Delivery of Care

The changing legal landscape in a time of pandemic

What are the legal trends to watch as the delivery system responds to a rapidly shifting world where policy interventions, focused access to care and health disparities, are bending the arc of health care

Image courtesy of Christopher Browning

Christopher Browning, a partner at Nixon Peabody, LLP, in Providence, R.I.

By Christopher Browning
Posted 1/25/21
Identifying the legal trends in a post-pandemic world surrounding health care delivery, transactions, and employment agreements, where rapid policy interventions have altered the prevailing landscape.
How will “risk” be redefined in contract negotiations with providers around care delivery? How are patients and providers notified when insurers shift policies, such as reinstituting co-pays after suspending them for five months because of the pandemic? What are the legal liabilities and limitations of public-private federal contracts around supplying vaccines or personal protective equipment? If algorithms embedded in software programs making decisions about care delivery by insurance-owned managed care organizations are found to reinforce racial health inequities, what are the legal remedies? Will not-for-profit health systems come under more legal scrutiny about the way that its investments are managed in financial markets?
Many of the new “innovations” in connecting health care directly to schools, such as the new “plug in and play” SMART health clinics at Roger Williams Middle School and Mt. Pleasant High School in Providence, developed by the Ginn Group Consulting, in corporate partnership with CVS and Aramark, and supported financially by the Partnership for Rhode Island, are built on the assumption that students and their families have access to health insurance and, if not, can be signed up for Medicaid coverage.
It ain’t necessarily so. The reality on the ground is that many students may come from families where one or more members are undocumented. In the initial two years of the SMART school clinics, the costs medical care that are not reimbursed by insurers are projected to be covered by the corporate sponsors. After that, it is unclear who pays: the Providence Community Health Centers, which will be managing the clinics; the corporate sponsors of the SMART health clinics; or the R.I. Department of Education, the overall pusher behind these clinics.
At a time when Medicaid costs, which amount to roughly one-third of the overall state budget, are coming under increased scrutiny by lawmakers in a time of looming shortfalls, the question is: will lawmakers challenge the corporate sponsors to pay for their projects, instead of shifting the burden to the state Medicaid program.

PROVIDENCE – Almost a year into the global pandemic, Rhode Island’s health care providers remain focused on treating COVID-19 and delivering safe, high-quality care to the rest of their patients.

At the same time, they must prepare for the inevitable changes such a paradigm-shifting event will bring to the industry. Despite lingering uncertainty about when life will be “back to normal” and what the health care delivery systems of the future will look like, we already know some of the trends to watch.

First, the pandemic will likely lead to lasting changes to the manner in which providers deliver health care and force regulators and payors to adopt policies to ensure patient safety and cost-effective care.

Second, corporate transactions will evolve to address pandemic-specific issues and liabilities.

• Remote delivery of care. Telehealth remains poised to continue its rapid growth, in terms of acceptance by providers and patients, but also in the scope of services available for remote delivery.

The governor’s emergency orders resulted in expanded telehealth options in Rhode Island by ensuring certain insurance coverages and relaxing regulatory requirements for multiple provider types. Meanwhile, the pandemic dramatically increased patient demand. Convenience along with improved technology and more secure delivery options could help that trend continue.

• Impact on access to care. The spread of COVID-19 also exacerbated access to care and health disparity issues in Rhode Island, particularly with respect to traditionally underserved populations, including racial and ethnic minorities. A larger suite of available telehealth services and the expansion of home testing and specimen collection options could represent an unprecedented opportunity to narrow the health disparity gap in Rhode Island and increase participation in the health care system.

• Changes to regulations and reimbursement. Once the pandemic subsides and emergency orders expire, licensing boards and payors will need to adapt regulatory structures, licensing requirements, and reimbursement policies governing telehealth services for a broad swath of providers from physicians and chiropractors to physical therapists and mental health professionals.

Providers will need to stay abreast of the developments and position their institutions and practices to successfully embrace the new delivery models and help increase Rhode Islanders’ access to high-quality health care.

A whole new legal world
There will also be major changes in corporate transactions, regulatory approvals, and employment contracts.

• Transactions generally. In response to the pandemic, federal and state funds flowed to health care providers by the billions. Some of those funds, like Medicare Advance Payments [MAP], need to be repaid.

Other stimulus programs, including Payroll Protection Program [PPP] loans and increased Medicaid payments [e.g., larger skilled nursing facility per diem rates] came with use restrictions and other requirements. Providers must keep detailed accountings of their expenditures and may need to demonstrate appropriate use of relief funds in order to avoid repayment obligations and potential penalties.

Parties to corporate transactions, such as facility and practice sales, need to address the potential liabilities associated with federal and state funds. Buyers should ensure that part of their due diligence includes identifying and understanding potential exposure.

Some buyers will find it difficult to identify issues due to a seller’s lack of record keeping or the fact that the liability does not actually accrue until a much later date.

Accordingly, the transaction documents should address the disposition of federal and state relief funds. Approaches will vary on a case-by-case basis, but parties should consider including closing conditions built around forgiveness of PPP loans and repayment of MAP funds.

Depending on the type of funding, it may also be required or simply appropriate to escrow funds at closing to cover the potential liabilities.

In any event, the pandemic resulted in a need for increased attention to precise drafting of robust force majeure and material adverse effect provisions, as well as pre-closing requirements to continue operations in the ordinary course.

• Regulatory approvals. In Rhode Island, changes of ownership or the development of new facilities often require prior approval by the R.I. Department of Health. The approval processes generally include comprehensive applications and public hearings before the Health Services Council.

In many states, the pandemic resulted in significant delays in obtaining regulatory approvals. In Rhode Island, however, the Health Services Council quickly adjusted to conduct its hearings remotely and still maintains a regular schedule of hearings.

The current remote work environment, though, poses new challenges for applicants to complete and submit applications. So, just as before the pandemic, applicants should start the approval process as early as possible.

• Employment agreements. Employment agreements for health care providers will also see changes due to the pandemic. Many institutional providers and practices found that their employment agreements lacked the desired flexibility to promptly respond to the drastic change in circumstances and make appropriate business decisions, including the ability to adjust salaries and schedules.

Expect to see expanded use of comprehensive force majeure provisions, which were previously often boilerplate or simply non-existent. Also, expect to see employers attempt to include provisions that permit certain changes at the employer’s discretion.

Christopher Browning, Esq., is a partner at Nixon Peabody, LLP, in Providence, R.I.


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