Supreme Court term mixed bag for healthcare industry

Last year, healthcare leaders had their eyes trained on one big case – King v. Burwell – and they celebrated when the justices voted to uphold a key provision of the Affordable Care Act.

This year wasn't nearly so straightforward for healthcare leaders watching the Supreme Court, which wrapped up its latest term last week. At least half a dozen notable cases fragmented healthcare wonks' attention. The outcomes of those cases left some in the industry cheering and others wringing their hands.

Healthcare-related cases focused on abortion, the ACA's contraception mandate, patents, unions, claims data and the False Claims Act, among other topics. And the mid-term death of Justice Antonin Scalia looks to have affected the outcomes of some of those cases.

“There were just a lot of cases that were considered that were very disparate,” said Tim Jost, a professor who focuses on health law at Washington and Lee University in Virginia.

One of the most talked-about cases, Whole Woman's Health v. Hellerstedt, was over a Texas abortion law that limited women's access to abortion. The justices decided, 5-3, to strike the law, which required doctors performing abortions to have admitting privileges at local hospitals, and it required clinics to meet the same standards as ambulatory surgical centers.

That decision could lead to litigation over similar laws in dozens of other states, clearing the way for easier access to abortion services across the country. Many declared the decision the court's most significant one on abortion in decades.

Jost wondered whether the decision might have gone the other way had Scalia lived. Scalia would very likely have sided with Texas, and maybe he would have been able to persuade Justice Anthony Kennedy to his side as well, Jost said.

“He was pretty persuasive,” Jost said of Scalia.

Another case that grabbed the public's interest was Zubik v. Burwell, a case over how religious not-for-profits must respond to the ACA's requirement that employers offer workers birth control coverage. A current Obama administration workaround requires religious not-for-profits that want to opt out of contraception coverage to notify their third-party administrators or provide information to HHS so the government can arrange for other coverage for employees. The not-for-profits argued that providing such information or notification made them complicit in helping their employees get contraception, in violation of their religious beliefs.

The court ultimately decided to punt cases over the issue to lower courts, asking those courts to help reach compromise decisions.

The abortion and contraception cases were striking, but perhaps not as relevant to healthcare business as another decided this term, Gobeille v. Liberty Mutual Insurance Co. The justices' 6-2 decision in that case was a win for insurers and a loss for states trying to reform healthcare.

The court decided that the federal Employee Retirement Income Security Act, known as ERISA, protects self-funded insurers and their third-party administrators from having to share certain data with states. In the case, Vermont argued it needed the data – such as on claims and member eligibility – to add to its all-payer database, which it intended to use to improve the cost and effectiveness of healthcare. But the insurer in the case, Liberty Mutual, said it didn't have to share that data under ERISA.

“From my perspective, Gobeille was a big step backward,” said Nicholas Bagley, a law professor at the University of Michigan. “Gobeille makes it much more difficult for states to try new approaches to reducing healthcare spending and improving quality.”

Business and insurance industry advocates, however, praised the decision, saying it would keep insurers from getting tangled in conflicting patchworks of state laws and requirements.

Decisions in several patent cases this term could also help some healthcare-related businesses – and hurt others. A decision in Cuozzo Speed Technologies v. Lee could make it easier for generic-drug makers to challenge brand-name drugmakers' patents. The justices affirmed a lower court ruling allowing the U.S. Patent and Trademark Office's Patent Trial and Appeal Board to continue using a broader standard than federal courts when it comes to interpreting patent claims. Many argue that the broader standard makes it easier for challengers to invalidate patents.

Another Supreme Court decision in a pair of consolidated patent cases could make it easier for medical-device makers to win large financial damages from companies that infringe on their patents. The justices invalidated a test now used by courts to determine whether a company has willfully infringed on a patent and is, therefore eligible for triple damages. The court said in its unanimous opinion that the test was too stringent.

The Supreme Court typically takes one False Claims Act case per term, said Larry Freedman, a member at Mintz Levin Cohn Ferris Glovsky and Popeo. This term, that case was Universal Health Services v. United States ex rel Escobar.

Providers watched the case closely because it had the potential to allow more False Claims Act suits against them, or potentially fewer. Ultimately, the justices chose a middle path.

They unanimously upheld a legal theory now used to bring any fraud cases against providers known as implied certification. Under that theory, providers can be held liable for submitting false claims to government programs for failing to follow certain regulations even if the government never explicitly stated that following the regulations was a condition of payment and even if the provider never explicitly vouched that it had complied with the regulations.

But the high court also tried to limit when the theory may be used, saying in order for it to apply, an organization's failure to reveal it didn't comply with material requirements that might render representations about its goods or services misleading.

Justice Clarence Thomas, who wrote the opinion, wrote that the False Claims Act cannot be used as “a vehicle for punishing garden-variety breaches of contract or regulatory violations.”

Whistle-blower attorneys were encouraged by the ruling, and for providers, it may be a mixed bag, Freedman said. The ruling should help weed out some of the more frivolous False Claims Act allegations against them, but it also raises questions about what exactly would be considered material in such cases, he said.

Scalia's absence also made a big difference in Friedrichs v. California Teachers Association. In that case, the court deadlocked at 4-4 on the issue of whether public employees unions may continue to charge dues to nonmembers who benefit from their collective bargaining activities. The tie vote automatically affirmed a lower court's ruling that unions may continue to charge the dues.

Though the case involved teachers' unions, it will affect unions at public hospitals as well. More than 21% of the U.S. hospitals are owned by federal, state or local governments, according to the American Hospital Association.

Jost said the case “may be one of the most important for healthcare in the long run because there are a lot of public healthcare facilities that are unionized.”

“Scalia's absence there made a huge difference between making a dramatic change in the law and leaving the law the way it is,” Jost said.

Also notable this term were the cases the Supreme Court turned away.

In a disappointing turn for the home healthcare industry, the Supreme Court decided not to take Home Care Association of America, et al. v. Weil, a case challenging a new Labor Department rule that requires higher wages for many home healthcare workers. The high court's decision not to hear the case means the decision of the lower court, which upheld the rule, stays in place.

The justices also declined to hear a challenge to a Washington state regulation that says pharmacies cannot refuse to fill certain prescriptions because of religious beliefs. The justices' refusal to take that case, Stormans v. Wiesman, means the regulation stays in place. It's a decision that surely would have been different had Scalia lived. The three most conservative justices dissented from the court's decision not to hear the case. Scalia would have likely joined that crowd, delivering the fourth vote needed to get the case in front of the full court.