, if state law permits, to use the employee’s accrued employer-provided paid leave to supplement the payments under the state or local leave program, but the employer cannot require it.
If an employee is eligible for a state or local PFML program under circumstances that do not qualify as FMLA leave, the employer cannot apply the leave against the employee’s FMLA entitlement.
If an employee’s leave under a state or local PFML program ends before the employee has exhausted the full FMLA entitlement, the employee is still entitled to the protections of the FMLA and the employee could elect, or the employer could require the employee, to substitute the employer-provided paid leave consistent with the FMLA rules and regulations.
The DOL provides a useful example to illustrate these principles:
Yvette takes eight weeks of continuous FMLA leave to care for her mother following her mother’s inpatient surgery. Yvette’s employer notifies her that the eight weeks are designated as FMLA leave. Caring for a parent with a serious health condition is also a qualifying reason under her state’s family leave program, and she applies for and receives benefits that replace two-thirds of her normal income each week that she is on leave, for up to six weeks.
During the six weeks that Yvette is receiving paid leave benefits under the state program, under the FMLA, her employer cannot require, and she cannot unilaterally elect, to substitute her accrued vacation under her employer’s leave plan and thereby receive full pay from her employer in addition to the state-paid benefit. However, if Yvette’s state permits an employee to use accrued paid leave concurrently with the state’s paid leave, the FMLA permits Yvette and her employer to agree that Yvette will use one-third of a week of her vacation time each week to supplement the portion of her full pay that is not provided by the state’s paid leave benefit.
During the final two weeks of Yvette’s FMLA leave, she will have exhausted her state program’s paid leave. At that point, her leave becomes unpaid leave, and the FMLA substitution provision applies. Yvette elects to use her employer-provided accrued paid vacation time to receive pay during the final two weeks of her FMLA leave.
FDA Dumps Trio of Device-Related Guidances Prior to Administration Change
Among the wave of guidance documents issued by the U.S. Food and Drug Administration (“FDA” or the “Agency”) in the first week of 2025 were three notable draft guidance documents pertaining to medical devices (together, the “Draft Guidances”). The Draft Guidances hit on the topics of in vitro diagnostic (“IVD”) devices, artificial intelligence (“AI”) enabled device software functions, and pulse oximeters. This uncharacteristic deluge of guidance all within the span of a week illustrates the Agency’s desire to disseminate policy ahead of the incoming administration – especially as it relates to medical devices, which for a variety of reasons that any follower of this blog could intuit, have become a hot-button issue across the various corners of the healthcare and life sciences industries.
I. In Vitro Diagnostic Devices
On January 6, FDA released a draft guidance titled “Validation of Certain In Vitro Diagnostic Devices for Emerging Pathogens During a Section 564 Declared Emergency” (the “IVD Draft Guidance”).[1] This guidance aims to provide a framework for manufacturers to efficiently validate IVDs for emerging pathogens – part of FDA’s continuing effort to lay the groundwork for a timely and effective response to future public health emergencies. FDA is inviting comments to the Draft Guidance with a deadline set for March 7, 2025.
A. Background
The Food, Drug, and Cosmetic Act (“FD&C Act”) grants FDA authority to facilitate the availability and use of medical countermeasures (“MCMs”) to address chemical, biological, radiological, and nuclear threats to the nation’s public health.[2] This power is referred to as Emergency Use Authorization (“EUA”) and allows FDA to authorize the use of certain unapproved medical products if the Secretary of Health and Human Services (the “Secretary”) declares that justifying circumstances exist. FDA has used EUA to authorize emergency use of IVDs for eight infectious diseases over the years – most recently and notably, for COVID-19.
During COVID-19, FDA had to play catch-up by issuing enforcement discretion policies, through guidance, for certain unauthorized tests to help rapidly increase testing capacity on a nationwide scale – meaning certain tests were made available without EUA. Whether or not tests are authorized through EUA or described in enforcement discretion policies, the key concern for FDA is that these tests are properly validated. To this end, FDA can, and has, taken appropriate action against tests lacking the proper validation. In the IVD Draft Guidance, FDA provides recommendations for test validation so that IVD manufacturers can have a framework to efficiently secure authorization under EUA, and get much-needed treatments to the public, in the event of a new infectious disease outbreak.
B. Takeaways
The IVD Draft Guidance is clearly underscored by a desire to be better prepared to efficient, safe, and effective testing in the event of another disease outbreak like COVID-19 – in fact, FDA says as much in the guidance itself. What FDA does not explicitly say, but would could also underscore the Agency’s timing in issuing the guidance when it did, is a concern about how the incoming administration might handle such an outbreak in terms of testing and therapeutics, given some of the discourse we’ve heard to date.
Aside from emergency preparation, the IVD Draft Guidance also underscores FDA’s concerns about the efficacy of IVDs, generally, especially those that are subject to abbreviated validation standards. For example, last year, the Agency issued a lengthy (and controversial) final rule outlining a plan to end its previous policy of enforcement discretion for laboratory-developed tests (“LDTs”) – a subset of IVD – based on over a decade of concerns over the efficacy of these tests that have historically not been subject to any oversight, including validation standards, from FDA at all. The framework outlined in this IVD Draft Guide similarly addressed concerns over the efficacy of testing during emergency scenarios when manufacturers are subject to urgent time constraints and abbreviated EUA standards.
II. AI-Enabled Device Software
On January 7, FDA released a draft guidance titled “Artificial Intelligence-Enabled Device Software Functions: Lifecycle Management and Marketing Submission Recommendations” (the “AI Draft Guidance”).[3] This is only the third guidance FDA has released related to Artificial Intelligence (“AI”), and the second relating specifically to AI-enabled device software functions.[4] The AI Draft Guidance was expected, as it appeared on FDA’s Center for Devices and Radiological Health’s (“CDRH”) “A-list” of guidances to publish in Fiscal Year 2025.[5] The AI Draft Guidance signifies an acknowledgement by FDA of the need to keep pace – as best it can – with technological advancements in the medical device space, particularly in light of the attention and concern swirling around AI use. FDA is inviting comments to the Draft Guidance with a deadline set for April 7, 2025.
A. Background
The rapid advance of AI technology in recent years has significantly influenced the development and implementation of medical device software functions. Device manufacturers are increasingly integrating these AI-enabled device software functions (“AI-DSFs”) to enhance diagnostic, monitoring, and treatment capabilities. In recent years, FDA has focused on promoting a Total Product Life Cycle (“TPLC”) approach to the oversight of AI-DSF, which emphasizes ongoing management and continuous improvement of AI-enabled devices both pre- and post-market according to guiding principles for Good Machine Learning Practice (“GMLP”), to ensure that AI-DSF remain safe and effective from design through decommissioning. In the AI Draft Guidance, FDA continues its effort by establishing lifecycle management and marketing submission recommendations for AI-DSF and, as always, encouraging early interaction with FDA to ensure the development of a safe and effective product for patients.
B. Takeaways
In its AI Draft Guidance, FDA makes clear that the integration of AI modeling into medical device software is being scrutinized in a way that at least parallels, or even exceeds, the oversight given to general device software functions. The AI Draft Guidance sets forth many FDA recommendations for lifecycle management, suggesting that a large overhaul is needed to come up-to-speed with rapidly evolving AI development. Significantly, the scope of the AI Draft Guidance includes the device itself and any device constituent parts of a combination product, which may include AI-DSFs.
Much of the AI Draft Guidance focuses on premarket notification (e.g., 510(k)) submissions for devices that include AI-DSFs, notably requiring a thorough explanation of how AI is integrated into the device. In light of all the uncertainties surrounding AI use and its seemingly unlimited application, FDA seems to be looking for some level of assurance that AI-DSF developers will properly leverage parameters and safeguards so that this “unlimited” use potential does not transform a device beyond its cleared and/or approved intended use.
Another key focus of the AI Draft Guidance is transparency and bias reduction. This is a typical, and growing, area of concern for FDA when it comes to devices that collect and store information; however, incorporating AI complicates the issue because of unknown risk of bias. Specifically, FDA notes that AI models may rely on data correlations and other machine learning-derived processes that do not connect to biologically plausible mechanisms of action. Therefore, while AI’s strength is its adaptability, risk lies in the fact that its decision-making processes are not fully predictable. To mitigate this risk, FDA provides a recommended design approach to transparency throughout the product lifecycle, especially with respect to involving data collection and monitoring.
Another key focus of the AI Draft Guidance – and another growing area concern for FDA and stakeholders alike – is cybersecurity. Here, FDA builds off of its 2023 guidance (“2023 Guidance”) which addressed, more generally, cybersecurity in medical devices,[6] to contextualize it within the AI-sphere. The application of AI to medical device software adds a new layer of security concern because, if AI systems are hacked/accessed, the consequences can be much more widespread. To mitigate this risk, FDA provides comprehensive, AI-specific recommendations for handling cybersecurity threats, while also deferring to the 2023 Guidance for the complete framework that should be implemented prior to marketing submission.
The emergence of AI necessitates that FDA alter its long-standing framework for ensuring the safety and efficacy of medical devices in light of the unique way that AI-enabled device functions operate – and the AI Draft Guidance illustrates FDA’s continued recognition of, and response to this need.
III. Pulse Oximeters for Medical Purposes
On January 7, FDA released a draft guidance titled “Pulse Oximeters for Medical Purposes – Non-Clinical and Clinical Performance Testing, Labeling, and Premarket Submission Recommendations.” (the “PO Draft Guidance”),[7] which provides recommendations for performance testing, labeling, and premarket submissions of pulse oximeters. Once finalized, the PO Draft Guidance FDA’s existing pulse oximeter guidance, which was issued on March 4, 2013 (“2013 Guidance”).[8] FDA is inviting comments to the PO Draft Guidance with a deadline set for March 10, 2025.
A. Background
In recent years, there has been growing concern over the accuracy of readings from pulse oximeters, which are devices that measure the amount of oxygen in arterial blood and pulse rate.[9] In addressing this concern, FDA found that a host of factors affects the accuracy of pulse oximeter readings, especially person’s skin pigmentation. In light of this particular concern, FDA engaged interested parties, and partnered with the University of California San Francisco, as part of the Centers of Excellence in Regulatory Science and Innovation (“CERSI”) program, to conduct a study comparing pulse oximeter errors in clinical patients with varying skin tones. Based on results from this study, as well as input from interested stakeholders, FDA has created enhanced recommendations for marketing submissions to ensure that pulse oximeters used as standalone medical devices, or as part of a multi-parameter medical device, accurately fulfill their intended use. This comprehensive list of marketing submission recommendations is laid out in the new PO Draft Guidance and includes enhanced clinical performance testing procedures that specifically account for disparities in performance across different populations, such as diverse skin tones and pediatric populations.
FDA is showing that it is concerned not only with whether the device performs its intended function accurately, but whether that performance is consistent across all patient populations. Significantly, FDA is exhibiting concern regarding the diversity of patient populations across this country, urging manufacturers to ensure accuracy for all.
B. Takeaways
This new PO Draft Guidance underscores FDA’s continuing commitment to ensuring that regulated products are safe and effective for all individuals – not only those majority populations who have typically been the subject of clinical testing and validation. It is incumbent on manufacturers, FDA, and providers to ensure that medical devices perform properly for each and every person, irrespective of differences in identifying characteristics. And where a certain product has not been tested on and/or cannot be confirmed safe and effective for a certain population, FDA is clear that this limitation needs to be made known to prescribers and end users by limiting the product’s intended use and associated labeling. Bottom line – we can’t have patients relying on products that do not operate safely and/or specifically for them and others like them.
Conclusion
The common thread among these device-specific Draft Guidances is an emphasis on early collaboration with FDA to get ahead of certain identified issues that pose public health threats—an infectious disease emergency, an unmanageable and/or unsecure AI algorithm, or a test result that was not clinically verified for a certain patient’s skin tone. Now, we have heard this refrain before, especially on the drug side of the house—we often roll our eyes when we see it, given that the Agency holds the ultimate power in just about any facet of inquiry, decision-making, and enforcement. But given the blistering speed with which these technologies have been and will continue to develop, FDA’s entreaties here might mean something more.
Indeed, despite the myriad of other critical issues that FDA needs to address, it is clear that CDRH policymakers did not intend for devices to fall by the wayside as this administrations changed guard. Whatever happens over the coming months, all eyes in our industry will be on FDA policy—in guidance, enforcement, or otherwise.
FOOTNOTES
[1] IVD Draft Guidance available here: Validation of Certain In Vitro Diagnostic Devices for Emerging Pathogens During a Section 564 Declared Emergency | FDA
[2] FD&C Act Section 564 available here: 21 U.S.C. 360bbb-3.
[3] AI Draft Guidance available here: Artificial Intelligence-Enabled Device Software Functions: Lifecycle Management and Marketing Submission Recommendations | FDA
[4] See December 2024 guidance available here: Marketing Submission Recommendations for a Predetermined Change Control Plan for Artificial Intelligence-Enabled Device Software Functions | FDA; January 2025 draft guidance available here: Considerations for the Use of Artificial Intelligence To Support Regulatory Decision-Making for Drug and Biological Products | FDA
[5] 2025 A-List available here: CDRH Proposed Guidances for Fiscal Year 2025 (FY2025) | FDA
[6] 2023 Guidance available here: Cybersecurity in Medical Devices: Quality System Considerations and Content of Premarket Submissions | FDA
[7] PO Draft Guidance available here: Pulse Oximeters for Medical Purposes – Non-Clinical and Clinical Performance Testing, Labeling, and Premarket Submission Recommendations | FDA
[8] 2013 Guidance available here: Pulse Oximeters – Premarket Notification Submissions [510(k)s]: Guidance for Industry and Food and Drug Administration Staff | FDA
[9] See, e.g., Pulse Oximeter Accuracy and Limitations: FDA Safety Communication, FDA (Feb. 19, 2021).; Multistate Letter Urging FDA to Address Concerns about Dangerous Pulse Oximeter Inaccuracies Impacting Communities of Color, Cal. Atty. Gen. (Nov. 1, 2023).
Healthcare Preview for the Week of: January 27, 2025 [Podcast]
RFK Nomination Hearing Week
Robert F. Kennedy Jr. (RFK), nominated for Secretary of Health and Human Services (HHS), has a busy week with two Senate nomination hearings. He will testify in front of the Senate Finance Committee on Wednesday and the Senate Health, Education, Labor, and Pensions (HELP) Committee on Thursday. Both hearings are likely to be highly charged. Some Republican senators, including Senate HELP Chair Cassidy (R-LA), have raised questions about RFK’s previous positions and may raise those questions to him directly during the hearings. With back-to-back hearings, members who sit on both committees (Sens. Cassidy (R-LA), Crapo (R-ID), Scott (R-SC), Blackburn (R-TN), Marshall (R-KS), Hassan (D-NH), and Sanders (I-VT)) have an opportunity to ask follow-up questions the next day.
Only the Senate Finance Committee will vote on RFK’s nomination, before it heads to the full Senate floor. RFK can only lose three Republicans and still be confirmed. On Friday, Secretary of Defense Pete Hegseth was confirmed by a vote of 51 – 50, with Vice President JD Vance breaking the tie. Sen. McConnell (R-KY) surprised some by joining moderate Sens. Collins (R-ME) and Murkowski (R-AK) to vote against Hegseth’s nomination.
While the House is out of session, eyes are on House Republicans who are convening in Miami, Florida, to discuss their plans on reconciliation. They aim to refine which policies to include in their budget reconciliation. Healthcare policies, such as 340B reform, Medicaid per capita caps, and a Medicare site neutral policy, are eyed as savers to fund Republican priorities of tax cuts and immigration policies. Read our latest +Insight for more on this topic.
On the administrative front, late Friday evening, President Trump took much-anticipated actions on abortion, including:
Issuing an executive order (EO) that revoked two Biden-era reproductive health executive orders. The EO directs the Office of Management and Budget to issue guidance ensuring agencies comply with the Hyde Amendment, which is passed by Congress annually and prohibits federal funding for abortion.
Issuing a memorandum to HHS and the US Department of State that reinstates the Mexico City Policy. This policy prohibits foreign organizations that receive US federal funding from providing or promoting abortions. The policy has consistently been revoked by democratic presidents and reinstated by republican presidents.
Today’s Podcast
In this week’s Healthcare Preview, Debbie Curtis and Rodney Whitlock join Maddie News to discuss the nomination hearing process and what could be in store for Robert F. Kennedy Jr.’s HHS Secretary hearings this week.
In Confirmation Hearings, AG Nominee Pledges to Defend the Constitutionality of the False Claims Act
What may have seemed like an out-of-the-blue question to the casual observer was no surprise to those who represent individuals and entities in the health care and life sciences industries: U.S. Attorney General (AG) nominee Pam Bondi was asked to share her thoughts on the constitutionality of the False Claims Act (FCA) and its qui tam provisions during her January 15, 2025, confirmation hearings.
Senator Chuck Grassley (R-IA) prefaced his questioning by noting that the FCA is “central to fighting government waste and fraud.” And since 1986—when Grassley authored amendments that modernized and strengthened the Civil War-era statute—he has been a fierce defender. Since the 1986 amendments, the FCA has brought in $78 billion for the federal government, with more than $2.9 billion recovered in fiscal year (FY) 2024.
“Most of that is due to patriotic whistleblowers who found the fraud and brought the cases forward at their own risk,” Grassley said.
The U.S. Supreme Court, the senator said, “has long upheld the law’s constitutionality.” Yet Justice Clarence Thomas, in a 2023 dissent,[1] wrote that “[t]he FCA’s qui tam provisions have long inhabited something of a ‘constitutional twilight zone,’” and posited that Article II of the Constitution does not permit Congress to “authorize a private relator to wield executive authority to represent the United States’ interests in civil litigation.” Subsequently, on September 30, 2024, a Middle District of Florida District Judge followed suit and declared the provisions unconstitutional.[2] Former AG William Barr, Grassley noted, once objected to the FCA’s whistleblower provisions—and then retracted that objection in confirmation hearings held six years earlier, to the day.
So, what is Bondi’s position on the constitutionality of the FCA’s qui tam provisions?
“I would defend the constitutionality, of course, of the False Claims Act,” the nominee said.
“If confirmed, would you commit to continuing [the Department of Justice’s (DOJ’s)] defense of the constitutionality of it—and will you ensure the entire staff and funding levels, to properly support and prosecute False Claims cases?” Grassley asked.
“Senator, the False Claims Act is so important and especially by what you said, with whistleblowers, as well, and the protection, and the money it brings back to our country. Yes, sir,” Bondi answered.
As we noted in our blog post analyzing the DOJ’s FY 2024 FCA statistics, also released on January 15, last year whistleblowers filed the highest number of qui tam actions in history—979—with the government and whistleblowers, combined, being parties to 588 settlements and judgments. FCA settlements and judgments topped $2.9 billion in FY 2024, with relator share awards totaling nearly $404 million.
The Middle District of Florida’s Dismissal with Prejudice
The U.S. Court of Appeals for the Eleventh Circuit has yet to weigh in on the matter after U.S. District Court Judge Kathryn Kimball Mizelle dismissed an FCA case brought by a qui tam relator based on her ruling that the qui tam provisions are unconstitutional.
Judge Mizelle, who was appointed to the federal bench by President Trump in his first term, dismissed the suit brought by Clarissa Zafirov, a physician who sued her former employer and others in an otherwise ordinary FCA case for allegedly misrepresenting patients’ medical claims to Medicare using false diagnosis codes to obtain inflated reimbursements.
“Zafirov has determined which defendants to sue, which theories to raise, which motions to file, and which evidence to obtain….Yet no one—not the President, not a department head, and not a court of law—appointed Zafirov to the office of relator,” Judge Mizelle wrote on September 30, 2024. “Instead, relying on an idiosyncratic provision of the False Claims Act, Zafirov appointed herself. This she may not do.”
The plaintiffs appealed to the Eleventh Circuit. Senator Grassley’s office filed an amicus brief on January 15, 2025, “strongly urging the Eleventh Circuit to reverse the lower court’s flawed decision and uphold the constitutionally sound qui tam provision.”
Specifically, Grassley’s 33-page brief rests on three tenets:
Qui tam statutes are deeply rooted in history: Indeed, qui tam provisions were enacted during the First Congress by the framers of the Constitution and are deeply embedded in the United States’ constitutional history.
Courts consistently find the FCA constitutional: Courts that have addressed this issue have uniformly concluded that the qui tam provision is constitutional.
The FCA is an effective (and cost-effective) leveraging of private knowledge and resources: The FCA, strengthened by the qui tam provision, is an effective tool to fight fraud, deter would-be fraudsters, and protect the public from harm.
“And the FCA is a resounding success, as Congress and the Executive Branch have both acknowledged,” Grassley wrote, noting that in health care—the largest area of FCA enforcement—qui tam whistleblowers have prevented harm and have uncovered fraud of which the government might not have been aware. “Additionally, an incalculable but astronomical amount of taxpayer money is saved via the deterrent effect of the whistleblower provisions.”
The United States filed a 77-page opening brief on January 6, 2025, and requested oral argument in the case, noting the importance of the issue. The district court’s decision, the government argued, conflicts with the prior opinions of four U.S. Courts of Appeals, as well as every other court to have considered the question. While the issue applies to cases where the government has not intervened, the government intervened in Zafirov for the limited purpose of defending the qui tam provisions. Specifically, the United States argued that:
Supreme Court precedent is clear that the qui tam provisions comport with Article II (e., relators do not exercise executive power);
the district court erred in applying the Appointments Clause to private citizens (e., relators do not exercise significant government authority and do not occupy a continuing position established by law); and
the district court erred in assessing and dismissing historical evidence bolstering the constitutionality of the FCA’s qui tam provisions, including early qui tam statutes comparable to the FCA.
What This Means for Health Care Enforcement
What might this mean for health care fraud enforcement, as we enter President Trump’s second term? As we noted in our recent blog post on the DOJ’s FCA recovery statistics, the fact that the first Trump administration saw nearly 370 more health care cases brought by relators than during the Biden administration, and the highest number of health care-related FCA cases brought by the DOJ in a single year—combined with Bondi’s support of the constitutionality of the statute—indicates the DOJ’s continued interest in pursuing FCA cases. Focusing on the health care sector continues to generate more FCA enforcement and recovery than any other industry, a trend likely to continue even if we may not yet know if Bondi’s leadership will ultimately prove more favorable to business interests. Stay tuned for more to come once the Eleventh Circuit issues its highly anticipated decision on the constitutionality of the FCA’s qui tam provisions.
Epstein Becker Green Attorney Ann W. Parks contributed to the preparation of this post.
ENDNOTES
[1] See U.S. ex rel. Polansky v. Executive Health Resources, 599 U.S. 419 (2023). In addition to Justice Thomas’ dissent, Justices Kavanaugh and Barrett in a concurrence acknowledged that “[t]here are substantial arguments that the qui tam device is inconsistent with Article II” and suggested that the Court consider those arguments in an “appropriate case.”
[2] See U.S. ex rel. Zafirov v. Florida Medical Associates LLC, 2024 WL 434942 (D. Fla. Sept. 30, 2024).
DOJ Announces Modest Increase in FCA Recoveries, Fueled Largely by Whistleblower Lawsuits
The Department of Justice (“DOJ”) recently announced a modest increase in monetary recoveries for 2024 from investigations and lawsuits under the False Claims Act (“FCA”), which is the Government’s primary tool for combating fraud, waste, and abuse. In fiscal year 2024, the DOJ recovered over $2.9 billion from FCA settlements and judgments, marking a 5% increase over 2023’s total and the highest amount in three years. Recoveries were fueled largely by qui tam lawsuits previously filed by whistleblowers, which contributed to $2.4 billion of the $2.9 billion recovered. The number of qui tams filed last year was also the highest ever in a single year at 979 cases. While health care fraud continues to be the primary source of enforcement activity, the rise in lawsuits stemmed from non-health care related cases. This underscores the Government’s and private citizens’ intensified enforcement efforts through FCA investigations and litigation in both the health care sector and beyond.
FCA Recoveries by the Numbers
While the nearly $3 billion recovered last year resulted from a record-breaking number of 566 settlements and judgments, last year’s haul remains well below peak year recoveries, such as 2014’s $6.2 billion and 2021’s $5.7 billion. The following chart illustrates the FCA recoveries by fiscal year, showcasing monetary trends over the past decade.
Key Enforcement Areas
In announcing 2024’s recoveries, the Government highlighted several key enforcement areas, such as:
The opioid epidemic. The Government continues to pursue health care industry participants that allegedly contributed to the opioid crisis, focusing primarily on schemes to market opioids and schemes to prescribe or dispense medically unnecessary or illegitimate opioid prescriptions.
Medicare Advantage Program (Medicare Part C). As the Medicare Advantage Program is the largest component of Medicare in terms of reimbursement and beneficiaries impacted, the Government stressed this remains a critical area of importance for FCA enforcement.
COVID-19 related fraud. Given the historic levels of government funding provided as a result of the COVID-19 pandemic, the Government also continues to pursue cases involving improper payment under the Paycheck Protection Program as well as false claims for COVID-19 testing and treatment. Close to half of 2024’s settlements and judgments resolved allegations related to COVID-19.
Anti-Kickback Statute and Stark Law violations. Cases premised on alleged violations of the AKS and Stark Law remain a driving force in FCA litigation for health care providers. In the last several years, there seems to be renewed interest in Stark Law enforcement, in particular.
Medically unnecessary services. The provision of medically unnecessary health care services also remains a widely-used theory of FCA liability, despite this being a historically challenging enforcement area often involving disputes over subjective clinical decisions.
EPA and OSHA Renew Cooperation With Memorandum of Understanding on Toxic Substances Control Act
The Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) have long cooperated with each other and have renewed their commitment to cooperation in a December 2024 memorandum of understanding (MOU) focused on the Toxic Substances Control Act (TSCA).
The EPA routinely recommends new chemicals be subject to TSCA review to determine whether a chemical or significant new use presents unreasonable risk of injury to health or the environment, without consideration of cost or other non-risk factors. The MOU was one of the last acts of the Biden administration’s assistant secretary of labor for workplace safety and health, Douglas Parker.
Quick Hits
A December 2024 memorandum of understanding (MOU) between OSHA and the EPA emphasizes sharing information on inspections, complaints, and potential violations related to Section 6 of the Toxic Substances Control Act (TSCA)
OSHA will encourage states with OSHA-approved state plans to participate in information-sharing activities under the MOU.
In decades’ old agreements, EPA and OSHA have outlined various alliances and agreements to work with each other in their respective inspection and enforcement activities. When personnel associated with the EPA observe workplace health and safety concerns, they are authorized under those agreements to make referrals to OSHA. When OSHA personnel identify potential environmental issues, they are authorized to make referrals to the EPA. OSHA’s process safety management (PSM) rules are the workplace health and safety corollary to EPA’s risk management program rules, both of which relate to processes involving “highly hazardous substances.”
In an MOU from 2021, the EPA and OSHA entered into an agreement related to TSCA, that resulted in:
establishing designated staff and management points of contact from each agency to discuss and resolve workplace exposure issues related to EPA’s review of new chemicals;
providing OSHA with regular updates on EPA’s new chemical determinations, including any necessary worker protection identified during EPA’s review; and
documenting EPA’s role in identifying and notifying OSHA of the need for formal consultation on EPA’s review of new chemicals.
It bears noting that the term “new chemicals” does not mean newly developed chemicals, but instead chemicals that are not on the TSCA inventory. In 2024, EPA issued draft and final risk assessments related to formaldehyde, 1,1 dichloroethane, and 1,3 butadiene. Five commonly used chemicals, acetaldehyde, acrylonitrile, benzenamine, vinyl chloride, and 4,4’-methylene bis(2-chloroaniline) (MBOCA), were designated as high-priority substances, which prioritizes the risk assessment of those chemicals. A change to the TSCA rules also resulted in all new per and polyfluoroalkyl substances (PFAS) being subject to a full safety review process under TSCA.
The 2024 MOU built on the 2021 MOU, but focused on the sharing of information and data concerning each agency’s focus areas for inspections, complaints, potential violations, and EPA’s planned enforcement pertaining to TSCA’s section 6 rulemaking and enforcement. While the MOU portends potential changes in substances that might fall under OSHA’s control, such as the list of highly hazardous chemicals related to PSM, it is not clear that OSHA will act to make any changes related to TSCA determinations.
The two agencies agreed to share information on complaints, inspections, potential violations, and EPA’s planned enforcement, as appropriate, related to TSCA section 6 activities in workplaces where areas of mutual interest exist. Each organization will exercise its independent jurisdiction to enforce applicable regulations and laws. EPA and OSHA agreed to mutually refer potential violations under TSCA section 6 and OSHA standards in workplaces within their respective jurisdictions, and, for cases of joint interest, take other cooperative steps to share information on such potential violations.
Regarding coordination with states with OSHA-approved state plans:
OSHA intends to share this MOU with state plans and encourage state plans to refer applicable potential violations to EPA.
OSHA intends to encourage states with OSHA-approved state plans to participate in all information-sharing activities established under this MOU.
Wearable Technologies in the Workplace May Implicate Nondiscrimination Laws
The U.S. Equal Employment Opportunity Commission (EEOC) recently released a fact sheet that explains why employers need to be careful in using wearable technologies so they do not violate federal nondiscrimination laws.
Companies in the warehousing, package delivery, construction, manufacturing, and healthcare industries are most likely to rely on wearable technologies and be impacted by federal enforcement of nondiscrimination laws.
Quick Hits
An increasing number of employers are requiring workers to use wearables to track their movements and location for safety and productivity purposes.
A new fact sheet from the EEOC describes how the use of wearables in the workplace could violate federal nondiscrimination laws.
When relying on wearables, employers may need to make reasonable accommodations for workers with disabilities.
On December 19, 2024, the EEOC published “Wearables in the Workplace: Using Wearable Technologies Under Federal Employment Discrimination Laws” to help employers prevent legal challenges related to using wearables.
The EEOC fact sheet defines wearables as “digital devices embedded with sensors and worn on the body that may keep track of bodily movements, collect biometric information, and/or track location.” Wearables include GPS trackers, smart watches, smart rings, smart glasses, smart helmets, and proximity sensors. They may monitor eye movements, blood pressure, heart rate, body temperature, or physical location.
Collecting Medical Information
The fact sheet advises that using wearables to collect information about an employee’s physical or mental condition, or to conduct diagnostic testing, could constitute “medical examinations” under the Americans with Disabilities Act (ADA).
The fact sheet also advises that requiring workers to provide medical information in connection with using wearables could constitute “disability-related inquiries” under the ADA. The EEOC reminds employers that the ADA bars disability-related inquiries unless they are job-related and consistent with business necessity.
If an employer collects medical or disability-related data from wearable devices, the ADA requires the employer to store that data in separate medical files and treat it as confidential medical information.
The EEOC confirmed that an employer may violate federal nondiscrimination laws if it uses information collected from wearables to make decisions that have an adverse impact on protected classes. The EEOC’s examples include using wearables’ information to determine that an employee is pregnant and treat her differently because of the pregnancy, or to fire an employee with an elevated heartbeat that a heart condition causes.
Reasonable Accommodation Issues
The EEOC advised that employers may have to provide employees with the reasonable accommodation of excusing them from utilizing wearable devices. The EEOC posited that an employer might have to excuse workers whose religion prevented them from wearing the device, or make a reasonable accommodation based on pregnancy and/or disability.
Next Steps
Employers that rely on, or are considering using, wearable technologies may wish to review their policies and practices to ensure they comply with federal nondiscrimination laws, particularly the ADA’s requirement that collecting medical information and making disability-related inquiries must be job-related and consistent with business necessity.
Employers that use data from wearables in their employment-related decision-making may wish to examine whether their use adversely impacts individuals in protected groups.
Update: California State Assembly Passes AB 3129 Requiring State Approval of Private Equity Healthcare Deals
California’s AB 3129, which would require private equity firms and hedge funds to obtain prior approval to consummate certain healthcare-related transactions, is now one step closer to becoming law following the State Assembly’s May 22, 2024 passage of the pending legislation. The legislation is now being considered by the California State Senate, where approval must be obtained prior to the end of the legislative session in August if it is to be enacted into law this year.
As previewed in our prior blog post, if enacted, AB 3129 would require private equity firms and hedge funds to file an application with the state Attorney General at least 90 days in advance of a transaction involving the acquisition or change of control of healthcare facilities and provider groups and in most cases, await approval to close the transaction. Furthermore, the bill would place significant restrictions on the ability of private equity and other investors to implement “friendly PC-MSO” and similar arrangements, which are widely used today by stakeholders as an investment structure to avoid violating California’s prohibition on the corporate practice of medicine.
While the bill has not yet been enacted into law, the State Assembly’s passage of the bill does represent positive momentum for proponents of the legislation, and stakeholders should be aware of the legislation’s broad implications on the structuring and consummation of healthcare-related transactions in the state.