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HCC CEO Bob Cimasi Recognized as a "Pioneer of the Profession" Under NACVA's "Industry Titans" Awards
HCC CEO Robert James Cimasi, MHA, ASA, FRICS, MCBA, CVA, CM&AA, has been named a "Pioneer of the Profession," by the National Association of Certified Valuators and Analysts (NACVA) and Consultants Training Institute (CTI) as part of their Silver Anniversary recognition luncheon of valuation "Industry Titans," held on June 10, 2016, during their 25th Annual Conference in San Diego. Mr. Cimasi joins valuation profession luminaries, including: Dr. Shannon P. Pratt, Chris Mercer, James R. Hitchner, Roger J. Grabowski, Richard Wise, Jay E. Fishman, Nancy Fannon, Honorable Judge David Laro, Howard Lewis, and Mel H. Abraham, along with fourteen others, in receiving this honor. Congratulations to Bob Cimasi and his fellow "Pioneer of the Profession" honorees from the HCC Team and Topics Staff!

FTC v. Pinnacle: Antitrust Concerns vs. Reform-Based Consolidation
On May 9, 2016, the U.S. District Court for the Middle District of Pennsylvania denied the Federal Trade Commission (FTC) and Pennsylvania Attorney General's motion for a preliminary injunction to prevent the merger of Penn State Hershey Medical Center (Hershey) with PinnacleHealth System (Pinnacle). The motion was filed in an effort to stop Hershey and Pinnacle "...from taking any steps toward[] consummating their proposed merger pending the completion of the FTC's administrative trial on the merits of the underlying antitrust claims." In denying the FTC's motion, the court concluded that: (1) the FTC's "...relevant geographic market is unrealistically narrow and does not assume the commercial realities faced by consumers in the region"; and, (2) the equitable factors stemming from the merger "weigh in the public interest." While the decision on the relevant geographic market provided the primary basis for denying the injunction, the opinion's discussion on equitable considerations provides a new example of the tension between antitrust enforcement and reform-based consolidation, stating, "[w]e find it no small irony that the same federal government under which the FTC operates has created a climate that virtually compels institutions to seek alliances such as the [h]ospitals intend here." This Health Capital Topics article will discuss the Hershey-Pinnacle litigation, as well as, the "efficiencies defenses" presented and the implications of these defenses in future hospital merger cases and antitrust enforcement in the evolving healthcare market. (Read more...)

"Pharmacy on Demand" To Revolutionize Drug Manufacturing
A new device, titled a "pharmacy on demand," is capable of producing 1,000 distinct pharmaceutical drugs, with the device being tested on generic drugs to start, in a 24-hour period. The Massachusetts Institute of Technology (MIT), in conjunction with the Defense Advanced Research Projects Agency (DARPA), recently developed this device with the potential to revolutionize the pharmaceutical industry by condensing the time and steps required to manufacture drugs. The current prototype consists of reconfigurable components, e.g., reactors, precipitation tanks, and filtration and crystallization units, that are added or removed depending on the drug being created. The current iteration of the device, which is the size of a standard kitchen refrigerator, utilizes continuous manufacturing techniques, which eliminates many of the steps required to create pharmaceuticals under traditional batch processing methods. Recent developments suggest that this device may eventually be located in military battlefield hospitals, hard to reach areas, traditional hospitals, and pharmacies, as researchers have demonstrated the device's current capabilities to produce pharmaceuticals commonly utilized in an inpatient setting, including Benadryl, Valium, Prozac, and a local anesthetic. This Health Capital Topics article will discuss the advent of this new technology, and briefly detail recent initiatives by private and public entities for expanding the use of continuous manufacturing techniques, such as the "pharmacy on demand," as well as, the differences between continuous and batch manufacturing. (Read more...)

Pharmaceutical Pay-for-Delay Agreements in Decline Since 2013
Between 2005 and 2013, the amount of pharmaceutical "pay-for-delay" agreements increased dramatically, from three (3) to 40. Pay-for-delay agreements, also known as reverse payments, allow brand-name pharmaceutical companies to delay generic competition to a brand-name drug by paying a generic competitor to hold its competing product off the market for a defined period of time. The Federal Trade Commission (FTC), which has been fighting these agreements since 2001, stated that these pay-for-delay agreements cost consumers an average of $3.5 billion in higher drug costs per year. Following an Eleventh Circuit decision in 2005, where the court held that pay-for-delay agreements "cannot be the sole basis for a violation of antitrust law," pay-for-delay agreements reemerged, increasing steadily each year until 2013, when they began to decrease significantly in response to the June 2013 U.S. Supreme Court decision Federal Trade Commission v. Actavis, Inc. The Supreme Court held that pay-for-delay agreements are neither presumptively valid or presumptively in violation of federal antitrust law, but should be examined under a "rule of reason" analysis to determine whether the agreement results in anticompetitive effects. This decision makes it possible for pay-for-delay agreements to be the basis for a violation of antitrust law, and has caused the number of these agreements to decrease; however, brand-name pharmaceutical companies are still using a number of other strategies to potentially stifle competition for their branded products. This Health Capital Topics article will briefly describe pay-for-delay agreements, the history of such agreements pre-Actavis, and the evolution of the competitive environment surrounding pharmaceutical patent disputes post-Actavis. (Read more...)

Rural Hospital Closure Rates Higher in Non-Medicaid Expansion States
Since the passage of the Patient Protection and Affordable Care Act (ACA) in March of 2010, the number of rural hospitals closing per year has significantly increased, from three (3) rural hospitals closing in 2010 to seventeen (17) rural hospitals closing in 2015, out of a total of 2,258 rural hospitals in the U.S. in 2015. This alarming trend in the increased closure rate of rural hospitals has continued into 2016, with eleven (11) rural hospitals closing from January to May of 2016. Of the total number of rural hospital closings since 2010, approximately 85% of the closings occurred in states that have not, or had yet to, expand the Medicaid programs in their state. This Health Capital Topics article will present an overview of the recent increase in the number of rural hospital closures in the U.S., as well as, explore the causes behind this growing problem, including the potential correlation between rural hospital closures and the lack of Medicaid program expansion. (Read more...)

Practice Loss Postulate: Regulatory Barrier to Healthcare Integration
There has been increased federal, state, and local regulatory scrutiny regarding the legal permissibility of vertical integration transactions in healthcare, with government regulators challenging these transactions under various federal and state fraud and abuse laws, basing their arguments, in part, on the concept that the acquisition of a physician practice, which then operates at a "book financial loss," is, in and of itself, dispositive evidence of the hospital's payment of consideration based on the volume and/or value of referrals. The underlying principle of this concept, termed the Practice Loss Postulate (PLP) and derived from cases such as U.S. ex rel. Drakeford v. Tuomey Healthcare System, as a harbinger case, as well as, U.S. ex rel. Parikh v. Citizens Medical Center, U.S. ex rel. Reilly v. North Broward Hospital District, et al., and U.S. ex rel. Payne, et al. v. Adventist Health System, et al., appears to be the allegation that hospitals enter into these arrangements in order to induce legally impermissible referrals from physicians, thus generating margins/profits that offset those "book financial losses" associated with the acquired physician practices. The current trend in the regulatory application of the PLP to challenge vertical integration in healthcare is misguided and imprudent, in that: (1) the PLP misapplies established and accepted economic thought; and, (2) the PLP represents a less than rational interpretation and application of the threshold of commercial reasonableness. This Health Capital Topics article provides an abstract of this argument against the application of the PLP, and future issues of this e-journal will explore this emerging regulatory topic in greater detail. (Read more...)