Health Care

In the CY 2026 Medicare Physician Fee Schedule proposed rule (PFS Proposed Rule), released on July 14, 2025, the Center for Medicare and Medicaid Innovation (CMMI) introduced the Ambulatory Specialty Model (ASM), a new payment model focused on specialists who treat heart failure and low back pain in ambulatory settings. If implemented as proposed, participation in ASM will be mandatory for specialists, including cardiologists, orthopedic surgeons, pain management specialists, anesthesiologists, and neurosurgeons, who are located in designated regions and treat Medicare Fee-for-Service (FFS) beneficiaries for heart failure or low back pain. Participating providers will continue to bill Medicare FFS but will receive payment adjustments – positive, neutral, or negative – based on their performance across four domains: cost, quality, care improvement, and interoperability. 

The CY 2026 Physician Fee Schedule Proposed Rule (PFS Proposed Rule) introduces significant changes to how drug manufacturers must treat Bona Fide Service Fees (BFSFs) when calculating Average Sales Price (ASP) for Medicare Part B drugs. While the rule is directed at manufacturers, it has important implications for plans, pharmacy benefit managers (PBMs), group purchasing organizations (GPOs), and other entities that receive BFSFs, particularly if the Centers for Medicare & Medicaid (CMS) proposes similar changes to Part D. 

The Rhode Island Medical Spas Safety Act (RI MSSA) was signed into law by Governor Daniel McKee on June 30, 2025, and is the latest example of the increasing regulation of medical spas.

U.S. District Court for the Southern District of Iowa issued a comprehensive preliminary injunction blocking enforcement of key provisions of Iowa Senate File 383.

The Center for Medicare and Medicaid Innovation (CMMI) recently announced a six-year payment model for 2026-2031 called the Wasteful and Inappropriate Service Reduction (WISeR) Model. This blog post outlines key considerations for health care providers and suppliers to prepare for WISeR, which becomes effective January 1, 2026. 

A July 14, 2025 U.S. Food & Drug Administration (FDA) warning letter to a prominent wellness product and services company offers a blunt reminder that medical device requirements cannot be waived or overlooked merely because a company advertises the product for wellness and lifestyle purposes. The advisory action also indicates that FDA’s Center for Devices and Radiological Health (CDRH) remains steadfast in its enforcement of device regulations despite ongoing changes in other centers and throughout the agency.

On July 11, 2025, the Ninth Circuit Court of Appeals affirmed the criminal conviction of laboratory operator Mark Schena for violations of the Eliminating Kickbacks in Recovery Act, 18 U.S.C. § 220 (EKRA) based on compensation paid to marketers who sold testing on behalf of Schena’s laboratory. 

A few elements of this decision are particularly significant, including the court’s finding that percentage-based compensation arrangements are not per se illegal under EKRA and that evidence of undue influence over providers’ decision-making must be presented to demonstrate that the compensation was paid to “induce a referral” in violation of the statute.  The decision is also notable for its reliance on case law interpreting the Anti-Kickback Statute to reach this conclusion.

Within the first six months of President Trump’s second term, his Administration and the GOP have already implemented significant policies that are reshaping health care in the United States. Through his Administration’s restructuring of the Department of Health and Human Services (HHS), promulgation of Marketplace Integrity and Affordability rules, sweeping RADV audit changes, and now the passage of the One Big Beautiful Bill Act (OBBA), entities throughout the health care industry—particularly managed care plans and sub-capitated providers—will need to readjust to the new paradigm. 

Since April 2024, the California Department of Health Care Access and Information (HCAI), Office of Health Care Affordability (OHCA) has received twenty-six Material Change Transaction Notices (Notices) as part of its authority to review certain proposed California health care transactions. (See our prior posts here and here.) In twenty-three of the proposed transactions, OHCA has reviewed the Notices and waived a full Cost and Market Impact Review (CMIR), with two transactions still under review. 

In a brief press release published on July 9, 2025, the Department of Justice (DOJ) announced the issuance of more than 20 subpoenas to doctors and clinics as part of investigations into health care fraud, false statements, and related federal violations. The actions specifically target health care providers involved in transgender medical procedures for minors, representing a significant enforcement response that warrants careful analysis.

On June 11, 2025, Iowa enacted Senate File 383 (the “Act”), a comprehensive bill aimed at regulating pharmacy benefit managers (PBMs) with the stated goals of increasing transparency, supporting independent pharmacies, and reducing prescription drug costs. However, on June 30, 2025, just one day before the Act’s effective date, the U.S. District Court for the Southern District of Iowa issued a temporary restraining order (TRO), enjoining enforcement of the Act against the lawsuit’s named plaintiffs. The court found that the plaintiffs, a coalition of Iowa employers and ERISA-governed health plans, demonstrated a likelihood of success on the merits of their claims that the Act is preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and violates the First Amendment. The lawsuit aligns with other recent challenges against similar comprehensive legislation and further demonstrates the long-lasting conflict between PBM reform legislation and preemption by federal law.

This year’s National Health Care Fraud Takedown (Takedown) announced recently by the Department of Justice (DOJ) was touted by the Department of Justice as the largest to date, involving over $14.6 billion in “intended loss” and 324 defendants charged. The Takedown reinforces the Trump administration’s commitment to prioritizing health care fraud enforcement, highlights the “significant return on investment” these efforts yield, and repeatedly emphasizes the imperative to prevent fraud before it starts.

On June 9, 2025, Oregon Governor Tina Kotek signed into law Oregon Senate Bill 951 (Oregon CPOM Law), further expanding Oregon’s prohibition on the corporate practice of medicine (CPOM) doctrine. The stated purpose of the Oregon CPOM Law is to build upon Oregon’s established corporate practice of medicine prohibition, originally established by the Oregon Supreme Court in the 1947 decision in State ex rel. Sisemore v. Standard Optical Co, which banned corporations from holding a majority ownership in medical practices, practicing medicine, or employing physicians.

On June 11, 2025, the Department of Health and Human Services Office of Inspector General (OIG) issued a favorable advisory opinion on a proposed arrangement where a physician practice managed by a management services organization (MSO) would engage telehealth-based practices and platforms (collectively, Telehealth Companies) to provide telehealth services, including leasing health care professionals and maintaining the telehealth platform. The physician practice would submit claims for the telehealth services under its own private and government payor contracts. This advisory opinion addresses an increasingly common telehealth delivery model aimed at increasing the availability of health plan coverage for telehealth services, particularly in recent years with the rise in popularity of GLP-1 drugs for managing obesity.  

In May 2025 the Department of Justice (DOJ) Criminal Division published its enforcement priorities, and the Civil Division has now followed suit with a memorandum of its own (the “Civil Division Memo”).  It outlines five policy objectives that President Trump and Attorney General Bondi have directed the Civil Division to prioritize in their investigative and enforcement work: 

(1) combatting discriminatory practices and policies; 

(2) ending antisemitism;

(3) protecting women and children; 

(4) ending sanctuary jurisdictions; and 

(5) prioritizing denaturalization. 

Each section identifies the Executive Order(s) and DOJ Memoranda that set forth the Trump Administration’s policy objective(s) in each priority area and describes the types of conduct that will be subject to enforcement, as well as some of the tools that DOJ might use in those efforts.  This article focuses on the Administration’s stated objective of “protecting women and children,” which relates to several Executive Orders regarding gender identity and gender-affirming care and a related directive from Attorney General Bondi that the Civil Division describing DOJ’s intent to investigate certain manufacturers and distributors of puberty blockers, sex hormones, and other drugs.

The PBM Policy and Legislative Update — Spring 2025 edition builds upon prior issues and summarizes activity from January through March (2025) that affects the PBM industry. It highlights federal activities, state activities, and other noteworthy events and trends affecting the PBM industry.

On April 16, 2025, Arkansas enacted Act 624 (the Act), an unprecedented law prohibiting pharmacy benefit managers (PBMs) from owning or operating pharmacies in the state. As we discussed in our May 2025 blog post, the law’s passage has already resulted in market disruptions, and PBMs with vertically integrated business models have cautioned that the law will limit patients’ access to drugs and cost many local jobs. 

Now, two of the nation’s largest PBMs, CVS Health and Cigna’s Express Scripts (ESI), have filed federal lawsuits seeking to block implementation of the Act on the grounds that the Act is unconstitutional, preempted by federal law, and harmful to Arkansans. 

Shortly following its announcement of sweeping changes to RADV audits, CMS shared industry guidance last week regarding upcoming deadlines for the submission of risk adjustment data corrections in advance of RADV sampling. While this type of notice is routine in advance of RADV audit sampling, it is unique as it covers five plan years (2020 through 2024).  CMS instructs Medicare Advantage organizations (MAOs) to submit data corrections for PY 2020 through PY 2024 with deadlines ranging from June 16, 2025, through July 15, 2025.   Based on these dates and CMS’s target of completing these audits by early 2026, we believe that MAOs can expect to receive audit notices on a rolling basis beginning in the mid to late summer. 

Over the past few years, Congress has attempted to pass “federal PBM reform.” Members of Congress have held numerous hearings related to PBMs and introduced numerous bills seeking to regulate PBMs (we regularly track these federal actions through our quarterly PBM Policy and Legislative Updates). Despite the rhetoric in Washington about bipartisan support to regulate PBMs, Congress has not been able to pass meaningful PBM reform.  This brings us to the One Big Beautiful Bill (Reconciliation Bill), which includes some PBM measures but remains  far from the sweeping reform Congress previously introduced and  from what we are seeing at the state level. The House passed the Reconciliation Bill on May 22, 2025, with a slim margin of 215 to 214.  The Reconciliation Bill will now move to the Senate, where the Senate will need to approve it with a simple majority for it to become law. 

In our February 14, 2025 blog post, we detailed a proposed expansion of Article 45-A of New York’s Public Health Law (hereinafter, the Disclosure of Material Transactions Law) included in the proposed Fiscal Year 2026 New York State Executive Budget (FY 26 Executive Budget). The amendment was dropped from the final FY 26 Executive Budget’s Health and Mental Hygiene Article VII Legislation, which was signed into law by Governor Hochul on May 9, 2025. The Memorandum of Support accompanying the proposed legislation touted the amendment as a way to strengthen New York State Department of Health’s (DOH) oversight of material health care transactions, contending that it would allow DOH to gather more quantitative information to assess the transaction’s potential and actual post-closure impact. The legislation would have increased oversight by altering notice and disclosure requirements, permitting DOH to require a full cost and market impact review, and empowering DOH to delay the transaction’s closing to allow for a fulsome cost and market impact review. However, with the rejection of the amendment from the final FY 26 Executive Budget, the Disclosure of Material Transactions Law will remain in effect as it has been since August 1, 2023.