Health Headlines: May 2025

On May 14, 2025, Pennsylvania State Sen. Tim Kearney and State Rep. Lisa Borowski introduced legislation addressing private equity and corporate interests in healthcare. Pennsylvania Gov. Josh Shapiro is touting the companion bills, Senate Bill 322 and House Bill 1460, as an opportunity to prioritize patients over profits. This new round of legislation comes in the wake of the closing of 26 hospitals in the state within the past five years, including two closures of hospitals this year by Prospect Medical Holdings that were formerly owned by a private equity firm. The bills would grant the state attorney general increased power to scrutinize healthcare deals and require corporations to submit additional financial disclosures prior to completing hospital mergers and acquisitions. The bills would also bar sale-leaseback transactions by private equity firms. Similar legislation passed earlier this year in Massachusetts and Indiana, following a trend of state laws providing greater scrutiny of corporate and private equity deals in healthcare.

Information on SB 322, sponsored by Sen. Kearney, can be found here. Information on HB 1460, sponsored by Rep. Lisa Borowski, can be found here.

The United States filed a lawsuit on May 1, 2025, in the District of Massachusetts against three of the largest health insurance companies in the country — Aetna Inc., Elevance Health Inc., and Humana Inc. — and three large insurance broker organizations — eHealth Inc., GoHealth Inc., and SelectQuote Inc. — alleging violations of the False Claims Act and Anti-Kickback Statute from 2016 through at least 2021. The case was initially brought by a relator who is a former employee of eHealth. The United States subsequently intervened as plaintiff.

The complaint alleges that the health insurance companies “knowingly and willfully paid hundreds of millions of dollars in kickbacks” to the insurance broker to induce the insurance brokers to drive Medicare beneficiaries to enroll in these insurance companies’ Medicare Advantage, or Medicare Part C, plans. The complaint also alleges that Aetna Inc. and Humana Inc. “discriminated against beneficiaries who might be less profitable” by rejecting these beneficiaries’ referrals, filtering their phone calls, and strategically directing them away from these insurers’ plans.

This case, against some of the largest players in the health insurance industry, signals that the federal government continues to pay close attention to potential violations of the False Claims Act and Anti-Kickback Statute, particularly in healthcare. In discussing the case, US Attorney Leah B. Foley for the District of Massachusetts stated that “[p]rofit and greed over beneficiary interest is something we will continue to investigate and prosecute aggressively. This office will continue to take decisive action to protect the rights of Medicare beneficiaries and vulnerable Americans.”

The full complaint can be found here.

On May 16, 2025, a group of 23 states was granted a preliminary injunction against the US Department of Health and Human Services (HHS) and Robert F. Kennedy Jr. in his official capacity as HHS secretary. This injunction bars the agency from terminating $11 billion in public health grants.

The funds at issue were appropriated by Congress during the COVID-19 pandemic; defendants argued that the grants are no longer necessary because the pandemic has ended. The court, however, found that the funding “did much more than address COVID-related public health concerns” and, more broadly, that this decision was not one that HHS has authority to make in the way it did. In granting the preliminary injunction, Judge Mary McElroy of the US District Court for the District of Rhode Island — a Trump appointee — determined that “an injunction would strongly serve the public interest in maintaining the States’ healthcare systems and initiatives” and that HHS “do[es] not have unfettered power to further a President’s agenda, particularly when Congress appropriated this money to the States to fund their public health systems and initiatives.”

The complaint, filed April 1, 2025, alleged that HHS violated the Administrative Procedure Act (APA) by issuing termination notices for funding provided to the plaintiff states through grants such as the Substance Abuse Prevention and Treatment Block Grant and the Community Mental Health Services Block Grant, as well as grants from the Centers for Disease Control and Prevention. The complaint also alleged that the terminations were arbitrary and capricious agency action that amounts to substantive violations of the APA. Plaintiffs amended the complaint on April 8, 2025, to add allegations that the funding decisions were contrary to law, violated the separation of powers, violated the spending clause of the US Constitution, and exceeded the scope of HHS’s constitutional and statutory authority. The complaint sought declaratory and injunctive relief. The court previously issued a temporary restraining order on April 5, 2025.

The plaintiff states are Colorado, Rhode Island, California, Minnesota, Washington, Arizona, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Kentucky, Maine, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, and Wisconsin.

The order granting the injunction can be found here, and the complaint can be found here.

Revenue Cycle Management (RCM) is a core administrative function through which healthcare entities manage the financial aspects of patient care from the moment a patient schedules an appointment to their final payment. In recent years, in an effort to refocus critical time and effort toward patient care, the healthcare market has seen dramatic shifts in the way that administrative functions, like RCM, are operationalized, including outsourcing those functions to third parties and streamlining them with new digital technologies. Artificial intelligence (AI) is revolutionizing the automation of administrative tasks in every industry, and investors in healthcare are hopeful about AI’s positive impact on RCM.

A recent survey cited by the Healthcare Information Management Systems Society found that 85% of senior executives believe AI will improve efficiencies in RCM operations over the next five years. There is a particular focus on outsourced servicers who offer generative AI tools for this purpose.

While generative AI presents tangible benefits in the automation and acceleration of medical coding, clinical documentation, claims analysis, and more, it comes with certain risks and nuance. Such tools often contain a data set on which they are trained, and they maintain that data set throughout their life. Entities engaged in the production and training of AI models should aim to deidentify any protected health information (PHI) prior to allowing the model to ingest that data. Use of PHI in this manner without deidentification would require individual patient authorizations. Moreover, there is an open question as to how an AI tool’s use of a large data set of PHI would comport with the Health Insurance Portability and Accountability Act (HIPAA) minimum necessary standard.

Entities attempting to deidentify the data should ensure that such process is done in compliance with HIPAA as well. HIPAA permits deidentification through either a safe harbor method, which requires removing specific identifiers from the data, or expert determination, which requires a qualified expert to apply statistical principles to determine that the risk of reidentification is low.

The US Department of Health and Human Services is proposing updates to the HIPAA Security Rule that would require healthcare entities to conduct AI-specific risk assessments; these may include tracking how systems interact with PHI and identifying vulnerabilities related to these interactions. As AI continues to grow in its importance, it is likely that more regulation will be proposed and guidance will be provided.

In January’s newsletter, we reported on the Texas Attorney General filing suit against a New York physician, accusing the physician of unlawfully providing a Texas resident with abortion-inducing drugs; and in February’s newsletter, we provided an update on the case, reporting on the default judgment entered for the state. In March’s newsletter, we reported on the arrest of a midwife in Texas, the first such arrest under the state’s abortion ban.

Most recently, the Texas state legislature passed a bill that would revise Texas’s current abortion laws. Senate Bill 31 (S.B. 31), also known as the Life of the Mother Act, was passed by the Texas Senate on April 29, 2025, and by the House of Representatives on May 22, 2025. The bill was sent to Gov. Greg Abbott on May 27. If signed by Gov. Abbott, the bill would clarify when an abortion is “medically necessary” and thus permissible under the state’s near-total abortion ban. State law previously provided an exception to the abortion prohibition if the abortion was provided by a licensed physician; the pregnant person had “a life-threatening physical condition aggravated by, caused by, or arising from a pregnancy,” placing them either at risk of death or at serious risk of “substantial impairment of a major bodily function unless the abortion is performed”; and the abortion was performed in a manner that “provides the best opportunity for the unborn child to survive,” unless that manner would increase the risk to the pregnant person.

This bill would clarify that a provider need not wait for a pregnant person to “suffer any effects of the risk” associated with their high-risk pregnancy before intervening to provide abortion care. The bill states that the law “does not require a physician to delay, alter, or withhold medical treatment” when doing so would increase the risk to the pregnant person of death or substantial impairment of a major bodily function. The bill specifies that examples of “reasonable medical judgment” in providing an abortion would include removal of an ectopic pregnancy or removal of a deceased fetus following a spontaneous abortion.

This follows the high-profile lawsuit in Zurawski v. State of Texas, in which 22 plaintiffs alleged that they faced significant risks to their health and lives after being denied abortion care due to the uncertainty around the medical exceptions to the state’s abortion ban and when they apply. In its 2024 decision, the Texas Supreme Court did not clarify when a medical exception to the ban could apply.

The full text of the bill as enrolled can be found here.

On May 13, 2025, a Michigan judge, in Northland Fam. Plan. Ctr. v. Nessel, found in favor of the plaintiffs in their challenge to the state’s abortion regulations. The plaintiffs — family planning centers and the organization Medical Students for Choice — sued state officials, seeking a declaration that four abortion regulations were unconstitutional under the Reproductive Freedom for All (RFFA) amendment to the state constitution. RFFA is the result of a 2022 ballot measure, when Michigan voters voted to “enshrine[] a right to reproductive freedom in the Michigan Constitution.”

The four regulations at issue were “a 24-hour mandatory waiting period, mandatory uniform informed consent for patients seeking an abortion, mandatory screening for coercion to abort, and a ban on advance practice clinicians ... performing an abortion.” The court found that three of these regulations were unconstitutional. The plaintiffs also sought — and were granted — a permanent injunction prohibiting enforcement of the three regulations the court found to be unconstitutional.

The court found that the mandatory waiting period, mandatory consent and counseling, and the prohibition of any medical providers who are not physicians in providing abortion care were all unconstitutional. The court held that these restrictions “burden or infringe upon individuals’ reproductive freedom, are not based on a compelling state interest to protect the health of individuals seeking abortion care, are not consistent with the accepted standard of care and evidence-based medicine and infringe on autonomous decision-making.”

The court let stand one of the challenged regulations: the “mandatory screening for coercion to abort.” The court found that the plaintiffs did not demonstrate that the coercion screening requirements impose a burden or infringe upon access to abortion care.

The full text of the order can be found here.