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Welcome
Welcome to our sixth issue of 2026 of The Health Record -- our healthcare law insights e-newsletter.
In this edition, Will Thompson and Chris Arthur look at the issue of medical billing, COVID loans and the current administration’s efforts to ramp up enforcement under the False Claims Act. We also look at a recent judicial decision striking down CMS’s efforts to override certain provisions of the Affordable Care Act, a recent bill presented by North Carolina lawmakers regarding the use of artificial intelligence in medical billing, the impact of the recent surge in fraud enforcement activities on hospice agencies, the latest regarding hospital billing transparency, concerns about the use of artificial intelligence in CMS’s WISeR pilot program, the use of artificial intelligence by hospice agencies, how artificial intelligence and telemedicine are impacting efficiency in health care, the impact of telehealth on the use of obesity drugs, and how telemedicine has or has not impacted care. We also dive into the growth of medi-spas and what to watch for in terms of legal issues.
We are pleased to announce that several of the firm’s practice groups and attorneys, including our Healthcare practice, were recognized in the 2026 edition of Chambers USA, a directory of leading law firms and attorneys. Chambers and Partners annually researches the strength and reputation of law firms and individual lawyers across the globe. The evaluation process includes interviewing lawyers and their clients, including influential general counsel at Fortune 100 companies, high-profile entrepreneurs, and significant purchasers of legal services. Considerable credence is given to the opinions of clients. Click here to learn more.
Thank you for reading!
Brienne T. Marco
Member, Chair of the Corporate Department, Co-Chair of the Health Care Practice Group, and Editor of The Health Record
| | Errors in Billing in the United States May Result in Severe Civil or Even Criminal Penalties | | |
By William S. Thompson and Christopher R. Arthur
The United States Department of Justice (DOJ) has ratcheted up its efforts to pursue actions against corporations, healthcare entities, and individuals, including physicians, for false Medicare or Medicaid billing and COVID-19-related loans. Billing claims that are deemed misleading may result in a DOJ investigation. DOJ touted a record $6.8 billion in False Claims Act (FCA), 31 U.S.C. §§3729-3733, recoveries in fiscal year 2025. On June 23, 2026, DOJ announced 455 arrests, including a number of physicians, for allegations of healthcare fraud and opioid abuse. This aggressive enforcement appears to be a top priority of the current administration.
Click here to read the entire article.
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“A federal judge has struck down key provisions in a CMS rule overhauling the Affordable Care Act, in a setback for the Trump administration’s push to combat fraud that critics argue is a smokescreen for weakening the exchanges set up by the Obama-era law.”
Why this is important: The ruling is not really a surprise, but a federal judge has vacated several key components of the administration’s 2025 rules changes governing the Affordable Care Act’s marketplaces. The ruling is not a surprise because Maryland District Judge Brendon Hurson had already enjoined many of those same provisions.
Saying that The Centers for Medicare & Medicaid Services (CMS) “cannot utilize its general rulemaking authority to override explicit statutory provisions,” the Court eliminated many elements of the regulation, such as a shortened enrollment period for the 2027 plan year, new eligibility verifications for special enrollment periods, and plans to eliminate a 60-day extension that would allow individuals to address inconsistencies in household income. In addition, the court struck down the proposed five-dollar penalty for automatic re-enrollments and the revocation of guaranteed coverage for people who have past-due premiums. The Court did allow changes to how CMS will calculate premium adjustments, saying that the rule did successfully support the argument for those updates.
While this decision stabilizes planning for the 2027 plan year, many of the Agency’s changes were also codified in the tax and policy mega bill that Congress passed last year, including effectively ending autorenewals and requiring enrollees to update income information more frequently or risk losing coverage. Those changes are set to go into effect in 2028. --- Eric E. Kinder
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“The amended bill presented to the Senate Health Committee would prohibit software developers from designing, training, or modifying AI systems for use in healthcare coding if the AI system is designed to ‘promote, incentivize or result in upcoding.’”
Why this is important: Some North Carolina lawmakers are attempting to address growing concerns of many regarding the use of AI in the medical field. Senator Amy Galey (R-Alamance) has introduced an amended bill (HB 565) to the North Carolina Senate Health Committee to prohibit AI from being used by medical care providers to “promote, incentivize or result in upcoding.” The problem, some detractors argue, is that the practice of upcoding (electing a higher billing code over a lesser code) is already illegal in North Carolina.
North Carolina faces a billion-dollar gap in Medicaid funding for the upcoming year and North Carolina Republicans believe this bill is one measure to address the budget issue. Democratic representatives contend that the bill is not needed. The bill requires medical care professionals to attest that they agree to comply with AI upcoding standards. Some lawmakers believe this requirement to be unnecessary. Most hospitals and doctors argue that AI is used solely for transcribing notes and that the requirements of this bill will limit the power of medical professionals to make independent decisions regarding patient care.
Senator Galey asserts that the Bill is not meant to limit the medical judgment of professionals; it is designed to look at the actual computer codes being used to ensure that higher codes are not auto-selected to produce higher payments to providers. North Carolina Republicans have expressed concerns that AI bots will be the first line of care for Medicaid and Medicare patients. North Carolina is at a crossroads between increased healthcare costs and the autonomy of medical care professionals in providing care. The North Carolina Senate Judiciary will now review this bill and attempt to address all concerns. --- Lynn P. Michael
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“In some cases, the fraud schemes involved bilking millions in federal dollars that were intended to provide end-of-life care to terminally ill individuals.”
Why this is important: Earlier this year, the Centers for Medicare & Medicaid Services (CMS) announced a nationwide initiative to protect Medicare beneficiaries and taxpayer dollars through implementation of a six-month, data-driven moratoria on new Medicare enrollment for hospices and home health agencies (HHAs) – which include hospice providers. This effort is in coordination with Vice President Vance’s Anti-Fraud Task Force and continues the crackdown on fraud, waste and abuse in the Medicare program by stopping improper billing and preventing bad actors from entering the system. The moratorium is supported by a national nonprofit hospice organization, the National Partnership for Healthcare and Hospice Innovation (NPHI), which in March sent a letter to CMS asking federal regulators to temporarily halt enrollment of new hospice providers, citing concerns about fraud and potential harm to patients. In supporting the pause in enrollment, NPHI contends that it allows CMS to focus on identifying and removing fraudulent providers already operating, while preventing additional questionable providers from entering the system.
This initiative has resulted in significant recent activity by the United States Department of Justice (DOJ), which announced on June 23, 2026, that this coordinated effort has produced charges against 455 defendants, including 90 physicians and other licensed medical professionals, for their alleged participation in healthcare fraud and false claims involving over $6.5 billion. The DOJ touted “unprecedented international cooperation” over a two-week period that resulted in the following:
- Actions by the Centers for Medicare and Medicaid Services (CMS) to suspend 1,079 providers and revoke billing privileges for 1,403 providers.
- 48 Civil Monetary Payment settlements amounting to over $73 million, over 1,400 provider exclusions, and 25 actions by the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) under the Civil Monetary Penalties Law seeking more than $10 billion in payments to the Medicare Trust Fund from payments that CMS caught and suspended before the funds were paid to the fraudulent providers.
- Civil charges against 13 defendants for $14.8 million in healthcare fraud schemes, as well as civil settlements with 31 defendants totaling $23 million.
- 928 administrative cases by the Drug Enforcement Administration (DEA) seeking the revocation of authority to handle and/or prescribe controlled substances since October 1, 2025.
The wide scope of the increased enforcement and oversight has also resulted in legitimate hospices ramping up their compliance strategies in response. Legitimate providers are sometimes swept up in the federal effort, and some have been forced to close their doors as a result. Hospices under suspension receive notice from CMS’s Unified Program Integrity Contractors (UPIC), citing “credible allegations of fraud” and stating that they are under investigation. The suspensions are for 180 days but can be extended for as long as 360 days. The targeted hospices have 15 days to file a response in opposition to the suspension, explaining why they are operating legitimately. One major issue for these hospice providers is that the suspension remains in place during the investigation by CMS – resulting in what some providers perceive to be a presumption-of-guilt standard in which innocence must be proven. While on suspension, there are no reimbursements to the provider being investigated – which can result in major disruption to the hospice’s revenue cycle and ability to continue its operations. The scope and unpredictability of the enforcement actions have had an unintended consequence of disrupting end-of-life care for some patients, as well as forcing a concentration of more patients, who are being transferred by the hospices under investigation and financial strain, among larger for-profit hospice chains. --- Michael S. Garrison
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“Hospitals could be fined up to $2 million annually should they fail to comply.”
Why this is important: President Trump issued an executive order mandating that hospitals make pricing information available to patients for 300 commonly provided services. This order took effect on February 25, 2025, so failure to comply by now seems curious and should certainly be corrected by the 11 hospitals in North Carolina that have been called out by the Trump administration for their failure to comply. Transparency in billing is and has been gaining steam for many years, and with private insurance providing less and less coverage for procedures, it is becoming even more critical that medical providers provide transparency in billing. Indeed, as medical providers compete for patients/services, transparency in billing will be paramount in those competitive efforts. --- Matthew W. Georgitis
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“Hospices need to carefully weigh the opportunities alongside potential impacts on clinical documentation, operational burden and organizational culture.”
Why this is important: This is an important message from Dr. Lalor at the Hospice News ELEVATE conference for the proper integration of improved efficiencies from artificial intelligence (AI) to provide best-in-class patient care. AI is rapidly transforming healthcare, but its introduction into hospice care requires a uniquely delicate approach. As technology integrates into the deeply personal space of end-of-life care, clinical and human oversight must remain the foundation of any AI utilization to ensure patient safety and emotional well-being. --- H. Dill Battle III
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“Powered by artificial intelligence, the program — called the Wasteful and Inappropriate Service Reduction Model, or WISeR — is intended to save the federal government money and protect patients from potentially unsafe or unneeded care.”
Why this is important: The Centers for Medicare & Medicaid Services (CMS) launched the Wasteful and Inappropriate Service Reduction (WISeR) Model in January 2026 as a pilot program in six states—Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington—to test the use of prior authorization in traditional Medicare. The initiative applies to 13 medical services considered vulnerable to fraud, waste, or overuse, including epidural injections, skin substitutes, and kyphoplasty procedures. Powered in part by artificial intelligence, the program is intended to reduce unnecessary care, lower Medicare spending, and expedite approval of medically appropriate services.
Despite these goals, the program's implementation has generated significant concerns among patients and healthcare providers. Many participants report confusion, administrative burdens, treatment delays, reimbursement backlogs, and inconsistent authorization decisions. Physicians indicate that the rapid rollout left little time to prepare, requiring practices to adapt to new submission systems and documentation requirements with minimal guidance.
Although CMS states that AI is used to streamline approvals and that most qualifying requests receive prompt authorization, providers report delays extending for weeks, postponed procedures, and denials they believe are based on factual inaccuracies or flawed AI-assisted reviews. Some patients have experienced additional office visits, delayed treatment, or sought more costly emergency care while awaiting authorization.
The program has also increased administrative responsibilities for providers, who must submit extensive documentation, respond to repeated information requests, and pursue appeals when claims are denied. These additional appeals create further costs for Medicare while increasing burdens on physicians and patients. Critics question whether the program reduces overall healthcare spending or simply shifts costs through longer wait times and greater administrative complexity.
CMS maintains that WISeR is designed to prevent inappropriate care without delaying necessary treatment and continues to monitor provider feedback to improve the program. While officials have stated that no expansion is currently planned, many healthcare providers believe the pilot could eventually lead to broader use of prior authorization throughout traditional Medicare if it demonstrates measurable cost savings. --- Shane P. Riley
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“But the companies often have another job: limiting obesity drug costs for employers.”
Why this is important: Telehealth companies managing obesity treatments have surged in popularity, but primary care providers are increasingly concerned about the advice these platforms give. Specifically, many telehealth providers are instructing patients to stop taking their weight-loss medications, which often leads to patients regaining the weight they lost. Dr. Catherine Varney, the obesity medicine director for UVA Health in Charlottesville, Virginia, expressed alarm over telehealth providers, frequently hired by employers to manage costs, pressuring her patients to discontinue their treatments.
Hoping to capitalize on the booming GLP-1 market, many telehealth companies now offer "wrap-around services" for weight loss. However, traditional medical providers argue that these companies are giving advice outside their scope of practice and are using their services to gatekeep access to the drugs. Dr. Carolynn Francavilla, Vice President of the Obesity Medicine Association, noted, “Too often, these telehealth companies seem to be prioritizing gatekeeping the medications and keeping costs down over the needs of patients.”
While current litigation surrounding GLP-1 medications and telehealth platforms has primarily focused on compounded medications, the legal landscape is shifting. Legal battles are expected to soon expand into the corporate sphere, targeting telehealth companies hired by employers to manage employee weight-loss benefits. --- Sara E. Chapman
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“The findings could ease concerns that the expansion of telemedicine would trigger spikes in usage and the nation’s already high health care costs.”
Why this is important: The CMS telemedicine flexibilities adopted during the pandemic, including payment parity, waived geographic restrictions, and eliminated cost-sharing, are set to expire in 2027, and lawmakers must decide whether to make them permanent. Opponents have raised concerns that easier access to virtual care would drive runaway utilization and cost growth. However, a new UCLA-led research study found that telemedicine use did not significantly increase visits or medical spending across Medicare fee-for-service, Medicare Advantage, dual-eligible Medicaid or commercial insurance populations. At the same time, the findings suggest telemedicine has functioned more as a substitute for in-person care than as a true expansion of access, tempering optimism that it would meaningfully close gaps for underserved populations. For policymakers, the study provides empirical grounding—rather than speculation—for a decision with implications for healthcare access and federal spending. --- Brienne T. Marco
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“'Current medical licensing laws require clinicians to have separate certifications depending on the state they’re treating patients in, Miller added.’”
Why this is important: Health system leaders believe that artificial intelligence and virtual care technologies can help address persistent workforce shortages, rising rates of chronic disease, and limited access to care in underserved communities. Technologies such as telemedicine, ambient AI medical scribes, automated referrals, and AI-powered clinical decision support are improving efficiency, reducing administrative burdens, and allowing clinicians to spend more time with patients.
Several large health systems have expanded their use of these tools. Virtual care platforms enable providers to determine which patients can safely receive care remotely, while AI assistants help patients understand health information and automate routine administrative tasks. Ambient AI scribes reduce documentation time, allowing clinicians to reclaim significant portions of their workday. Other AI applications are improving clinical decision-making by analyzing patient records to identify health risks, increasing diagnostic accuracy, and generating more effective referrals. Health systems are also exploring technologies such as robotic surgery to further enhance patient care.
Despite these advances, healthcare executives contend that technology alone cannot resolve structural challenges within the healthcare system. They argue that reimbursement policies should better support preventive care, care navigation, and value-based payment models that reward improved patient outcomes rather than the volume of services provided. They also advocate for modernization of physician licensing requirements, noting that state-by-state licensure limits the expansion of telemedicine and restricts patients' access to qualified providers across state lines.
Health system leaders conclude that realizing the full benefits of AI and digital health technologies will require complementary regulatory reforms, including updated reimbursement policies and streamlined licensing frameworks that allow providers to deliver care more efficiently and expand access to patients regardless of location. --- Shane P. Riley
| | Featured Attorneys Question & Answer | | This is our Featured Attorney Q&A to introduce you to our large healthcare law team. To help you get to know our team a little better, we are highlighting attorneys in each issue by asking them a healthcare-related question. We hope their responses will be insightful for you. | |
Brienne T. Marco
Member; Chair, Corporate Department; Co-Chair, Health Care Practice Group
Office 304.720.4060
bmarco@spilmanlaw.com
Q: The medi-spa industry has grown exponentially in recent years. As someone who has worked with providers in this field, what are the main legal issues you watch for when consulting with new medi-spa providers entering the field?
A: One of the first legal issues someone seeking to enter the medical spa industry may encounter is determining who can own the business. Most states have some form of corporate practice of medicine (CPOM) doctrine, which prohibits general business corporations or unlicensed entities from practicing medicine or employing licensed physicians to practice medicine, and many states prohibit a non-physician from owning or controlling a medical practice. Few states have straightforward statutory prohibitions. Instead, states have developed restrictions and exceptions through various mechanisms, including statutes and regulations, case law, and attorney general opinions. Medi-spas sit right at the fault line of the CPOM doctrine because they blend cosmetic and spa services such as facials and dermaplaning with medical procedures, such as neurotoxins, dermal fillers, laser treatments, chemical peels, IV therapy, and hormone therapy.
The typical workaround in states with a strict CPOM doctrine is a Management Services Organization (MSO) model, where a physician-owned medical corporation or professional limited liability company holds the medical license and provides the clinical services, and a separately owned MSO handles non-clinical functions (like marketing, billing, human resources, real estate, or equipment leasing) under a Management Services Agreement. The Management Services Organization structure must be carefully constructed to ensure that the MSO is not creeping into the practice of medicine. Fee structures that look like profit-splitting on medical services, control over the hiring and firing of clinical staff, control over clinical protocols, or termination provisions that effectively let the MSO dictate medical decisions must be avoided. Many states separately prohibit splitting professional fees with non-physicians, even when CPOM ownership rules are satisfied. An MSO management fee structured as a percentage of medical service revenue (rather than a flat fee or fair-market-value fee for actual services rendered) is a common red flag.
Licensure and scope of practice issues are also a major concern for someone seeking to break into this industry. Who can legally perform each type of procedure (e.g., laser hair removal, microneedling depth thresholds, certain peels) is set state-by-state, sometimes by the cosmetology board, sometimes by the medical or nursing board, and they don’t always agree with each other. Some states allow Nurse Practitioners or Physician Assistants to inject under general physician supervision; others require the physician to be on-site, within a certain mileage radius, or to personally perform an initial exam before any delegated treatment. Many medi-spas rely on physician-signed standing orders or protocols to authorize nurse injectors. States differ on whether a remote “medical director” who has never actually seen the patient can lawfully authorize this.
The bottom line is that medical spa businesses are at the intersection of cosmetic services and medical practice, governed by a patchwork of state-specific rules that rarely speak to medi-spas directly and often don't speak to each other. A structure that satisfies CPOM ownership requirements may still run afoul of fee-splitting prohibitions; a delegation model that works for nurse injectors in one state may constitute unauthorized practice in the next. There is no off-the-shelf template that works across jurisdictions, and even well-intentioned operators can find themselves out of compliance simply because they modeled their business on a competitor licensed elsewhere. For anyone entering this space, the safest course is to build the ownership structure, management agreement, and clinical delegation protocols around the specific licensing board rules and CPOM framework of the state where the practice will operate — ideally with counsel involved before the lease is signed, not after the board sends a letter.
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