In March, the Department of Health and Human Services (HHS) withdrew the Richardson Waiver, a policy under which HHS voluntarily undertook notice-and-comment rulemaking in circumstances where it wouldn’t otherwise need to. HHS also issued a new Statement of Organization for the Office of the General Counsel (HHS-OGC), which, among other things, may signal an effort to consolidate and expand HHS-OGC’s authority. Jaime Jones, Partner, Sidley Austin LLP, and Brenna Jenny, Partner, Sidley Austin LLP, discuss HHS’ potential rationale for these changes and the implications for the health care industry. During the first Trump Administration, Brenna Jenny served as the Principal Deputy General Counsel at HHS and the Chief Legal Officer at the Centers for Medicare & Medicaid Services.
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Speaker 1 (00:00):
Speaker 2 (00:04):
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Speaker 3 (00:27):
Hi, I'm Jamie Jones.
I co-lead Sly Austin'shealthcare practice and
represent healthcare and lifesciences clients in litigation
and enforcement mattersinvolving the Department of
Health and Human Services andits constituent agencies and
their authorities.
Speaker 4 (00:42):
I'm Brenna Jenny .
I'm a partner in Sidley'shealthcare practice here in DC
and I focus on healthcarelitigation matters and
engagement with HHS. During thefirst Trump administration, I
served as the principal DeputyGeneral Counsel at HHS and the
Chief Legal Officer for CMS.
Speaker 3 (01:00):
So today we're gonna talk about two major
announcements from HHS thatinvolve the agency's legal
function referred to as the HHSOffice of General Counsel, or
H-H-S-O-G-C. And that givesrise to some new challenges and
opportunities for thehealthcare industry.
H-H-S-O-G-C is often not aparticularly visible component
(01:22):
of HHS to externalstakeholders, and the
department itself can be a bitof a black box because it is so
large. So Brandon , given yourbackground, let's level set and
can you start off with anoverview of how HHS is
structured?
Speaker 4 (01:38):
HHS has two primary arms, the office of the
secretary, and the operatingdivisions. At a very high level
of generalization, the officeof the secretary includes the
divisions that engage in littleto no policy making . So this
is where H-H-S-O-G-C sits.
Other divisions within theoffice of the secretary include
(01:58):
the Office of LegislativeAffairs, which represents HHS
in its engagement with Congressaspa , which handles public
affairs. So they help draftpress releases. And then in
this day and age, manageofficial social media postings
and the HHS Office of InspectorGeneral, also referred to as
H-H-S-O-I-G. The operatingdivisions in contrast include
(02:22):
the core policymaking functionssuch as C-M-S-F-D-A,
C-D-C-N-I-H, and hrsa. There'sgenerally a layer of political
appointees within eachdivision, both on the policy
making and the non policymaking sides of the department.
And they change with eachadministration. The most senior
(02:43):
positions require Senateconfirmation, but many
political positions do not.
Instead, these appointees movethrough a more streamlined
non-public approval process runby the White House because that
process is a lot morestreamlined than senate
confirmation. It can be commonfor these political appointees
to hold a position for a coupleyears and then rotate to a
(03:05):
different position during thesame administration or even
head back into the privatesector. At a high level ,
political appointees areresponsible for making ma major
final decisions on big issuesand questions. And the goal of
career staff is to apply theirsubject matter expertise and
their institutional knowledgeand help political appointees
(03:26):
make fully informed decisions.
HHS has a large central officein downtown DC referred to as
the Humphrey building.
Virtually all HHS politicalappointees across both branches
of the department sit there aswell as a number of career
officials. There are alsoseveral offices in the greater
DC area specific to some of thelarger components of HHS such
(03:49):
as a CMS office in Baltimoreand an FDA office in White Oak
Maryland. These offices, ofcourse, are in addition to the
HHS regional offices, which areacross the country. The legal
function , uh, that youmentioned, Jamie , H-H-S-O-G-C
is spread out across thedowntown DC office and as well
the other DC area offices plusregional offices. So
(04:11):
H-H-S-O-G-C is divided intoteams that support the
different policymakingcomponents of HHS. There's a
team that advises CMSA teamthat advises FDA and so on.
There's one component of HHSthat is more siloed than the
others, and that is the Officeof Inspector General.
H-H-S-O-I-G is responsible forpolicing fraud, waste and abuse
(04:36):
committed by HHS. That's thecore mission of any i's office
police, your own agency. ButH-H-S-O-I-G is unique among
federal inspectors generalbecause it actually spends the
majority of its time policingthe healthcare industry. The
secretary a long time agodelegated to H-H-S-O-I-G, civil
Monetary Penalty EnforcementAuthority under laws such as
(04:59):
the Annie Kickback statute andthe beneficiary inducement
statute. H-H-S-O-I-G also hasits own lawyers who advise the
IG and H-H-S-O-G-C lawyershistorically do not advise on
any of the issues thatH-H-S-O-I-G works on. So for
example, H-H-S-O-I-G lawyershave traditionally responded to
(05:20):
requests for advisory opinionson the applicability of the
Annie Kickback statute and thebeneficiary inducement statute
to certain arrangements. TheOIG lawyers , uh, issue those
opinions and they can have apretty significant impact on
the way the healthcare industryperceives risk and therefore
how it structures commonbusiness arrangements. And the
OIG lawyers are doing that workwithout consulting the OGC
(05:43):
lawyers, equally important, OIGlawyers have traditionally
exercised the authority grantedby statute to the HHS secretary
to determine when individualsor companies should be excluded
from participating in thefederal healthcare programs.
And they have relatedly decidedwhen to waive the secretary's
permissive exclusion authorityin exchange for a corporate
(06:06):
integrity agreement. So Jamie ,let's talk about the first of
the two developments. Theannouncement on February 28
that HHS was withdrawing theRichardson waiver. Practically
speaking, what does thischange?
Speaker 3 (06:20):
So many listeners are probably familiar with the
requirement in theAdministrative Procedure Act or
a PA that when agencies issuesubstantive rules that
establish or change the rightsof regulated entities, they
need to do so through what wecall notice and comment
rulemaking. The A PA includes acouple of exceptions, one of
(06:42):
which is for any rules relatingto agency management or
personnel or to public propertyloans, grants, benefits or
contracts. Because of thenature of the work that HHS
performs, a lot of itsrulemaking could be interpreted
as implicating this exceptionand thus removed from having to
(07:03):
go through notice and comment.
So, HHS could just issue therule as a final rule in the
federal register. Now, HHS maystill need to publish a 30 day
delayed effective date , um,but that would be the only
notice required and therewouldn't be any chance for
industry to comment. TheRichardson waiver is shorthand
(07:25):
for a policy that HHS adoptedin 1970, under which HHS would
voluntarily undertake noticeand comment rulemaking in
circumstances where it wouldn'totherwise need to. Under the
Richardson waiver, HHS haswaived the exemption and
undertaken notice and comment.
(07:46):
For all rulemaking involvingpublic property loans, grants
benefits or contracts with thewithdrawal of the Richardson
waiver, HHS can now rely on theexemption. Now, it's important
to note that HHS did not say itwas never going to voluntarily
undertake notice and commentrulemaking if the exemption
(08:10):
applies. Instead, what it saidwas that it would, in certain
circumstances choose to invokethe exemption, but there are a
lot of open questions about howbroadly this language in the a
PA exemption should beinterpreted. In other words,
how often can HHS lawfullyinvoke the exemption? And then
(08:30):
separately, how often will HHSinvoke the exemption having
served Brenna as the PRIprincipal, deputy General
counsel of HHS during the lastTrump administration, do you
have any thoughts you can shareas to why HHS withdrew the
Richardson waiver? Now,
Speaker 4 (08:48):
From my own perspective, I think this was
driven by a belief that HHSshouldn't lose in court solely
because it skipped notice andcomment rulemaking. It didn't
even have to undertake in thefirst place. The failure to use
notice and comment. Rulemakinghas already been raised against
HHS by plaintiffs in litigationso far that's happened during
the new administration. And Ithink from HH S's perspective,
(09:12):
if their actions aresubstantively lawful, they feel
that they shouldn't be enjoinedon a procedural technicality.
So I view the motivation asrelatively narrow,
Speaker 3 (09:21):
So it's narrow. But how do you think the revocation
of the Richardson waiver willimpact the healthcare industry
then?
Speaker 4 (09:29):
Well , consistent with my perception that the
decision was made in responseto a fairly narrow concern, I
am not envisioning a dramaticshift in the use of notice and
comment rulemaking. Rather, Ithink the exemption is gonna be
used on a pretty isolatedbasis. And I say that for three
overlapping reasons. First, HHSbenefits from using notice and
comment rulemaking, and I thinkthey know it. As someone who
(09:52):
has participated in therulemaking process on the other
side, I can say thatstakeholder feedback can be
helpful, including because itcan raise new ways of
addressing challenges orsuggest new compromises that
policymakers hadn't thought ofbefore. Second, if HHS is dead
set on finalizing a proposal,feedback can strengthen the
rules that they finalize,including the justifications
(10:15):
for those rules in ways thatmight help those rules survive
a lead legal challenge down theline, particularly one under
the arbitrary and capriciousstandard of the a PA . And then
third, as you mentioned, thereare a lot of open questions
about the scope of the APAsexemption. For example, does
any rule touching on Medicareimplicate public benefits under
(10:36):
the exemption? There arerelatively few cases
interpreting that statutorylanguage. You really have to go
back to the seventies and earlyeighties to find them. And then
since then, because of theRichardson waiver, there hasn't
been any litigation over thescope of the exemption and
there really weren't a lot of aPA challenges back in the pre
Richardson waiver time period,especially as compared to
(10:57):
modern day. So relying on theexemption, therefore is going
to carry some litigation risk.
HHSI think can certainly expectthat if they skip notice and
comment and cite the exemption,plaintiffs will argue the
exemption doesn't apply. Soit's a fairly preventable
litigation risk just by takinga couple extra months to go
through notice and commentrulemaking as a belt and
(11:18):
suspenders approach.
Speaker 3 (11:21):
So three good reasons why the rescission of
the Richardson waiver might notsignal some massive change for
industry. But what do you see ,uh, in terms of any clues
coming out of the rulemakingissued by HHS since the
Richardson waiver was pulleddown on March 14th?
Speaker 4 (11:41):
So as of the date of this recording , um, we're a
few weeks out from therescission and uh, there was
one notice of proposedrulemaking issued in March
relating to Affordable Care Actexchange plans. I think there
are aspects of that rule thatarguably could meet the
exemption, but HHS did submitthe full rule for notice and
comment. The other major datapoint is the annual Medicare
(12:05):
payment rules. Some pundits inthe immediate aftermath of HH
S'S announcement that it wasrescinding, the Richardson
waiver predicted the sky isfalling. HHS is going to use
the exemption broadly to exemptall Medicare related rules, for
example, from notice andcomment. And according to that
narrative, we would start toeven see annual payment rules,
(12:26):
which constitute some of themost time intensive notice and
comment rulemaking undertakenby HHS each year. We would see
that rammed through as finalrules, but we're not seeing
that on April 11th, HHS issuedfive proposed payment rules for
various types of healthcarefacilities operating on a
fiscal year payment ruleschedule. And there's been no
(12:47):
indication in any of thoserules that the rescission of
the Richardson waiver hasaltered the rulemaking process.
Now, it is true that the listof proposed rules under review
at OMB is much, much smallerthan it has been in the past.
Um, but that being said, Ithink that's really a symptom
(13:07):
of a broader deregulatory push,and we're seeing the same thing
across agencies. Um, so eventhough there are actually no
proposed rules right now infront of HHS , um, I don't
think that has anything to dowith the rescission of the
Richardson waiver.
Speaker 3 (13:24):
I see. So I thought the Medicare Act had its own
notice and comment rulemakingrequirement built into the
statute. And if that's right,how should the listeners think
about how that affects things?
Speaker 4 (13:38):
Yes, it does. The Medicare Act requires notice
and comment for certain typesof actions relating to the
Medicare program. The SupremeCourt in a 2019 case called
Allina , concluded that thisnotice and comment requirement
is actually broader than theone in the A PA and it's also
completely independent from theAPAs requirements. And so some
of the impact in the Medicaresphere from the rescission of
(14:00):
the Richardson waiver is goingto be blunted by this separate
rulemaking requirement, whichthe Richardson waiver doesn't
touch. There also haven't beena lot of decisions though
interpreting this separaterulemaking requirement probably
because it does significantlyoverlap with the APAs , uh,
rulemaking requirement. So thisis another place, I think,
where we're likely to see thecase law develop and have that
(14:23):
pace of development pick upthrough legal challenges over
the next few years. Uh, again,the pace of that development
though is going to depend onhow frequently HHS ends up
invoking this exemption fornotice and comment rulemaking.
Speaker 3 (14:37):
So at , at a high level, just to sort of
summarize , um, we've got thischange, we're still waiting to
see a bit what it really isgonna mean , um, in terms of
where HHS engages in rulemakingor not, but as this is all
going on, where do you seeopportunities for healthcare
providers or life sciences comcompanies , um, arising from
(14:59):
this development?
Speaker 4 (15:02):
One potential opportunity is that where HHS
might be inclined to skipnotice and comment rulemaking
HHS also might be morereceptive to meeting with
stakeholders in advance ofissuing a final rule. As I said
before, I think HHS knowsstakeholder input is valuable
for a number of reasons, andthat input will help improve a
(15:23):
rule. So if there is anindication that HHS is working
on a rule, I think companieseither directly or through
trade associations shouldconsider proactively reaching
out to the right policy makersor potentially H-H-S-O-G-C,
depending on the issue and thestrength of potential legal
challenges and ask for ameeting. In my experience, HHS
(15:45):
both in the last administrationand so far in this one, has
been very receptive to meetingrequests.
Speaker 3 (15:51):
Got it. Okay. So on that note , um, let's turn from
the Richardson waiver totalking about another recent
development, which is thestatement of organization that
was issued by the department inMarch, and it was issued
specifically by H-H-S-O-G-C,which you just mentioned. Tell
(16:11):
the listeners what the purposeof a statement of organization
by H-H-S-O-G-C is.
Speaker 4 (16:17):
For a long time since the early nineties,
H-H-S-O-G-C has maintained aformal statement of
organization, but for most ofits history, the statement of
organization was very highlevel . And then in August,
2020, so the tail end of thefirst Trump administration,
H-H-S-O-G-C amended thestatement of organization and
provided significantly moreinformation about the structure
(16:40):
of the divisions within OGC andtheir relative
responsibilities. So we're nowon the fourth update since
August, 2020. So it's become adocument that really is updated
more frequently. A couple daysbefore releasing the latest
amendments to the statement oforganization, H-H-S-O-G-C
previewed two of the changes ontheir website. And a lot of
(17:03):
people saw this in the news.
First six of the 10 H-H-S-O-G-Cregional offices will be
closed, although there was noannouncement as to timing. And
second, H-H-S-O-G-C isreorganizing some of the FDA
related OGC leadership. Thestatement of organization does
reflect those changes, butthere are also a number of
(17:24):
other more subtle changes. Andin my experience, some of those
subtle changes can reflectbroader changes or shifting
dynamics behind the scenes. SoJamie , what jumped out at you
the most in terms of changes inthe March statement of
organization?
Speaker 3 (17:40):
Well, I see some potential for H-H-S-O-G-C to
start to opine on matters thatH-H-S-O-I-G lawyers who are
within the office of counsel tothe Inspector General or OIG ,
have historically owned. So thesecretary of HHSA while back
(18:00):
delegated to H-H-S-O-I-G, asyou said, the authority to
enforce a lot of the fraud andabuse laws that shaped the way
, uh, healthcare entitiesoperate in the industry. And
that includes the anti kickbackstatute and the beneficiary
inducement statute. Um, OIG inturn took the position that
only its lawyers in OCI couldopine on how those fraud and
(18:22):
abuse laws are interpreted andenforced. And as a result,
H-H-S-O-G-C lawyers have notreally , um, given their
opinions on some of the fraudand abuse laws that have the
biggest impact on the industry,but there are a couple of hints
in the March statement oforganization that the lines
that have been drawn around thework considered to be within
(18:47):
OIGs jurisdiction might bechanging. For example, the
statement of organizations saysthat H hs, OIG G is authorized
to have its own council withrespect to matters solely
within the OIGs jurisdiction.
That is new language to thestatement of organization.
(19:08):
Similarly, the H-H-S-O-G-Cdescription of responsibilities
previously stated that OGCsupervises all legal activities
of the department and itsoperating and staff divisions
except the OIG, that languagehas now been updated to say
(19:28):
except with respect to certainmatters within the jurisdiction
of the OIG. So with thesechanges, it seems like OGC may
begin taking the position thatcertain legal issues OIG
currently advises on orhistorically has advised on,
are not solely within OIG G'Sjurisdiction and thus should be
(19:51):
worked on by H-H-S-O-G-Clawyers and not OS lawyers.
What might be
Speaker 4 (19:58):
An example of something not solely within HHS
OIGs jurisdiction?
Speaker 3 (20:03):
Yeah, good question.
I mean, we're in wait and Cmode, but one possibility is
that H-H-S-O-G-C says that itshould opine on some of the
fraud and abuse laws delegatedway back by the secretary to
OIG, like the anti-kickbackstatute. And one hook for that
, uh, might come from theInspector General Act of 1978,
(20:25):
which requires each federalagency to establish an Office
of Inspector General, butprohibits agencies from
transferring to that office,any program operating
responsibilities, and some ofthe policy making that OIG does
around the fraud and abuse lawslike the Anna Kickback statute
(20:46):
could indeed be viewed asprogram operating
responsibilities . So it wouldbe about rethinking , um, the
way in which that authority gotdelegated.
Speaker 4 (20:57):
What are the implications if H-H-S-O-G-C
does start to assert this newposition and, and take the
position that it should beopining on some of these fraud
and abuse laws?
Speaker 3 (21:07):
So it might lead to changes in some of OIGs longs
longstanding interpretations offraud and abuse laws. OIG,
including OIG for a long time,has been insulated from
political leadership at HHS.
Right? The ig, the InspectorGeneral is usually a
(21:27):
longstanding career officialwith a background in combating
healthcare fraud, waste, andabuse, and usually someone who
has worked within H-H-S-O-I-Gfor a number of years. And
that's the same for seniorstaff within OIG and within osi
I , for example, the mostrecent inspector general was
(21:47):
Christie Grim, who was a longtime civil servant within OIG.
And one result of that is thatOIGs positions rarely changed
with new administrations,there's priorities in their ,
you know, interpretations ofthe, the core statutes remain
pretty consistent. In contrast,H-H-S-O-G-C has political
(22:09):
leadership, and as a result,the positions in OGC fluctuate
more as administrations change.
So if OGC takes over any OCIareas, you may see some changes
in position resulting fromthat. And we also might see
more willingness to reconsiderprevious positions because of
(22:30):
new leadership within OIG. InJanuary, president Trump fired
a number of agency inspectorsgeneral, including Christie
Grin. Recently, March Bell wasnominated to be the new
Inspector General of HHS. Hisnomination is as of this
recording pending senateconfirmation. He was a
political appointee in thefirst Trump administration and
(22:52):
served in the HHS Office ofCivil Rights, also known as
OCR. He has enforcementexperience relating to the
civil rights laws enforced byOCR, but he does not have an
established record regardingthe healthcare fraud and abuse
laws. And he'll probably have adifferent perspective than a
longstanding OIG civil servantwith respect to how those laws
(23:13):
are enforced.
Speaker 4 (23:16):
Jamie , you've dealt with H-H-S-O-I-G-A lot over the
years on different enforcementmatters, negotiating corporate
integrity agreements. How mightstakeholders use this as an
opportunity?
Speaker 3 (23:27):
Healthcare companies faced with H-H-S-O-I-G
enforcement actions might wannathink through with their
counselors, whether C'S newlyarticulated position gives them
an opportunity to pull in otherdecision makers in the agency
outside of OIG. Now that is apotentially high risk , but
(23:49):
high reward strategy , um, thatwouldn't be taken undertaken
lightly. For example, thoughit's possible that H-H-S-O-G-C
might consider decisions aroundwhether to impose a corporate
integrity agreement as aprogram operating
responsibility, that should bedetermined outside of OIG. And
(24:10):
in turn, we might see OGC bemore hesitant to impose
corporate integrity agreements.
That kind of position would infact be consistent with one
taken recently by theDepartment of Justice to pause
all corporate monitorships.
It's possible too thatpolitical appointees at
H-H-S-O-G-C might be receptiveto alternatives to corporate
(24:35):
integrity agreements inconnection with the resolution
of issues that implicate hh s'spermissive exclusion
authorities. For example, youcould imagine HHS being
interested in other deal making, right? Such as a company
providing free goods orservices to the government as
part of a negotiated resolutionrather than agreeing to
(24:57):
implement prospectivecompliance obligations. And
that would be particularlytrue, I would think, where the
conduct at issue is historic,you know, where it maybe was
self-disclosed and or where thecompany can demonstrate a
highly effective complianceprogram. Brenna, what about
you? What other changes caughtyour eye here ?
Speaker 4 (25:18):
Well, H-H-S-O-G-C formally added a new item to
its list of responsibilities.
Uh, and that item is issuingadvisory opinions. When I
served in H-H-S-O-G-C, westarted the practice of issuing
advisory opinions, and it is apractice that was continued
during the Bidenadministration, and one I
(25:39):
expect to see continue duringthe second Trump
administration. There's reallyno formal source of authority
for issuing advisory opinionsother than the fact that OGC is
the final arbiter ofinterpreting HHS laws and
regulations. Aside from the OIGcarve out , you mentioned Jamie
. And so this addition to thestatement of in , um,
organization really creates abit of more of a formal basis
(26:02):
for issuing advisory opinions.
Speaker 3 (26:04):
Well, let's pause on that for a minute. So what
types of advisory opinions didH-H-S-O-G-C issue, for example
, when you were there duringthe last Trump administration?
Speaker 4 (26:15):
A whole range of issues from three 40 B contract
pharmacies to interpreting theSupreme Court's decision. In
the Allina case that Imentioned, we basically issued
advisory opinions on topicsthat we believed were important
and where it would be helpfulto share HH S's views on a
question of legalinterpretation with
stakeholders. Because keep inmind, OGC generally doesn't
(26:37):
represent HHS in court. TheDepartment of Justice
represents HHS, like itrepresents , uh, a whole host
of agencies. And so OGC doesn'talways have a direct way to
communicate its views on legalissues. They end up having to
channel those views through thefilter of DOJ advisory
opinions, though allowH-H-S-O-G-C to communicate
(26:57):
directly to stakeholders.
Speaker 3 (26:59):
So what opportunities does that present
to industry stakeholders?
Brenna,
Speaker 4 (27:06):
I think the amendments to the statement of
organization, including thisone , uh, more broadly reflect
and empowered H-H-S-O-G-C legalfunction. I think OGC is
interested in drafting advisoryopinions on topics of interest
to stakeholders, and I thinkthey would be receptive to
stakeholders reaching out andexplaining why it would be
helpful for OGC to issue anadvisory opinion. And of
(27:28):
course, sharing thoughts on thecontent of said advisory
opinion stakeholders shouldassess their operations and
consider proactivelyapproaching OGC about a
proposed advisory opiniontopic. So of course, as with
all things in Washington rightnow, there is lots in flux and
we'll continue to monitor thechanges coming out of HHS.
(27:49):
Thanks everyone for joining uson discussing these two updates
coming out of HHS.
Speaker 2 (27:59):
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Speaker 3 (00:27):
Hi, I'm Jamie Jones.
I co-lead Sly Austin'shealthcare practice and
represent healthcare and lifesciences clients in litigation
and enforcement mattersinvolving the Department of
Health and Human Services andits constituent agencies and
their authorities.
Speaker 4 (00:42):
I'm Brenna Jenny .
I'm a partner in Sidley'shealthcare practice here in DC
and I focus on healthcarelitigation matters and
engagement with HHS. During thefirst Trump administration, I
served as the principal DeputyGeneral Counsel at HHS and the
Chief Legal Officer for CMS.
Speaker 3 (01:00):
So today we're gonna talk about two major
announcements from HHS thatinvolve the agency's legal
function referred to as the HHSOffice of General Counsel, or
H-H-S-O-G-C. And that givesrise to some new challenges and
opportunities for thehealthcare industry.
H-H-S-O-G-C is often not aparticularly visible component
(01:22):
of HHS to externalstakeholders, and the
department itself can be a bitof a black box because it is so
large. So Brandon , given yourbackground, let's level set and
can you start off with anoverview of how HHS is
structured?
Speaker 4 (01:38):
HHS has two primary arms, the office of the
secretary, and the operatingdivisions. At a very high level
of generalization, the officeof the secretary includes the
divisions that engage in littleto no policy making . So this
is where H-H-S-O-G-C sits.
Other divisions within theoffice of the secretary include
(01:58):
the Office of LegislativeAffairs, which represents HHS
in its engagement with Congressaspa , which handles public
affairs. So they help draftpress releases. And then in
this day and age, manageofficial social media postings
and the HHS Office of InspectorGeneral, also referred to as
H-H-S-O-I-G. The operatingdivisions in contrast include
(02:22):
the core policymaking functionssuch as C-M-S-F-D-A,
C-D-C-N-I-H, and hrsa. There'sgenerally a layer of political
appointees within eachdivision, both on the policy
making and the non policymaking sides of the department.
And they change with eachadministration. The most senior
(02:43):
positions require Senateconfirmation, but many
political positions do not.
Instead, these appointees movethrough a more streamlined
non-public approval process runby the White House because that
process is a lot morestreamlined than senate
confirmation. It can be commonfor these political appointees
to hold a position for a coupleyears and then rotate to a
(03:05):
different position during thesame administration or even
head back into the privatesector. At a high level ,
political appointees areresponsible for making ma major
final decisions on big issuesand questions. And the goal of
career staff is to apply theirsubject matter expertise and
their institutional knowledgeand help political appointees
(03:26):
make fully informed decisions.
HHS has a large central officein downtown DC referred to as
the Humphrey building.
Virtually all HHS politicalappointees across both branches
of the department sit there aswell as a number of career
officials. There are alsoseveral offices in the greater
DC area specific to some of thelarger components of HHS such
(03:49):
as a CMS office in Baltimoreand an FDA office in White Oak
Maryland. These offices, ofcourse, are in addition to the
HHS regional offices, which areacross the country. The legal
function , uh, that youmentioned, Jamie , H-H-S-O-G-C
is spread out across thedowntown DC office and as well
the other DC area offices plusregional offices. So
(04:11):
H-H-S-O-G-C is divided intoteams that support the
different policymakingcomponents of HHS. There's a
team that advises CMSA teamthat advises FDA and so on.
There's one component of HHSthat is more siloed than the
others, and that is the Officeof Inspector General.
H-H-S-O-I-G is responsible forpolicing fraud, waste and abuse
(04:36):
committed by HHS. That's thecore mission of any i's office
police, your own agency. ButH-H-S-O-I-G is unique among
federal inspectors generalbecause it actually spends the
majority of its time policingthe healthcare industry. The
secretary a long time agodelegated to H-H-S-O-I-G, civil
Monetary Penalty EnforcementAuthority under laws such as
(04:59):
the Annie Kickback statute andthe beneficiary inducement
statute. H-H-S-O-I-G also hasits own lawyers who advise the
IG and H-H-S-O-G-C lawyershistorically do not advise on
any of the issues thatH-H-S-O-I-G works on. So for
example, H-H-S-O-I-G lawyershave traditionally responded to
(05:20):
requests for advisory opinionson the applicability of the
Annie Kickback statute and thebeneficiary inducement statute
to certain arrangements. TheOIG lawyers , uh, issue those
opinions and they can have apretty significant impact on
the way the healthcare industryperceives risk and therefore
how it structures commonbusiness arrangements. And the
OIG lawyers are doing that workwithout consulting the OGC
(05:43):
lawyers, equally important, OIGlawyers have traditionally
exercised the authority grantedby statute to the HHS secretary
to determine when individualsor companies should be excluded
from participating in thefederal healthcare programs.
And they have relatedly decidedwhen to waive the secretary's
permissive exclusion authorityin exchange for a corporate
(06:06):
integrity agreement. So Jamie ,let's talk about the first of
the two developments. Theannouncement on February 28
that HHS was withdrawing theRichardson waiver. Practically
speaking, what does thischange?
Speaker 3 (06:20):
So many listeners are probably familiar with the
requirement in theAdministrative Procedure Act or
a PA that when agencies issuesubstantive rules that
establish or change the rightsof regulated entities, they
need to do so through what wecall notice and comment
rulemaking. The A PA includes acouple of exceptions, one of
(06:42):
which is for any rules relatingto agency management or
personnel or to public propertyloans, grants, benefits or
contracts. Because of thenature of the work that HHS
performs, a lot of itsrulemaking could be interpreted
as implicating this exceptionand thus removed from having to
(07:03):
go through notice and comment.
So, HHS could just issue therule as a final rule in the
federal register. Now, HHS maystill need to publish a 30 day
delayed effective date , um,but that would be the only
notice required and therewouldn't be any chance for
industry to comment. TheRichardson waiver is shorthand
(07:25):
for a policy that HHS adoptedin 1970, under which HHS would
voluntarily undertake noticeand comment rulemaking in
circumstances where it wouldn'totherwise need to. Under the
Richardson waiver, HHS haswaived the exemption and
undertaken notice and comment.
(07:46):
For all rulemaking involvingpublic property loans, grants
benefits or contracts with thewithdrawal of the Richardson
waiver, HHS can now rely on theexemption. Now, it's important
to note that HHS did not say itwas never going to voluntarily
undertake notice and commentrulemaking if the exemption
(08:10):
applies. Instead, what it saidwas that it would, in certain
circumstances choose to invokethe exemption, but there are a
lot of open questions about howbroadly this language in the a
PA exemption should beinterpreted. In other words,
how often can HHS lawfullyinvoke the exemption? And then
(08:30):
separately, how often will HHSinvoke the exemption having
served Brenna as the PRIprincipal, deputy General
counsel of HHS during the lastTrump administration, do you
have any thoughts you can shareas to why HHS withdrew the
Richardson waiver? Now,
Speaker 4 (08:48):
From my own perspective, I think this was
driven by a belief that HHSshouldn't lose in court solely
because it skipped notice andcomment rulemaking. It didn't
even have to undertake in thefirst place. The failure to use
notice and comment. Rulemakinghas already been raised against
HHS by plaintiffs in litigationso far that's happened during
the new administration. And Ithink from HH S's perspective,
(09:12):
if their actions aresubstantively lawful, they feel
that they shouldn't be enjoinedon a procedural technicality.
So I view the motivation asrelatively narrow,
Speaker 3 (09:21):
So it's narrow. But how do you think the revocation
of the Richardson waiver willimpact the healthcare industry
then?
Speaker 4 (09:29):
Well , consistent with my perception that the
decision was made in responseto a fairly narrow concern, I
am not envisioning a dramaticshift in the use of notice and
comment rulemaking. Rather, Ithink the exemption is gonna be
used on a pretty isolatedbasis. And I say that for three
overlapping reasons. First, HHSbenefits from using notice and
comment rulemaking, and I thinkthey know it. As someone who
(09:52):
has participated in therulemaking process on the other
side, I can say thatstakeholder feedback can be
helpful, including because itcan raise new ways of
addressing challenges orsuggest new compromises that
policymakers hadn't thought ofbefore. Second, if HHS is dead
set on finalizing a proposal,feedback can strengthen the
rules that they finalize,including the justifications
(10:15):
for those rules in ways thatmight help those rules survive
a lead legal challenge down theline, particularly one under
the arbitrary and capriciousstandard of the a PA . And then
third, as you mentioned, thereare a lot of open questions
about the scope of the APAsexemption. For example, does
any rule touching on Medicareimplicate public benefits under
(10:36):
the exemption? There arerelatively few cases
interpreting that statutorylanguage. You really have to go
back to the seventies and earlyeighties to find them. And then
since then, because of theRichardson waiver, there hasn't
been any litigation over thescope of the exemption and
there really weren't a lot of aPA challenges back in the pre
Richardson waiver time period,especially as compared to
(10:57):
modern day. So relying on theexemption, therefore is going
to carry some litigation risk.
HHSI think can certainly expectthat if they skip notice and
comment and cite the exemption,plaintiffs will argue the
exemption doesn't apply. Soit's a fairly preventable
litigation risk just by takinga couple extra months to go
through notice and commentrulemaking as a belt and
(11:18):
suspenders approach.
Speaker 3 (11:21):
So three good reasons why the rescission of
the Richardson waiver might notsignal some massive change for
industry. But what do you see ,uh, in terms of any clues
coming out of the rulemakingissued by HHS since the
Richardson waiver was pulleddown on March 14th?
Speaker 4 (11:41):
So as of the date of this recording , um, we're a
few weeks out from therescission and uh, there was
one notice of proposedrulemaking issued in March
relating to Affordable Care Actexchange plans. I think there
are aspects of that rule thatarguably could meet the
exemption, but HHS did submitthe full rule for notice and
comment. The other major datapoint is the annual Medicare
(12:05):
payment rules. Some pundits inthe immediate aftermath of HH
S'S announcement that it wasrescinding, the Richardson
waiver predicted the sky isfalling. HHS is going to use
the exemption broadly to exemptall Medicare related rules, for
example, from notice andcomment. And according to that
narrative, we would start toeven see annual payment rules,
(12:26):
which constitute some of themost time intensive notice and
comment rulemaking undertakenby HHS each year. We would see
that rammed through as finalrules, but we're not seeing
that on April 11th, HHS issuedfive proposed payment rules for
various types of healthcarefacilities operating on a
fiscal year payment ruleschedule. And there's been no
(12:47):
indication in any of thoserules that the rescission of
the Richardson waiver hasaltered the rulemaking process.
Now, it is true that the listof proposed rules under review
at OMB is much, much smallerthan it has been in the past.
Um, but that being said, Ithink that's really a symptom
(13:07):
of a broader deregulatory push,and we're seeing the same thing
across agencies. Um, so eventhough there are actually no
proposed rules right now infront of HHS , um, I don't
think that has anything to dowith the rescission of the
Richardson waiver.
Speaker 3 (13:24):
I see. So I thought the Medicare Act had its own
notice and comment rulemakingrequirement built into the
statute. And if that's right,how should the listeners think
about how that affects things?
Speaker 4 (13:38):
Yes, it does. The Medicare Act requires notice
and comment for certain typesof actions relating to the
Medicare program. The SupremeCourt in a 2019 case called
Allina , concluded that thisnotice and comment requirement
is actually broader than theone in the A PA and it's also
completely independent from theAPAs requirements. And so some
of the impact in the Medicaresphere from the rescission of
(14:00):
the Richardson waiver is goingto be blunted by this separate
rulemaking requirement, whichthe Richardson waiver doesn't
touch. There also haven't beena lot of decisions though
interpreting this separaterulemaking requirement probably
because it does significantlyoverlap with the APAs , uh,
rulemaking requirement. So thisis another place, I think,
where we're likely to see thecase law develop and have that
(14:23):
pace of development pick upthrough legal challenges over
the next few years. Uh, again,the pace of that development
though is going to depend onhow frequently HHS ends up
invoking this exemption fornotice and comment rulemaking.
Speaker 3 (14:37):
So at , at a high level, just to sort of
summarize , um, we've got thischange, we're still waiting to
see a bit what it really isgonna mean , um, in terms of
where HHS engages in rulemakingor not, but as this is all
going on, where do you seeopportunities for healthcare
providers or life sciences comcompanies , um, arising from
(14:59):
this development?
Speaker 4 (15:02):
One potential opportunity is that where HHS
might be inclined to skipnotice and comment rulemaking
HHS also might be morereceptive to meeting with
stakeholders in advance ofissuing a final rule. As I said
before, I think HHS knowsstakeholder input is valuable
for a number of reasons, andthat input will help improve a
(15:23):
rule. So if there is anindication that HHS is working
on a rule, I think companieseither directly or through
trade associations shouldconsider proactively reaching
out to the right policy makersor potentially H-H-S-O-G-C,
depending on the issue and thestrength of potential legal
challenges and ask for ameeting. In my experience, HHS
(15:45):
both in the last administrationand so far in this one, has
been very receptive to meetingrequests.
Speaker 3 (15:51):
Got it. Okay. So on that note , um, let's turn from
the Richardson waiver totalking about another recent
development, which is thestatement of organization that
was issued by the department inMarch, and it was issued
specifically by H-H-S-O-G-C,which you just mentioned. Tell
(16:11):
the listeners what the purposeof a statement of organization
by H-H-S-O-G-C is.
Speaker 4 (16:17):
For a long time since the early nineties,
H-H-S-O-G-C has maintained aformal statement of
organization, but for most ofits history, the statement of
organization was very highlevel . And then in August,
2020, so the tail end of thefirst Trump administration,
H-H-S-O-G-C amended thestatement of organization and
provided significantly moreinformation about the structure
(16:40):
of the divisions within OGC andtheir relative
responsibilities. So we're nowon the fourth update since
August, 2020. So it's become adocument that really is updated
more frequently. A couple daysbefore releasing the latest
amendments to the statement oforganization, H-H-S-O-G-C
previewed two of the changes ontheir website. And a lot of
(17:03):
people saw this in the news.
First six of the 10 H-H-S-O-G-Cregional offices will be
closed, although there was noannouncement as to timing. And
second, H-H-S-O-G-C isreorganizing some of the FDA
related OGC leadership. Thestatement of organization does
reflect those changes, butthere are also a number of
(17:24):
other more subtle changes. Andin my experience, some of those
subtle changes can reflectbroader changes or shifting
dynamics behind the scenes. SoJamie , what jumped out at you
the most in terms of changes inthe March statement of
organization?
Speaker 3 (17:40):
Well, I see some potential for H-H-S-O-G-C to
start to opine on matters thatH-H-S-O-I-G lawyers who are
within the office of counsel tothe Inspector General or OIG ,
have historically owned. So thesecretary of HHSA while back
(18:00):
delegated to H-H-S-O-I-G, asyou said, the authority to
enforce a lot of the fraud andabuse laws that shaped the way
, uh, healthcare entitiesoperate in the industry. And
that includes the anti kickbackstatute and the beneficiary
inducement statute. Um, OIG inturn took the position that
only its lawyers in OCI couldopine on how those fraud and
(18:22):
abuse laws are interpreted andenforced. And as a result,
H-H-S-O-G-C lawyers have notreally , um, given their
opinions on some of the fraudand abuse laws that have the
biggest impact on the industry,but there are a couple of hints
in the March statement oforganization that the lines
that have been drawn around thework considered to be within
(18:47):
OIGs jurisdiction might bechanging. For example, the
statement of organizations saysthat H hs, OIG G is authorized
to have its own council withrespect to matters solely
within the OIGs jurisdiction.
That is new language to thestatement of organization.
(19:08):
Similarly, the H-H-S-O-G-Cdescription of responsibilities
previously stated that OGCsupervises all legal activities
of the department and itsoperating and staff divisions
except the OIG, that languagehas now been updated to say
(19:28):
except with respect to certainmatters within the jurisdiction
of the OIG. So with thesechanges, it seems like OGC may
begin taking the position thatcertain legal issues OIG
currently advises on orhistorically has advised on,
are not solely within OIG G'Sjurisdiction and thus should be
(19:51):
worked on by H-H-S-O-G-Clawyers and not OS lawyers.
What might be
Speaker 4 (19:58):
An example of something not solely within HHS
OIGs jurisdiction?
Speaker 3 (20:03):
Yeah, good question.
I mean, we're in wait and Cmode, but one possibility is
that H-H-S-O-G-C says that itshould opine on some of the
fraud and abuse laws delegatedway back by the secretary to
OIG, like the anti-kickbackstatute. And one hook for that
, uh, might come from theInspector General Act of 1978,
(20:25):
which requires each federalagency to establish an Office
of Inspector General, butprohibits agencies from
transferring to that office,any program operating
responsibilities, and some ofthe policy making that OIG does
around the fraud and abuse lawslike the Anna Kickback statute
(20:46):
could indeed be viewed asprogram operating
responsibilities . So it wouldbe about rethinking , um, the
way in which that authority gotdelegated.
Speaker 4 (20:57):
What are the implications if H-H-S-O-G-C
does start to assert this newposition and, and take the
position that it should beopining on some of these fraud
and abuse laws?
Speaker 3 (21:07):
So it might lead to changes in some of OIGs longs
longstanding interpretations offraud and abuse laws. OIG,
including OIG for a long time,has been insulated from
political leadership at HHS.
Right? The ig, the InspectorGeneral is usually a
(21:27):
longstanding career officialwith a background in combating
healthcare fraud, waste, andabuse, and usually someone who
has worked within H-H-S-O-I-Gfor a number of years. And
that's the same for seniorstaff within OIG and within osi
I , for example, the mostrecent inspector general was
(21:47):
Christie Grim, who was a longtime civil servant within OIG.
And one result of that is thatOIGs positions rarely changed
with new administrations,there's priorities in their ,
you know, interpretations ofthe, the core statutes remain
pretty consistent. In contrast,H-H-S-O-G-C has political
(22:09):
leadership, and as a result,the positions in OGC fluctuate
more as administrations change.
So if OGC takes over any OCIareas, you may see some changes
in position resulting fromthat. And we also might see
more willingness to reconsiderprevious positions because of
(22:30):
new leadership within OIG. InJanuary, president Trump fired
a number of agency inspectorsgeneral, including Christie
Grin. Recently, March Bell wasnominated to be the new
Inspector General of HHS. Hisnomination is as of this
recording pending senateconfirmation. He was a
political appointee in thefirst Trump administration and
(22:52):
served in the HHS Office ofCivil Rights, also known as
OCR. He has enforcementexperience relating to the
civil rights laws enforced byOCR, but he does not have an
established record regardingthe healthcare fraud and abuse
laws. And he'll probably have adifferent perspective than a
longstanding OIG civil servantwith respect to how those laws
(23:13):
are enforced.
Speaker 4 (23:16):
Jamie , you've dealt with H-H-S-O-I-G-A lot over the
years on different enforcementmatters, negotiating corporate
integrity agreements. How mightstakeholders use this as an
opportunity?
Speaker 3 (23:27):
Healthcare companies faced with H-H-S-O-I-G
enforcement actions might wannathink through with their
counselors, whether C'S newlyarticulated position gives them
an opportunity to pull in otherdecision makers in the agency
outside of OIG. Now that is apotentially high risk , but
(23:49):
high reward strategy , um, thatwouldn't be taken undertaken
lightly. For example, thoughit's possible that H-H-S-O-G-C
might consider decisions aroundwhether to impose a corporate
integrity agreement as aprogram operating
responsibility, that should bedetermined outside of OIG. And
(24:10):
in turn, we might see OGC bemore hesitant to impose
corporate integrity agreements.
That kind of position would infact be consistent with one
taken recently by theDepartment of Justice to pause
all corporate monitorships.
It's possible too thatpolitical appointees at
H-H-S-O-G-C might be receptiveto alternatives to corporate
(24:35):
integrity agreements inconnection with the resolution
of issues that implicate hh s'spermissive exclusion
authorities. For example, youcould imagine HHS being
interested in other deal making, right? Such as a company
providing free goods orservices to the government as
part of a negotiated resolutionrather than agreeing to
(24:57):
implement prospectivecompliance obligations. And
that would be particularlytrue, I would think, where the
conduct at issue is historic,you know, where it maybe was
self-disclosed and or where thecompany can demonstrate a
highly effective complianceprogram. Brenna, what about
you? What other changes caughtyour eye here ?
Speaker 4 (25:18):
Well, H-H-S-O-G-C formally added a new item to
its list of responsibilities.
Uh, and that item is issuingadvisory opinions. When I
served in H-H-S-O-G-C, westarted the practice of issuing
advisory opinions, and it is apractice that was continued
during the Bidenadministration, and one I
(25:39):
expect to see continue duringthe second Trump
administration. There's reallyno formal source of authority
for issuing advisory opinionsother than the fact that OGC is
the final arbiter ofinterpreting HHS laws and
regulations. Aside from the OIGcarve out , you mentioned Jamie
. And so this addition to thestatement of in , um,
organization really creates abit of more of a formal basis
(26:02):
for issuing advisory opinions.
Speaker 3 (26:04):
Well, let's pause on that for a minute. So what
types of advisory opinions didH-H-S-O-G-C issue, for example
, when you were there duringthe last Trump administration?
Speaker 4 (26:15):
A whole range of issues from three 40 B contract
pharmacies to interpreting theSupreme Court's decision. In
the Allina case that Imentioned, we basically issued
advisory opinions on topicsthat we believed were important
and where it would be helpfulto share HH S's views on a
question of legalinterpretation with
stakeholders. Because keep inmind, OGC generally doesn't
(26:37):
represent HHS in court. TheDepartment of Justice
represents HHS, like itrepresents , uh, a whole host
of agencies. And so OGC doesn'talways have a direct way to
communicate its views on legalissues. They end up having to
channel those views through thefilter of DOJ advisory
opinions, though allowH-H-S-O-G-C to communicate
(26:57):
directly to stakeholders.
Speaker 3 (26:59):
So what opportunities does that present
to industry stakeholders?
Brenna,
Speaker 4 (27:06):
I think the amendments to the statement of
organization, including thisone , uh, more broadly reflect
and empowered H-H-S-O-G-C legalfunction. I think OGC is
interested in drafting advisoryopinions on topics of interest
to stakeholders, and I thinkthey would be receptive to
stakeholders reaching out andexplaining why it would be
helpful for OGC to issue anadvisory opinion. And of
(27:28):
course, sharing thoughts on thecontent of said advisory
opinion stakeholders shouldassess their operations and
consider proactivelyapproaching OGC about a
proposed advisory opiniontopic. So of course, as with
all things in Washington rightnow, there is lots in flux and
we'll continue to monitor thechanges coming out of HHS.
(27:49):
Thanks everyone for joining uson discussing these two updates
coming out of HHS.
Speaker 2 (27:59):
Thank you for listening. If you enjoyed this
episode, be sure to subscribeto ALA's speaking of health
law, wherever you get yourpodcasts. To learn more about
ah , HLA and the educationalresources available to the
health law community, visitAmerican health law.org.
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