The Weekly Articles

Big changes have come to health care transactions in California since January 1, 2024. Now, in addition to review proceedings by the Attorney General and the Department of Managed Health Care, certain health care transactions will be subject to pre-closing review by the newly constituted Office of Health Care Affordability (“OHCA”).

SB 184 established OHCA, which issued emergency regulations for cost and market impact review (“CMIR Regulations”). OHCA has three primary responsibilities: (1) slow health care spending growth, (2) promote high value system performance, and (3) assess market consolidation. OHCA will collect, analyze, and publicly report data on total health care expenditures, and enforce spending targets set by the Health Care Affordability Board. The new emergency CMIR Regulations became effective on December 18, 2023. The CMIR Regulations impact those who are subject to the CMIR rules, define what is a covered transaction, how transactions are approved, and the submission process itself.

Health care entities covered by this process include health care service plans, health insurers, hospitals, hospital systems, fully integrated delivery systems, pharmacy benefit managers, certain physician organizations, other providers, and payers, which also include parents, affiliates or subsidiaries that act on behalf of California payers. The approved regulations narrow the scope of entities required to report, requiring a California impact. In addition to this limitation, entities above certain revenue thresholds or in a health professional shortage areas are subject to certain noticing requirements.

OHCA will evaluate transactions that transfer material amount of control, responsibility, or governance of either the assets or operations of the covered health care entity to another entity. Transactions include mergers, acquisitions, affiliations, and other agreements that impact the provision of health care services in California; this can include sale, lease, options, or other way of disposing of assets. Also regulated is the transfer of control or governance of covered entities. Notice requirements under the CMIR Regulations are limited to certain types of transactions, such as those meeting certain financial thresholds or that create of certain new entities, and may be subject to a ten year look back period for some transactions. Note, certain out of state transactions may be also be subject to notice requirements.

CMIR Regulation covered transactions closing on or after April 1, 2024 must submit a written notice at least 90 days in advance of the transaction closing.

Catherine Wicker was recently named a partner with Hooper, Lundy & Bookman.  When asked how she was celebrating this professional milestone, Catherine reported that she had gone to a couple of special dinners and was also planning a trip to Paris in April.  Congratulations Catherine!

Several bills impacting the delivery of behavioral health care services in California took effect last year or take effect this year.  SB 43 expands the definition of “gravely disabled,” broadening eligibility for involuntary detention or conservatorship under the Lanterman-Petris-Short (“LPS”) Act.  Under SB 43 (new language is emphasized), “gravely disabled” is defined as a condition in which a person, as a result of a mental health disorder, a severe substance use disorder, or a co-occurring mental health disorder and severe substance use disorder, is unable to provide for their personal needs for food, clothing, shelter, personal safety, or necessary medical care.  SB 43 became effective on January 1, 2024, but only San Francisco and San Luis Obispo counties are moving forward with full implementation of the highlighted language as of that date, as the law allows for counties to delay implementation until 2026.  SB 326 and AB 531, both passed in 2023, go to voters as Proposition 1 in March.  Proposition 1 would amend the state’s Mental Health Services Act (renaming it to the Behavioral Health Services Act (“BHSA”)), shift BHSA allocations to create a new housing category, and require counties to provide new substance use disorder services.  It would also make $6.38 billion available for behavioral health capital projects including permanent supportive housing, short-term crisis stabilization units, residential facilities, and outpatient facilities.  Key legislation effective in 2023 continues to be implemented this year, including SB 929 (data collection and reporting by counties and facilities involved in implementing involuntary hold provisions of the LPS Act), AB 2242 (development of care coordination plans at release from involuntary hospitalization and termination of conservatorship), and AB 2275 (clarifying the time when a 72-hour involuntary hold begins and additional due process protections for individuals on involuntary holds). 

Hooper, Lundy & Bookman recently elevated five CSHA members to partnership, including publication committee member, Andrea Frey. When asked how she was celebrating the milestone, Andrea Frey reported that she had already gone out to a couple of fancy dinners and was also planning a trip to Albania and Greece. Congratulations!

A California court of appeal recently held that pharmaceutical manufacturers can be held liable for deferring development of a drug. Gilead Tenofovir Cases were coordinated cases brought by plaintiffs alleging that they had suffered adverse effects from using an HIV/AIDS drug developed by Gilead, tenofovir disoproxil fumarate (TDF). Instead of proceeding on the theory that TDF was defective, the plaintiffs alleged that their injuries were caused by Gilead’s ordinary negligence in deferring development of another HIV/AIDS drug, tenofovir alafenamide fumarate (TAF).

The Contraceptive Equity Act of 2022, effective January 1, 2024, marked a significant stride in reproductive rights and healthcare accessibility. According to the sponsors, during and after the pandemic, individuals experienced a lot of negative effects on their ability to get birth control and related care, creating barriers and delays. Further, after the U.S. Supreme Court overturned the constitutional right to an abortion, many states, including those who have kept broad access to abortion, have sought to increase contraceptive access. By mandating private and Medi-Cal insurance coverage for contraceptives in California, the Act sought to empower individuals to make informed decisions about their reproductive health without financial barriers. As an example, individuals can now pick up over the counter FDA-approved contraception, paid by their health insurance, without a prescription at in-network pharmacies. Additionally, individuals can now receive vasectomies at no additional cost other than what they pay for their monthly premiums. 

From everyone at CSHA we wish you and yours a happy new year. The next issue of the Weekly will be issued on January 9, 2024.

SB 487, passed in the last legislative session, revised Health and Safety Code (HSC) Section 123467.5 to clarify that abortion providers, and not just practitioners who perform abortions, are protected from civil liability under the statute. HSC Section 123467.5 was one of a trio of laws passed by the California legislature in 2022 in response to the U.S. Supreme Court decision in Dobbs v. Jackson’s Women’s Health Organization overturning their 1973 decision Roe v. Wade and sending decisions about the availability of abortion services back to each state. Under HSC 123467.5, as revised, California may not permit a court to consider a civil action brought by another state relating to a person or entity that seeks or receive an abortion, performs or provides one, or who attempt or intend to engage in conduct that aids or abets the performance or inducement of an abortion, nor can the courts or state enforce or satisfy a civil judgement in connection with another state’s civil action relating to abortion services. 

HSC Section 123467.5 was enacted at least partially in response to a Texas law permitting any Texas resident to take civil action against any individual or entity who, directly or indirectly, facilitates the performance of an abortion. HSC Section 123467.5 seems especially relevant this week in light of last week’s Texas Supreme Court decision prohibiting a 31-year-old Texas woman, who was more than 20 weeks pregnant, from obtaining an abortion after her physicians had informed her that her fetus had a genetic anomaly and was not expected to survive. Her physician believed that her health and future fertility were at risk if she did not end the pregnancy. The woman left Texas to terminate her pregnancy in another state after the Attorney General of Texas appealed the decision of a lower court granting her request for an abortion, and just hours before the Texas Supreme Court decision was issued.

AB 716 (Boerner), effective January 1, 2024, will end the surprise billing loophole for emergency medical services.  Under current law, consumers who use an out-of-network ambulance for emergencies can be hit with large “surprise” bills.  AB 716 will limit the amount covered patients are required to pay to the amount they would pay if the ambulance service was in-network (“in-network cost sharing amount”).  Emergency services providers will be prohibited from attempting to collect more than this amount from patients.  Health insurance plans will only be required to pay non-contracted ambulance providers the difference between the in-network cost sharing amount and a local rate.  These rates will be published by the Emergency Medical Services Authority by March 1, 2024.  AB 716 will also limit charges for patients who do not have insurance to the greater of the Med-Cal or Medicare rate.

The Office of Health Care Affordability (OHCA) published a notice and further revised draft text on November 28, 2023 of its proposed regulations on Cost and Market Impact Reviews (CMIR) for certain healthcare transactions, as discussed in the September 18 and 26 “Watching” posts. The latest proposed text has been revised since the previous draft dated October 9, 2023. According to the notice, OHCA intends to file its proposed emergency regulations with the Office of Administrative Law (OAL) within at least 5 working days. Filing with OAL will kick off a 5-­calendar day comment period and a 10-calendar day OAL review period. (Gov. Code § 11349.6.) Watch OHCA’s regulations page and OAL’s pending emergency regulations page for updates.