CMMI Unveils New Strategic Direction: Preventive Care, Patient Empowerment, and Competition
The Center for Medicare and Medicaid Innovation (CMMI) recently announced a new strategic direction during a public webinar and accompanying white paper, outlining its evolving priorities under the current administration. During the May 13, 2025 webinar, Abe Sutton, Director of CMMI and Deputy Administrator for the Centers for Medicare & Medicaid Services (CMS), emphasized CMMI’s continued mission to improve the U.S. health care system and to build on its 15 years of testing alternative payment models. As described in more detail below, however, CMMI’s new strategic direction reflects a shift in focus from CMMI’s approach under the Biden administration even while certain longstanding goals remain the same.
CMMI Under the Trump Administration: Prevention, Patient Empowerment, and Competition
CMMI’s new strategy emphasizes evidence-based prevention, personal agency, and market competition as central pillars to improving health outcomes and reducing costs. This three-pillar approach is structured around the following strategies:
Promote Evidence-Based Prevention. While CMMI has arguably been focused on preventive care for some time (e.g., the PC Flex Model, which focused on incentivizing primary care and preventive services), in his comments Sutton highlighted a renewed emphasis on prevention to avoid disease occurrence, promote early disease detection, and manage chronic diseases. Specifically, CMMI will include preventive care measures in all of its models, which may include working with community-based organizations to assist with nutrition and lifestyle counseling or offering access to evidence-based alternative medicine. Other examples offered by CMMI include (i) waivers for accountable care entities to assume global risk to provide durable medical equipment (DME) if the DME supports patients’ ability to transition or remain in their homes, (ii) reduced cost-sharing for preventive services, and (iii) payments to caregivers to support individuals with cognitive decline.
Empower People to Achieve Their Health Goals. Under CMMI’s new strategy, CMMI will aim to give individuals more control over their health care decisions by increasing access to usable data aimed at supporting individuals’ understanding of their health status. For example, CMMI may use models to test how mobile device applications, shared decision-making tools, and health education materials empower people to manage their chronic conditions and improve their health. CMMI may also explore opportunities to support individuals’ decision-making by publishing data about providers and services, including costs and quality performance. Lastly, CMMI indicates that it is considering waivers to support predictable cost-sharing for certain health care items, specifically prescription drugs or medical devices.
Drive Choice and Competition. The third strategic pillar focuses on supporting a competitive health care marketplace where providers are incentivized to deliver high-quality, cost-effective care. CMMI discusses designing models intended to incentivize participation by independent physician practices and providers that are not part of a larger health system or owned by a health plan. It is worth noting that CMMI has endeavored to incentivize these types of entities’ participation in value-based care for several years as demonstrated by its ACO REACH and PC Flex Models, both of which included incentives for smaller organizations that had not previously participated in a CMMI model. The new CMMI strategy also addresses potential changes to Medicare Advantage models, which, for example, could include requirements for site-neutral payments across care settings to incentivize the use of outpatient and community-based care.
CMMI’s white paper also states that these strategic pillars are underpinned by a foundational commitment to protecting federal taxpayer dollars. Under its new approach, CMMI states that it will focus on models that are fiscally responsible and scalable, aligning with its statutory mandate to reduce program expenditures while preserving or enhancing quality of care.
CMMI Under the Biden Administration: Emphasizing Health Equity and Aligning with Stakeholders to Achieve System Transformation
While there are similarities between CMMI’s new strategic approach and CMMI’s previous strategic approach, introduced in 2021, they differ in focus and implementation. The previous strategic approach emphasized health equity, multi-payer alignment, and person-centered care as opposed to an emphasis on market-based competition and patient choice. The prior strategic direction was around five key objectives:
Drive Accountable Care. CMMI aimed to expand the number of beneficiaries in care relationships accountable for quality and total cost, aiming for universal Medicare fee-for-service participation by 2030. The new strategic direction appears to reiterate that goal by stating that new model designs could require a growing proportion of beneficiaries in global downside risk arrangements.
Advance Health Equity. Previously, CMMI endeavored to integrate equity into every model by collecting demographic data, addressing social determinants of health, and ensuring underserved populations were represented. This objective is notably absent from the new strategic direction, which instead focuses on patient empowerment.
Support Care Innovations. One of CMMI’s previous objectives was to use data, technology, and payment flexibilities to enable integrated, person-centered care, including behavioral health and home-based services. While the new CMMI strategy also focuses on using data and technology to improve health care, the focus is on empowering patients with more data to help them take control of their health care.
Improve Access by Addressing Affordability. Under its prior strategic direction, CMMI emphasized reducing health care prices, particularly with respect to drug prices, and using models that waive cost-sharing. CMMI’s new strategic direction echoes these goals. One distinction, however, is that the prior strategy included a goal of setting targets to reduce the percentage of Medicare beneficiaries who forgo care due to cost – a goal that is not specifically mentioned in the new strategic direction.
Partner to Achieve System Transformation. Previously, CMMI had a goal to align priorities across CMS and engage stakeholders, including payers, purchasers, states, patient advocates, and patients, to improve quality, outcomes, and reduce costs, targeting multi-payer alignment in all new models by 2030. In contrast, the new CMMI direction calls for increasing financial risk for providers and discontinuing models that fail to meet cost-saving criteria.
Looking Ahead
These contrasting strategies illustrate the impact of administrative philosophies on health care policy and the direction of innovation within Medicare and Medicaid services. As CMMI continues to develop and then implements its updated strategy, stakeholders can expect a sustained emphasis on value-based care, with evolving priorities that reflect the current administration’s policy framework. The coming years will likely bring new models and initiatives aimed at improving outcomes, enhancing patient engagement, and ensuring fiscal responsibility in Medicare and Medicaid services.
Workplace Strategies Watercooler 2025: Mental Health Matters—Managing Issues at Work [Podcast]
In this installment of our Workplace Strategies Watercooler 2025 podcast series, John Stretton (shareholder, Stamford) and Maria Greco Danaher (shareholder, Pittsburgh) discuss mental well-being and mental health issues in the workplace. Maria and John highlight the challenges employers face when dealing with employees who have mental health conditions, and explore common issues, such as anxiety, depression, addictive behaviors, introversion, and discrimination concerns. The speakers provide tips on how to recognize, discuss, and manage anxiety among employees. They also share effective practices for promoting a professional and emotionally supportive work environment while properly handling accommodation requests under the Americans with Disabilities Act and addressing potential legal concerns.
CMS to Immediately Begin Auditing Medicare Advantage Plans in Significant Expansion of Enforcement Efforts
On May 21, 2025, the Centers for Medicare and Medicaid Services (“CMS”) announced a significant expansion of its auditing efforts with respect to Medicare Advantage (“MA”) plans.
For newly initiated audits of MA plans, CMS will audit all eligible MA contracts for each payment year. Additionally, for audits already initiated, CMS will expedite the completion of audits for payment years (“PYs”) 2018 through 2024. While the Trump Administration has expressed frustration at the fact that CMS is currently several years behind in completing these audits, CMS has vowed to shore-up its backlog and complete all audits for PY 2018 to PY 2024 by early 2026.
CMS verifies the accuracy of risk-adjusted payments to MA plans by conducting Risk Adjustment Data Validation (“RADV”) audits, which seek to ensure that any diagnoses submitted by health plans are supported by the patient’s medical records. If such diagnoses are unsupported, CMS may seek recoupment of funds paid to those MA health plans based on the unsupported risk adjusted diagnoses.
CMS has outlined a two-pronged approach in accelerating RADV audits. First, it will use enhanced technology to efficiently review medical records and flag unsupported diagnoses—allowing CMS to drastically increase the number of audits conducted each year. Currently, CMS audits between 50 and 60 health plans per year—CMS expects that such enhanced technology will enable them to enable all 550 active MA health plans each year. Additionally, CMS will increase its auditing sample of each MA health plan from 35 records per health plan per year to 200. Second, CMS will substantially increase the number of medical coders employed to manually verify flagged diagnoses—increasing audit efficiency. CMS notes that it plans to increase its team of medical coders from 40 to approximately 2,000 by September 1, 2025.
CMS’s continued and now-heightened and aggressive focus on RADV audits comes as part of the Trump Administration’s intensified efforts to combat waste, fraud and abuse in health care. It is important to note that while CMS may recover overpayments made to MA health plans based on unsupported diagnosis codes, the MA health plans may then seek to recover those amounts from downstream providers. Depending on their contract with the MA health plan, such downstream providers may be scrutinized for causing the MA health plan to submit an unsupported diagnosis code to CMS. Such aggressive enforcement measures from the Trump Administration signals to the industry that it should ensure that the auditing and monitoring component of its compliance program is proactive and not just reactive.
CMS’s most recent final rule on RADV audits, which updated RADV audit methodology with the aim of improving MA program integrity and payment accuracy, became effective on April 3, 2023.
Beltway Buzz, May 23, 2025
The Beltway Buzz™ is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
SCOTUS: Wilcox to Remain Off NLRB. On May 22, 2025, the Supreme Court of the United States issued a decision blocking NLRB Board Member Gwynne Wilcox’s reinstatement to the NLRB while her challenge makes its way through the courts. The stay will remain effective through the appeals stage and until the Supreme Court declines to review the case or issues a decision on the merits.
House Passes Massive Tax Passage. Lawmakers in the U.S. House of Representatives this week passed a far-reaching tax and spending package by a narrow 215–214 vote. The bill would extend provisions of the 2017 Tax Cuts and Jobs Act, provide additional funding for national security and immigration enforcement, roll back green energy tax incentives, and add Medicaid work requirements. On the labor and employment policy front, the bill includes provisions to allow deductions for income earned as tips or overtime pay. Now it is the U.S. Senate’s turn, where some Republicans have expressed some skepticism about the bill, so any final legislation that the U.S. Congress may pass will likely be different than what the House passed this week.
Senate Says “Yes” to “No Tax on Tips.” In a surprise move, the U.S. Senate this week passed the No Tax on Tips Act (S.129). Democratic Senator Jacky Rosen (NV), a cosponsor of the bill, asked that the bill be passed via the Senate’s unanimous consent mechanism, and no one objected. Passage of a bill this significant in this manner is unusual. Here are the details:
The bill would allow individuals a 100 percent tax deduction on income from qualified tips, up to $25,000.
Individuals claiming the tip deduction must be employed “in an occupation which traditionally and customarily received tips,” as set forth in a pending list to be published by the secretary of the treasury.
The deduction is available to individuals earning $160,000 or less in 2025, with this amount being adjusted for inflation going forward.
Language in the Senate-passed No Tax on Tips Act is similar in concept to the provisions included in the tax package described above. However, there are some significant differences in the details. It is unclear at this time how this will be resolved, but some form of “no tax on tips” has a very good chance of being enacted in this Congress.
2024 EEO-1 Data Collection Opens, With Warning From Acting Chair. The U.S. Equal Employment Opportunity Commission’s (EEOC) 2024 EEO-1 Component 1 data collection opened this week (May 20, 2025) with covered employers having until June 24, 2025, to file. In a statement accompanying the announcement of the opening of the data collection, EEOC Acting Chair Andrea Lucas wrote, “Your company or organization may not use information about your employees’ race/ethnicity or sex—including demographic data you collect and report in EEO-1 Component 1 reports—to facilitate unlawful employment discrimination based on race, sex, or other protected characteristics in violation of Title VII.
House Committee Examines “Modern Workers.” On May 20, 2025, the House Committee on Education and the Workforce’s Subcommittee on Workforce Protections held a hearing entitled “Empowering the Modern Worker.” The hearing focused on the benefits of worker flexibility, practical problems associated with the “ABC” worker classification test (as embodied in California’s A.B. 5), and the value of portable benefits, as set forth in the Modern Worker Empowerment Act (H.R. 1319). The hearing follows on the heels of a March 25, 2025, hearing about the application of the Fair Labor Standards Act to the modern workplace.
DOL, MSHRC Nominees on the Move. On May 22, 2025, the Senate Health, Education, Labor, and Pensions (HELP) Committee advanced the following nominations en bloc by a party-line vote of 12–11:
Julie Hocker to serve as assistant secretary of labor and head the U.S. Department of Labor’s (DOL) Office of Disability Employment Policy
Marco Rajkovich to serve as a commissioner of the Mine Safety and Health Review Commission (MSHRC)
Wayne Palmer to serve as assistant secretary of labor for mine safety and health, leading the DOL’s Mine Safety and Health Administration
Henry Mack III to serve as assistant secretary of labor, leading the DOL’s Employment and Training Administration
The nominations now move to the Senate floor.
NLRB Acting GC Issues New Guidance on Settlement Agreements. On May 16, 2025, National Labor Relations Board (NLRB) Acting General Counsel William B. Cowen issued a memorandum entitled, “Seeking Remedial Relief in Settlement Agreements.” The memorandum follows on Cowen’s rescission of various memoranda issued by his predecessor that instructed NLRB regional offices to expand the scope of remedies in settlement agreements (e.g., reimbursement of car loan payments, letters of apology, etc.). Cowen’s latest memo provides regional directors with more discretion in approving settlement agreements, and it reminds them that they should seek make-whole relief in settlement agreements, but “should be mindful of not allowing our remedial enthusiasm to distract us from achieving a prompt and fair resolution of disputed matters.”
SCOTUS Permits Cancelation of Venezuela TPS. In an 8–1 order issued this week, the Supreme Court stayed a March 31, 2025, decision by a federal court to preliminarily block the U.S. Department of Homeland Security’s (DHS) January 28, 2025, notice of termination of the 2021 and 2023 Temporary Protected Status (TPS) designations for Venezuela. While both the Supreme Court’s order and U.S. Citizenship and Immigration Services’ (USCIS) TPS website are unclear as to the ruling’s impact on stakeholders, it appears that applicable dates for termination of the 2023 TPS designation reverts to April 7, 2025, while the 2021 TPS designation will remain in effect until September 10, 2025. Because the Supreme Court’s decision only concerns the lower court’s grant of a preliminary injunction, the underlying legal challenge to the TPS termination decision will continue.
Administration Pauses Enforcement of Mental Health Parity Regs. Last week, at the request of the U.S. Departments of Health and Human Services, Labor, and the Treasury, the U.S. District Court for the District of Columbia stayed a lawsuit challenging 2024 changes to regulations implementing provisions of the Mental Health Parity and Addiction Equity Act (MHPAEA). As a result, the departments issued a statement noting that they will not enforce the 2024 regulatory changes and will “reconsider the 2024 Final Rule, including whether to issue a notice of proposed rulemaking rescinding or modifying the regulation through notice and comment rulemaking.”
Memorial Day. This weekend, the Buzz will take time to remember the brave men and women who died in service to our country. We wrote about the cultural and legislative origins of Memorial Day several years ago.
Multistate Compliance Roundup: State Laws Will Take Effect July 1, 2025
A number of employment-related laws recently passed in various states that impact the workplace will take effect on July 1, 2025.
Quick Hits
New state laws will impact minimum wage, leaves of absence, restrictive covenants, child labor, and other workplace issues.
These laws will take effect on July 1, 2025.
Here is a roundup briefly summarizing the new state laws:
Alaska Ballot Measure 1 increases the minimum wage to $13.00 per hour, establishes paid sick leave, and prohibits employers from holding mandatory meetings to share political or religious opinions. Employers will be required to provide one hour of paid sick leave per thirty hours worked.
In California, Los Angeles County passed a Fair Workweek Ordinance, which includes predictive scheduling provisions. It requires employers to provide advance notice of schedule changes, premium pay for schedule changes, and rest time between shifts. It applies to retail businesses that have at least 300 employees worldwide. In addition, California’s minimum wage will increase to $17.81 per hour.
Indiana Senate Bill 409 requires employers to give workers time off to attend a school attendance conference or case conference meeting for their child. The time off can be unpaid.
Kansas Senate Bill (SB) 241 clarifies that certain nonsolicitation agreements with business owners and employees are presumptively enforceable and not a restraint on trade.
In New Hampshire, employers with six or more employees will be required to provide nursing mothers with a reasonable break time and a private, non-bathroom space to express milk for up to one year after their child’s birth. The law mandates an unpaid break of approximately thirty minutes for every three hours of work.
Oregon will increase its minimum wage to $15.05 per hour.
In Vermont, H. 704 requires employers with five or more employees to include wage ranges in job advertisements. Another law, H. 259, requires hospitals to develop and implement a security plan for preventing workplace violence and establish a workplace violence incident reporting system.
In Virginia, employers will be prohibited from entering into a noncompete agreement with any employee who earns less than $76,081 annually or is entitled to overtime compensation under the federal Fair Labor Standards Act.
Washington, D.C., will raise its minimum wage to $18.00 per hour. The minimum wage for tipped employees will increase to $12.00 per hour.
Washington State’s paid sick leave law will be expanded to include time off for immigration-related proceedings, starting on July 27, 2025.
In West Virginia, Senate Bill 427 eliminates the requirement that fourteen- and fifteen-year-olds obtain a work permit as a condition of employment. Instead, an employer seeking to hire a teenager must obtain an age certificate verifying the child’s age from the state Division of Labor and the written consent of the child’s parent or guardian.
Next Steps
Employers will need to comply with new laws taking effect in states in which they operate.
McDermott+ Check-Up: May 23, 2025
THIS WEEK’S DOSE
House Passes Reconciliation Package. The package now moves to the Senate, where substantive changes, including in healthcare, will likely be made.
HHS Secretary Kennedy, FDA Commissioner Makary Testify at Senate Appropriations Committee. The officials testified in separate hearings on the Trump administration’s fiscal year 2026 skinny budget request.
House Oversight Committee Examines IRA. The hearing focused on how the Inflation Reduction Act (IRA) has impacted healthcare innovation and prices.
HHS Releases MAHA Commission Report. The report explores four factors contributing to high rates of childhood chronic diseases and recommends 10 research initiatives.
HHS Begins Implementing Most-Favored-Nation EO. This quick action follows last week’s executive order (EO).
CMS Announces Plans to Increase MA Auditing. The announcement echoes the administration’s focus on addressing waste, fraud, and abuse.
Agencies Issue Guidance, RFIs on Healthcare Price Transparency. The actions across multiple federal agencies are in line with a February 2025 EO.
CONGRESS
House Passes Reconciliation Package. Here’s the play-by-play on how it happened. Regrouping after last week’s failure to advance the bill, the House Budget Committee advanced House Republicans’ reconciliation package late on May 18, 2025. The committee combined, without amending, the 11 committee prints that individual committees advanced over the past few weeks into a singular piece of legislation. The final vote to advance the package to the House Rules Committee was 17 – 16. All yes votes were Republicans, and all no votes were Democrats. Four hardline conservatives, Reps. Norman (R-SC), Roy (R-TX), Brecheen (R-OK), and Clyde (R-GA), who previously voted to stall the package in committee, voted present. Their present vote allowed the package to move to the Rules Committee while showing their continued strong reservations about the bill. They specifically urged House leaders to make changes that would expedite Medicaid work requirements, enact more cuts to Medicaid, and enact additional tax changes. Meanwhile, a key group of moderate Republicans from blue states continued to push for changes to the state and local tax (SALT) deduction provisions as a condition of their votes on the House floor.
The House Rules Committee met on May 21, 2025, in a marathon session to finalize the package and prepare it for a floor vote. While the Rules Committee was meeting, moderates and hardliners continued to urge Republican leadership to add provisions they support. Moderates reached a deal with Speaker Johnson to increase the SALT cap, prompting hardliners and members of the House Freedom Caucus to increase their push for more cuts to Medicaid. President Trump then met with the House Freedom Caucus and sent a statement of administration policy urging Republicans to support the package, stating that “failure to pass this bill would be the ultimate betrayal.”
Late on May 21, a manager’s amendment was released that included an increase in the SALT cap and modifications to other provisions, including health policies, to appease Freedom Caucus members. Changes included:
Expediting the Medicaid work requirement implementation from 2029 to December 31, 2026.
Expanding the ban on Medicaid funding for gender-affirming care from minors only to all Medicaid enrollees.
Providing non-expansion states more flexibility to implement state directed payments up to 110% of the Medicare cap.
After debating most of the night, the House passed the One Big Beautiful Bill Act in the early morning of May 22, 2025, by a 215 – 214 vote. Reps. Massie (R-KY) and Davidson (R-OH) joined Democrats in voting no. Rep. Harris (R-MD), chair of the House Freedom Caucus, voted present. Two Republicans, Reps. Garbarino (R-NY) and Schweikert (R-AZ), did not vote.
Now that the House has met Speaker Johnson’s goal of passage by Memorial Day, the bill moves to the Senate. Speaker Johnson stated that he wants the bill on President Trump’s desk by July 4, 2025. However, he no longer controls the timeline – the Senate does. And, if reports to date are accurate, the Senate will make changes to key provisions.
On May 20, 2025, the Congressional Budget Office (CBO) released a preliminary cost estimate for the reconciliation package as it was reported from the House Budget Committee, including scores for each provision. The CBO analysis does not reflect changes made after the bill passed out of the Budget Committee, nor does it incorporate all of the interactive effects across titles. CBO estimates that:
As a result of the Energy and Commerce Committee health provisions, 8.6 million individuals would become uninsured.
As a result of the Ways and Means Committee health provisions, 2.1 million individuals would become uninsured.
At the request of Democrats, CBO also released a letter with a preliminary distributional analysis finding that the reconciliation package will cause a decrease in household resources for the lowest 10% of the income distribution and an increase in household resources for the highest 10% of the income distribution.
HHS Secretary Kennedy, FDA Commissioner Makary Testify at Senate Appropriations Committee. US Department of Health and Human Services (HHS) Secretary Kennedy continued his string of congressional appearances by testifying in front of the Senate Appropriations Labor, Health and Human Services, Education, and Related Agencies Subcommittee. Questioning focused on the FY 2026 skinny budget request and HHS research funding. Republicans emphasized the importance of maintaining clinical trials and ensuring transparency in research funding and discussed the need to improve care delivery in rural communities. Democrats meanwhile pressed Secretary Kennedy on when a full budget will be released and expressed concern over reductions in National Institutes of Health (NIH) funding and the implications for Alzheimer’s disease, cancer, and rare disease research.
Later in the week, US Food and Drug Administration (FDA) Commissioner Makary testified in front of the Senate Appropriations Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Subcommittee. Republicans expressed concern about the FDA’s decision to loosen safety requirements for mifepristone, questioned Makary on the FDA’s artificial intelligence policies, and discussed the FDA’s work on improving infant safety. Appropriations Committee Chair Collins (R-ME) expressed concern about recent FDA staffing changes and the impact they could have on regulatory review. Democrats emphasized the importance of congressional collaboration and the expertise available within the committee to improve the FDA’s processes, particularly for diabetes treatments and COVID-19 boosters. Commissioner Makary emphasized that the goal of the FY 2026 budget is to rebuild the gold standard science at the FDA.
House Oversight Committee Examines IRA. The hearing was a joint Economic Growth, Energy Policy, and Regulatory Affairs Subcommittee and Health Care and Financial Services Subcommittee meeting. Republicans stated that the IRA has increased energy and healthcare costs for consumers and the federal government. Democrats focused on ongoing reconciliation efforts, stating their concern about any cuts to Medicaid and the expiration of the enhanced advanced premium tax credits. They stated that the IRA has improved healthcare access and created jobs.
ADMINISTRATION
HHS Releases MAHA Commission Report. A February 2025 EO created the President’s Make America Healthy Again (MAHA) Commission and directed the release of this report. The report explores four causes of increased rates of childhood chronic diseases: an increase in consumption of ultra-processed foods, chemicals in the environment, childhood behaviors in the digital age, and overmedicalization of children. The report does not include specific proposals and alludes to release of a strategy in August 2025. The report recommends 10 research initiatives, including research on long-term drug safety, the effects of whole foods compared to ultra-processed foods, and expansion of the NIH-Centers for Medicare & Medicaid Services (CMS) autism data initiative. There are 14 members of the MAHA Commission, including FDA Commissioner Makary and NIH Director Bhattacharya. The EO directed that the Centers for Disease Control and Prevention director also hold a position on the commission, but a director has not yet been sworn in.
HHS Begins Implementing Most-Favored-Nation EO. The EO, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” was signed on May 12, 2025, and included a directive that HHS bring pharmaceutical drug prices in line with prices in comparable developed nations within 30 days. In a press release this week, HHS announced that it expects manufacturers to commit to aligning US prices for brand name products, without a generic or biosimilar, with the lowest price in a peer country that has a gross domestic product (GDP) per capita that is at least 60% of the US GDP per capita. As directed in the EO, if drug manufacturers don’t voluntarily comply, HHS will develop rulemaking to impose most-favored-nation pricing. With limited reason for voluntarily compliance, we anticipate additional rulemaking to follow. US Customs and Border Protection later released a statement reminding pharmaceutical companies that declaring incorrect values on import or export documentation is a trade evasion.
CMS Announces Plans to Increase MA Auditing. CMS intends to increase auditing of risk adjustment diagnoses submitted by Medicare Advantage (MA) plans. CMS says it will audit all eligible MA contracts annually moving forward and will invest additional resources to complete ongoing audits of contracts for payment years 2018 through 2024. To accomplish this, CMS outlines three actions it will take:
Enhancing technology to flag unsupported diagnoses and review medical records.
Increasing the number of medical coders working to verify flagged diagnoses from 40 to 2,000 by September 2025.
Moving from audits of about 60 contracts each year to audits of all contracts, and increasing the number of records audited in a contract.
CMS intends to collaborate with the HHS Office of Inspector General (OIG) to recover uncollected overpayments from audits conducted by the OIG.
Agencies Issue Guidance, RFIs on Healthcare Price Transparency. HHS and the US Departments of Labor and the Treasury jointly issued a request for information (RFI) to inform potential future rulemaking or guidance on prescription drug price transparency requirements for insurance plans. Previously, as part of its Transparency in Coverage final rule, HHS sought to implement transparency requirements for prescription drugs but ultimately deferred enforcement because of legal challenges. In this RFI, HHS requests comments on issues related to compliance with, and implementation of, the prescription drug machine-readable file disclosure requirements. Comments are due 30 days after publication of the RFI in the Federal Register. The agencies also updated frequently asked questions regarding implementation of schema version 2.0 transparency in coverage requirements for certain provisions of the Affordable Care Act.
Separately, CMS released new guidance and an RFI on hospital price transparency. The agency expects that for most contracting scenarios, hospitals’ payer-specific negotiated charges can be expressed as a dollar amount, not an estimate. The RFI seeks comment on whether and how CMS can improve hospital price transparency compliance and enforcement processes to ensure pricing information in the machine-readable file is accurate and complete. Comments are due by July 21, 2025.
QUICK HITS
FDA Modifies State and Tribal Drug Importation Request Process. The FDA will now allow states and tribes to submit a draft Section 804 importation program proposal and receive FDA feedback before final submission to assist them in importing prescription drugs from Canada. The action was a directive in the April 2025 EO “Lowering Drug Prices by Once Again Putting Americans First.”
FTC Sends Warning Letters to Drug Companies Alleging Anticompetition. The Federal Trade Commission (FTC) alleged that more than 200 patent listings for brand name drugs in the FDA’s Orange Book are inappropriate and therefore limit competition by delaying generic market entry. This is the third round of FTC patent disputes, following previous challenges in 2023 and 2024.
Senators Welch, Baldwin Host Forum with Former Biden HHS Officials. The forum focused on the impact of the Trump administration’s restructuring of HHS and included former FDA, NIH, and CMS officials.
BIPARTISAN LEGISLATION SPOTLIGHT
Senators Marshall (R-KS) and Warner (D-VA) and Representatives DelBene (D-WA), Kelly (R-PA), Bera (D-CA), and Joyce (R-PA) reintroduced the Improving Seniors’ Timely Access to Care Act. The legislation would codify most provisions from the 2024 CMS Interoperability and Prior Authorization Final Rule to streamline the MA prior authorization process and increase transparency. The legislation passed the House unanimously in 2022. Read the press release and legislation here.
NEXT WEEK’S DIAGNOSIS
After the House passed the reconciliation package, both chambers left town for the Memorial Day recess. The Senate will return on June 2, 2025, and the House on June 3, 2025. The next step in the reconciliation process is Senate consideration. The Senate is likely to make substantive changes to the House-passed package to appease more moderate Republican Senators, and Democrats will likely raise Byrd rule challenges to strike certain lines or provisions that are extraneous to the CBO score of that policy.
NY DOH Publishes Electronic Material Health Care Transaction Reporting Form, Increasing Disclosure Requirements to Include Potentially Sensitive Business Information
On May 15, 2025, the New York State Department of Health (“DOH”) announced the launch of the electronic Material Transaction Reporting Form for health care transactions (“Electronic Form”). To assist reporting entities in preparing their submissions, the DOH has also released a list of all questions included in the Electronic Form.
Collectively, the reporting requirements set forth in the Electronic Form appear significantly more extensive than those imposed by other states, including California’s health care transaction reporting framework. Notably, the Electronic Form includes obligations to disclose potentially sensitive business information, such as investor materials.
Existing Statutory Authority
Proskauer has tracked the evolving reporting obligations in a series of posts, including one published last month that discussed the latest DOH guidance concerning the reporting obligations.
Pursuant to PHL § 4552, a health care entity shall submit to the DOH “written notice, with supporting documentation as described below and further defined in regulation developed” by the DOH. Such written notice “shall include, but not be limited to:”
The names of the parties to the material transaction and their current addresses;
Copies of any definitive agreements governing the terms of the material transaction, including pre- and post-closing conditions;
Identification of all locations where health care services are currently provided by each party and the revenue generated in the state from such locations;
Any plans to reduce or eliminate services and/or participation in specific plan networks;
The closing date of the proposed material transaction; and
A brief description of the nature and purpose of the proposed material transaction.
As of the publication date of this post, the DOH has not promulgated regulations concerning the law. Nevertheless, the Electronic Form outlines a range of documents and information that reporting entities must submit to the state as part of a material transaction report.
Reporting Obligations to Consider
Below are certain categories of information requested in the Electronic Form that may raise particular concerns for investors and sponsors. Some of the requested categories are sensitive in nature, and careful attention should be paid to ensuring that the DOH treats the submitted information as confidential. Other categories of requested information may require significant effort to analyze and prepare a response, particularly for larger enterprises.
Reporting Obligation Contained in Electronic Form
Impact and Considerations
Part 2, Section A.10-Provide the identities of and interrelationships among the Party and all persons known to control or to be controlled by or under common control with the Party, in a chart that clearly presents the relationships.
-Additionally, the organizational chart must identify (1) voting percentage: the percentage of voting securities for each person identified in the organizational chart and (2) other control: if control of any person is maintained other than by the ownership or control of voting securities, then indicate the basis of such control for each relevant party identified in the organizational chart; as to each person, indicate the type of organization (e.g., corporation, trust, partnership) and the State or other jurisdiction of domicile.
The form appears to require broad disclosure of ownership and control rights of each Party. Of note, the form asks for the disclosure of “all persons known to control or to be controlled by or under common control with the Party,” which may require analysis and review in highly complex, sponsor-backed deal structures to disclose affiliates of the Party.
Part 3, Section B-C-Projected annual revenue (in $ millions) of the Surviving Entity over the next three years.
-Provide information on all transaction activity in the past 3 years by each Party to this Material Transaction.
Any “Party” to the “Material Transaction” must report historic “transaction activity.” The Electronic Form does not clarify whether the disclosure obligation concerns all other historic Material Transactions, or if the DOH expects a party to disclose all historic transactions involving health care entities in the state, regardless of size over the prior 3 years. The historic transaction reporting obligation may require careful review and consideration by entities who consistently engage in transactions in the ordinary course of business.
Part 3, Section D, Subparagraphs (c)-(d)-How many transactions has the Surviving Entity from this Material Transaction engaged in within the prior 12 months (from the anticipated close of this Material Transaction) that have increased gross in-state revenues?
-Considering the most recent of these transactions: Submit the Surviving Entity’s standalone gross in-state revenue before the transaction’s close date. Submit the combined gross in-state revenue of the Parties to this transaction as of the transaction’s close date.
Notice: Any series of transactions designed to evade the threshold provisions of this article shall be deemed a Material Transaction and subject to the notice requirements of Article 45-A of the Public Health Law.
In posing this question, it appears that the DOH is requiring parties to submit information as to prior transactions in a 12-month period in order to potentially determine whether the Parties have complied with the reporting obligations.
Part 3, Section EFor all Parties, submit Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) or other accounting principles prescribed or permitted under law (audited with an independent CPA’s opinion thereof, preferred but not required) of the Parties to this Material Transaction as of the end of the last two fiscal years.
These financial statements shall include the following components: Balance Sheet; Income Statement; Statement of Cash Flows; Notes to Financial Statement (Narrative); and For the Surviving Entity, also submit projected financial statements dated one day after closing.
The Electronic Form requires all Parties to the Material Transaction to submit financial information.
Part 4, Section A, Subparagraph (a)-(c)-Describe the health care services provided by each Party to the Material Transaction at all locations of operation within New York.
-Does any party to this transaction directly or indirectly employ physicians? If so, each party that directly or indirectly employs physicians should fill out the “Physician Locations Spreadsheet” and upload it in question A(d).
The question asks an entity to report all locations in which it operates in New York. For each location, the Electronic Form asks for gross in-state commercial, Medicare, Medicaid, and other revenue. In addition, if any Party to the Material Transaction employs physicians, the entity is to upload an additional worksheet, titled “Physician Location Spreadsheet”. The spreadsheet requires detailed reporting of physician relationships, including whether the physician is employed or otherwise affiliated with the Party, including their NPI, and hours worked at each location.
Part 4, Section BWhich best describes this transaction?
An acquisition resulting in a Surviving Entity-For each acquired entity, in the 12-month period preceding the proposed transaction, what is the average contracted commercial payor rate for each service line identified in Question A (a) (v) (“Services Offered at Location”)? Your response should be expressed in a dollar ($) amount.-For the surviving entity, what is the anticipated overall contracted commercial payor rate by service line in the year immediately following the Material Transaction close date for the Surviving Entity as a result of this transaction?
A merger or other transaction resulting in the formation of a New Entity (“NewCo”)-For each entity involved in the formation of NewCo, in the 12-month period preceding the proposed transaction, what is the average contracted commercial payor rate for each service line identified in Question A (a) (v) (“Services Offered at Location”)? Your response should be expressed in a dollar ($) amount-For the NewCo, what is the anticipated overall contracted commercial payor rate increase in the year immediately following the Material Transaction close date as a result of this transaction? For any commercial rate increases that are expected as a result of the deal, describe in detail (including any differential in rate increases expected by service and/or location, and the degree of the differential).
The question requires the reporting entity to submit confidential and detailed information concerning health plan reimbursements for each “service line.” The Electronic Form does not define what a “service line” is, a term traditionally utilized by hospitals to describe their business segments.
Part 5-Required Documents: Definitive Transaction Document(s) (e.g., Asset Purchase Agreement); Charter and Bylaws; Operating Agreements or Partnership Agreement(s); and Financing Agreements or documents.
-As Applicable Documents: Fairness Opinions, Offering Memoranda, Private Placement Memoranda, Investor Disclosure Statements, and Other Investor Solicitation Materials.
The broad document request covers a host of documents that are treated as highly confidential in the ordinary course of business.
Disproportionate Impact: Supreme Court Narrows Disproportionate Share Hospital Reimbursement to Supplemental Security Income Cash Recipients
The U.S. Supreme Court has issued a significant ruling affecting hospitals that serve low-income Medicare beneficiaries, narrowing the interpretation of the Disproportionate Share Hospital (“DSH”) payment formula. In Advocate Christ Medical Center v. Kennedy, the Court determined that only Medicare patients who were eligible to receive a cash Supplemental Security Income (“SSI”) payment during the month of their hospitalization may be included in the calculation for additional DSH reimbursement. This decision represents a setback for more than 200 hospitals that had advocated for a broader, more inclusive definition of SSI entitlement, potentially reducing the financial support available for treating Medicare’s poorest patients.
The DSH Program and the Medicare Fraction at Issue
Medicare, the government-funded health insurance program for elderly and disabled Americans, reimburses hospitals for inpatient services at standardized rates based on diagnosis-related groups. Since this fixed-rate system does not account for the higher treatment costs of low-income patients—who often face greater health challenges and social service needs—Congress established the DSH adjustment to support hospitals serving these populations. The DSH adjustment increases reimbursement to incentivize providers to maintain access for underserved patients.
The DSH adjustment is calculated using two fractions:
Medicare fraction – the percentage of a hospital’s Medicare patients who are also entitled to SSI, a proxy for low-income Medicare beneficiaries.
Medicaid fraction – the proportion of total patient days attributable to individuals not entitled to Medicare, but eligible for Medicaid.
This system ensures hospitals receive additional financial support for treating economically disadvantaged patients.
The dispute revolved around the calculation of the Medicare fraction—specifically, the definition of “entitled to [SSI] benefits” under 42 U.S.C. §1395ww(d)(5)(F)(vi)(I).
More than 200 hospitals argued that all patients enrolled in SSI at the time of hospitalization should be counted, even if they did not receive an SSI payment during the month of their hospitalization. They maintained that SSI entitlement continues unless an individual remains ineligible for 12 consecutive months and emphasized that SSI benefits extend beyond cash payments to include services like continued Medicaid coverage. In contrast, the United States Department of Health and Human Services (“HHS”)—the federal agency tasked with calculating and administering the DSH adjustment—asserted that only patients who received an SSI cash payment during their hospitalization month qualified under the statute. HHS emphasized that SSI is a monthly, cash-based benefit, meaning entitlement applies only when an individual is eligible for and receives payment in a given month.
In a 7–2 decision, the Supreme Court sided with HHS. The majority reasoned that SSI benefits consist of monthly cash payments provided to low-income individuals who meet certain financial and categorical eligibility criteria and did not include non-cash benefits such as ongoing Medicaid eligibility or access to vocational services. The Court reasoned that the SSI program is structured to assess eligibility for those cash payments on a month-by-month basis, based on an individual’s income and resources during each specific month. Accordingly, the Court determined a person may be eligible for a payment in one month and ineligible in the next, even if they remain otherwise enrolled in the SSI program.
Building out from this understanding, the Court concluded that a Medicare patient is “entitled to SSI benefits” within the meaning of the Medicare fraction only if they receive an SSI cash payment during the month of their hospitalization. In reaching this conclusion, the majority rejected the argument that general enrollment in the SSI program suffices to establish entitlement. Rather, the Court reasoned that the phrase “entitled to benefits” in this context tracks the monthly cash-payment eligibility that defines the structure of the SSI program, thereby requiring that the Medicare beneficiary actually receive their SSI cash payment during the month of their hospitalization. Because Congress specifically tied the Medicare fraction numerator to this entitlement, the Court held that hospitals may count only those Medicare patients whose monthly income and resource levels made them eligible for an SSI cash benefit during the month of hospitalization.
The Court rejected the hospitals’ broader reading and dismissed the dissent’s arguments, which characterized the SSI benefit as a long-term, insurance-style entitlement. The majority also rebuffed the notion that non-cash services (such as Medicaid continuation) could be counted as SSI benefits under the Medicare statute. Finally, the Court held that the 12-month reapplication provision cited by the hospitals did not mean patients remained “entitled” to benefits during months of ineligibility—it merely required reenrollment after a year without payments.
What’s Next? Reimbursement Impacts for Safety-Net Hospitals
The Court’s decision reinforces a narrow, text-based approach to statutory interpretation in the Medicare context, and limits hospitals’ ability to count patients enrolled in—but not actively receiving—SSI as low-income for DSH reimbursement purposes. While the ruling clarifies how the Medicare fraction must be calculated, it also lowers reimbursement for safety-net hospitals serving economically vulnerable populations. Meanwhile, recent litigation in other courts has already begun to reshape related aspects of the DSH formula, signaling that judicial scrutiny of HHS’s interpretation of reimbursement provisions is far from settled. Providers should thus assess how this decision may affect their DSH payments and monitor whether Congress or CMS pursue additional legislative or regulatory changes in response.
Workplace Strategies Watercooler 2025: FMLA Unpacked—Advanced Leave and Compliance Issues [Podcast]
In this installment of our Workplace Strategies Watercooler 2025 podcast series, shareholders Heather Ptasznik (Detroit (Metro)), Dalton Green (Raleigh), and Burt Garland (St. Louis) discuss the most challenging aspects of leave management—with a particular focus on navigating the Family and Medical Leave Act (FMLA). Heather, Dalton, and Burt tackle the most common pain points in leave administration, including what frontline managers should listen for and how HR can proactively manage the process to minimize legal risks. The speakers answer the most common questions on managing the FMLA, covering topics such as what constitutes proper notice, chronic condition certifications, tracking intermittent leave, training for managers, keeping up with regulatory changes, and more.
Cardiac Monitors Found Subject to Sales Tax in California
The First District of the California Court of Appeal upheld the denial of Medtronic USA, Inc.’s (“Medtronic”) refund claim for California sales tax that it collected on sales of cardiac monitors. Medtronic USA, Inc. v. California Dep’t of Tax & Fee Admin., A169290 (Cal. Ct. App. Apr. 16, 2025).
The Facts: Medtronic manufactures two types of cardiac monitors, known as “RICMS,” which are implanted into a patient’s chest to monitor and collect information about the patient’s heart rhythm. Doctors then use the information to make decisions about and diagnose heart diseases of the patient.
For the periods at issue, Medtronic collected California sales tax on sales of its RICMS monitors. Subsequently, Medtronic requested a refund, maintaining that the RICMS devices met the definition of “medicines” that were statutorily exempt from sales tax.
The Law: California’s Revenue and Taxation Code Section 6369 exempts “medicines” from sales tax. The statute, in part, defines “medicines” as those furnished or prescribed for treatment of a human body by a licensed physician and “any substance or preparation intended for use by external or internal application to the human body in the diagnosis, cure, mitigation, treatment, or prevention of disease[.]”
The statute states that “medicines” specifically include “articles . . . permanently implanted in the human body to assist the functioning of any natural organ, artery, vein, or limb and which remain or dissolve in the body,” including bone screws, bone pins, and pacemakers. However, the statute specifically excludes from the definition of “medicines” “articles that are in the nature of splints, bandages, pads . . . instruments, apparatus, contrivances, appliances, devices, or other mechanical, electronic, optical, or physical equipment….”
The Decision: Medtronic offered multiple arguments to support that the RICMS devices are exempt from sales tax—all of which the Court rejected. First, Medtronic argued that the RICMS devices are specifically exempt because they are “articles [that are] permanently implanted in the human body to assist the functioning of” the heart. The Court agreed that the RICMS devices are permanently implanted but did not agree that they “assist the functioning” of the heart. The Court determined that unlike bone screws, bone pins, and pacemakers—which by themselves assist an organ to function—the RICMS devices “serve a purely informational function that requires subsequent human intervention to ‘assist the functioning’ of the heart.” Because the RICMS devices are diagnostic in nature, the Court held that they do not fall squarely within the relevant statutory provision that exempts permanently implanted articles that assist any natural organ in functioning.
The Court also rejected Medtronic’s argument that the RICMS devices are not specifically excluded from the definition of “medicines.” Medtronic argued that because the relevant statutory provision only excludes those articles—such as “splints, bandages, and pads”—that are applied externally to the patient, the RICMS devices (which are implanted in the patient’s body) are not in the same nature of those external applications and are not excluded from “medicines.” The Court rejected Medtronic’s external versus internal distinction, noting that the statute’s generic definition of “medicines” includes devices that are “intended for use by external or internal application to the human body[.]” The Court reasoned that if the generic definition of “medicines” includes devices that are applied both externally and internally, it could not read a different provision of the same statute to make such distinction and to apply only to external devices.
In rendering its decision, the Court strictly construed the plain language of the statute to ultimately affirm the trial court’s decision that the RICMS devices do not meet the definition of “medicines” exempting them from California sales tax. The Court recognized that while the function of the RICMS devices touches several concerns of the statute exempting “medicines” from tax, “those touches are too tenuous to establish the firm basis needed for an exemption.”
A takeaway here is just because the spirit of a statute seems to apply to a taxpayer, it does not necessarily mean the statute actually applies. And we can ask whether the spirit of a statute creates an ambiguity, as to its words, that requires further consideration. However, the plain language of a statute generally will prevail. Whether the Court came to the correct conclusion in analyzing the plain language here seems questionable.
Getting Too Personal? Illinois Court Says Family Medical History is Genetic Information
On May 15, 2025, a district court in Illinois denied a motion by defendant Hospital Sisters Health System and Saint Francis (HSHS) to dismiss a class action claim brought against the hospital system under the Illinois Genetic Information Privacy Act (GIPA).
GIPA regulates the use, disclosure, and acquisition of genetic information and has adopted the same definition of genetic information as provided in the federal Health Insurance Portability and Accountability Act (HIPAA):
(i) the individual’s genetic tests; (ii) the genetic tests of family members of the individual; (iii) the manifestation of a disease or disorder in family members of such individual; or (iv) any request for, or receipt of, genetic services, or participation in clinical research which includes generic services, by the individual or any family member of the individual.
GIPA prohibits employers from soliciting or requesting genetic testing or genetic information of a person or their family members as a condition of employment. GIPA also prohibits employers from changing the terms, conditions, or privileges of employment or terminating the employment of any person due to a person or their family member’s genetic testing or information.
In this case, the plaintiff filed their complaint in December 2024, which states that the hospital system requires potential employees to submit a pre-employment medical examination that an HSHS employee conducts. This examination allegedly entails job applicants being required to disclose information concerning their family medical histories. The plaintiff alleges that she was a job applicant with HSHS and that she, too, was required to submit a medical examination that asked questions about her family’s medical history. These questions reportedly included inquiries on family history of heart disease, asthma, or psychological conditions in the plaintiff’s family.
In its motion to dismiss filed in February 2025, HSHS argued that the generic family medical history questions included in its medical examination are routine medical questions that do not constitute genetic information as protected by GIPA. The court was unconvinced, holding that “these questions involved[d] a clear report of the manifestation of a disease or disorder in a family which is clearly specified in GIPA through its adaptation of HIPAA’s definitions.” In addition, to support its holding, the court noted that the federal Genetic Information Nondiscrimination Act (GINA), which is also incorporated into GIPA, defines the term “family medical history” as “information about the manifestation of disease or disorder” in family members.
Though GIPA litigation has not yet risen to the level of litigation regarding Illinois’ Biometric Information Privacy Act (BIPA), several courts in 2024 have noted that GIPA should apply broadly. In Taylor v. Union Pacific Railroad Co., No. 23-CV-16404, 2024 WL 3425751, (N.D. Ill. July 16, 2024), the court held that GIPA plaintiffs have lenient standing requirements, concluding that BIPA’s definition of “aggrieved persons” – which encompasses individuals who sustained no actual injury beyond a violation of their rights under the statute – applies to GIPA, as well. In McKnight v. United Airlines, Inc., No. 23-CV-16118, 2024 WL 3426807, at *1 (N.D. Ill. July 16, 2024), the court found that individuals outside of Illinois may nonetheless initiate GIPA litigation if the underlying activity “occurred primarily substantially in Illinois” and that GIPA has a five-year statute of limitations.
Employers with ties to Illinois should note that GIPA may apply to them. Any questions about a job applicant’s family medical history may be considered genetic information under the act—even if these questions are intended to be routine health inquiries—and could give rise to a GIPA claim. Pre-employment exams should be structured carefully to avoid running afoul of GIPA and potential class action risks.
Data Breach Lawsuits Surge Against Chord Specialty Dental Partners
Pennsylvania-based Chord Specialty Dental Partners is under fire after a September 2024 data breach compromised the personal information of over 173,000 individuals. At least seven proposed class action lawsuits have been filed in federal courts in Tennessee and Pennsylvania, alleging the company failed to secure and protect patient data properly.
The lawsuits claim Chord Dental violated its obligations under state and federal laws, including the Federal Trade Commission (FTC) Act and the Health Insurance Portability and Accountability Act (HIPAA). Plaintiffs argue that the company did not implement reasonable cybersecurity measures or provide timely and sufficient notice of the breach.
Exposed data included names, addresses, Social Security numbers, driver’s license numbers, bank and payment card information, dates of birth, and medical and insurance records.
The plaintiffs claim that they have suffered harm, including out-of-pocket costs, time spent mitigating the damage, emotional distress, and increased risk of identity theft. One plaintiff also seeks to represent a specific subclass of affected Pennsylvania residents.
The flurry of suits alludes to various legal claims, from negligence and breach of contract to unjust enrichment. Plaintiffs are seeking damages, restitution, credit monitoring, and court orders requiring stronger data protections.
As legal proceedings unfold, the case highlights ongoing concerns over cybersecurity practices in the healthcare industry—and the steep costs of failing to protect protected health information.