Category: Healthcare
Clear ResultsBusiness
Pennsylvania Supreme Court Narrows Scope of Workers’ Compensation Anti-Referral Provision: Implications in Light of Federal Physician Self-Referral Law
On June 16, 2026, the Pennsylvania Supreme Court issued a significant decision interpreting Section 306(f.1)(3)(iii) of the Workers’ Compensation Act (the “Act”), commonly known as the Anti-Referral Provision. The Court held that the placement of the phrase “goods or services” following a list of enumerated medical services does not operate as a broad catch-all prohibition on physician self-referrals. Instead, the Court concluded that the statutory prohibition is limited strictly to the specifically enumerated services that precede that phrase. As a result, physician self-referrals to pharmacies in which they hold a financial interest (e.g., ownership interest or compensation arrangement) fall outside the scope of the Act’s anti-referral restriction. Employers and insurers are therefore required to reimburse for reasonable and necessary prescriptions, even where the prescribing physician has a financial interest in the dispensing pharmacy. This ruling represents a major shift in the interpretation of Pennsylvania’s healthcare cost-containment framework and invites comparison to the federal Ethics in Physician Self-Referral Law, 42 U.S.C. § 1395nn (“Stark Law”) enacted in 1989 and later expanded in 1993. Background The case arose from multiple consolidated claims involving two (2) physicians who issued prescriptions filled by 700 Pharmacy, an entity in which they held a financial interest. When the State Workers’ Insurance Fund (“SWIF”) denied payment for those prescriptions, the pharmacy filed Medical Fee Review Applications seeking reimbursement. The applications were denied at the administrative level, when the hearing officer concluded that the prescriptions constituted unlawful self-referrals under the Act. The Commonwealth Court affirmed that determination, relying on what it viewed as the plain language of the statute. In its view, the phrase “goods or services” reflected a deliberate legislative choice intended to broadly encompass all forms of medical care, including pharmaceuticals and pharmacy services. Supreme Court Opinion The Pennsylvania Supreme Court reversed. The majority applied a textualist approach, concluding that the statutory language does not extend beyond the specific categories of medical services expressly listed in the provision. Because prescription drugs and pharmaceutical services are not included among those specified categories, the Court held that they fall outside the scope of the Anti-Referral Prohibition. In doing so, the Court rejected the argument that “goods or services” should function as a residual clause capturing all forms of medical treatment. Instead, it interpreted the statute as intentionally limited, declining to expand its reach based on broader policy considerations. Two dissenting opinions highlight the stakes of that interpretive choice. Justice McCaffery emphasized that the Anti-Referral Provision was enacted to prevent financially motivated medical decision-making and argued that the phrase “goods and services” should be read broadly to effectuate that purpose. Justice Wecht, in a separate dissent, challenged the majority’s textual analysis, suggesting that the statutory language more naturally supports a broader interpretation. Legislative Context and Comparison to Stark Law The Anti-Referral Provision was enacted as part of Pennsylvania’s workers’ compensation reform efforts in 1993 (Act 44), legislation designed to control rising system costs and curb perceived abuses. Its purpose closely parallels that of the federal Stark Law, which Congress enacted in 1989 to address the risks posed by physician self-referrals and the resulting overutilization of healthcare services. The difference lies in execution. The Stark Law is deliberately expansive, covering a wide range of “designated health services,” including outpatient drugs, and imposing strict liability for prohibited referrals unless a regulatory exception applies. It is grounded in the premise that financial incentives can distort clinical judgment and therefore must be tightly regulated. By contrast, the Pennsylvania Supreme Court’s decision reflects a narrower, text-driven interpretation of state law. Rather than extending the Anti-Referral Prohibition to align with its underlying purpose, the Court confined its application to the statute’s enumerated categories. The result is a regulatory gap: a set of financial relationships that would raise significant concerns under federal law now fall outside the scope of Pennsylvania’s workers’ compensation anti-referral framework. Practical Implications for Healthcare Providers The Court’s decision opens the door for physicians to more freely integrate ancillary services into their practices, particularly in the area of pharmacy ownership. Physicians may now prescribe medications that are filled by a pharmacy in which they have a financial interest without violating the Anti-Referral Provision. This flexibility brings with it clear financial opportunities. Providers now have the ability to capture additional revenue streams tied to prescription medications, including dispensing margins and pharmacy-related services. Given the frequency with which injured workers require ongoing medication management, particularly in chronic or complex cases, this development may have a meaningful economic impact on certain practices. At the same time, the decision does not eliminate compliance risk; rather, it shifts the focus of that risk. Providers remain subject to the Act’s cost-containment measures, including fee schedules and utilization review. Prescribing decisions must still be medically necessary and defensible, and patterns of overutilization or unusually high-cost prescribing are likely to draw scrutiny. In practice, the question is no longer simply whether a referral is permitted, but whether it can be justified. It is also critical to recognize that this ruling is limited to Pennsylvania’s workers’ compensation system and does not alter obligations under federal law. The Stark Law and the Anti-Kickback Statute continue to impose strict limitations on financial relationships tied to referrals in Medicare, Medicaid, and other federal healthcare programs. As a result, providers must take care not to conflate what is permissible in the workers’ compensation context with what is allowed elsewhere. Maintaining clear compliance boundaries between these regulatory frameworks will be essential. From a strategic standpoint, the decision is likely to prompt providers to reconsider how they structure ownership and referral relationships. Investments in pharmacies, compounding operations, and related ancillary services may become more attractive, particularly where those services can be aligned with workers’ compensation patients. The ruling effectively invites more deliberate planning around the integration of care delivery and revenue generation. At the same time, providers should expect increased scrutiny from insurers and payers. Carriers are unlikely to accept this shift passively and may respond by intensifying utilization review and monitoring prescribing patterns more closely. High-cost medications, unusual prescribing volumes, or patterns suggesting financial motivation may face heightened challenge. In that sense, while the legal restriction has narrowed, the practical oversight surrounding these arrangements may increase. Conclusion The Pennsylvania Supreme Court’s decision represents a significant narrowing of the Workers’ Compensation Act’s Anti-Referral Provision, grounded in a strict textual reading of statutory language. While the ruling is consistent with principles of statutory interpretation, it departs from the broader policy approach embodied in the federal Stark Law and from the apparent cost-containment objectives underlying Act 44 of 1993. By excluding pharmaceuticals from the anti-referral framework, the Court has created a gap between legislative intent and statutory reach. For healthcare providers, the decision presents both opportunity and risk: new flexibility in structuring business relationships, coupled with continued regulatory oversight and the possibility of future legislative correction. Whether the General Assembly will act to close that gap remains to be seen, but the decision has already reshaped the compliance landscape for provider self-referrals in Pennsylvania’s workers’ compensation system.
July 28, 2026
Business
Why the Friendly PC Model Remains Critical to Healthcare Private Equity Transactions with Medical and Dental Practices
Private equity (“PE”) activity in healthcare across the United States has caused continued focus by state legislatures and enforcement agencies on the doctrines of corporate practice of medicine and dentistry (“CPOM” or “CPOD”). Notwithstanding this attention, the often-referenced “Friendly PC” model remains the optimal corporate strategy to ensure post-closing compliance with CPOM and CPOD regulations in most jurisdictions. The following identifies some key considerations for the agreement's ancillary to the purchase of the non-clinical assets by the PE company’s management services organization (“MSO”), which are commonly used to ensure compliance with CPOM and CPOD. Friendly PC Model As a general matter, the term “Friendly PC” model in PE healthcare deals most often refers to a business arrangement where a physician or dentist-owned professional corporation (“PC”) sells all of its non-clinical assets to an entity owned by the MSO (controlled by the PE firm), which then takes responsibility for the PC’s non-clinical business operations. This model complies with fundamental CPOM and CPOD legal requirements, which are designed to restrict non-physicians from owning or controlling medical practices. Such a structure prevents the PE buyer from owning clinical assets or unduly controlling the clinical operations and decision-making of the providers employed by the PC. In the “Friendly PC” structure, the parties designate a single clinical professional to serve as the sole owner of the PC post-closing. This individual is referred to as the friendly physician or dentist (“Friendly Provider”), who is then expected to cooperate with the PE buyer in accomplishing its business goals. Such a transaction requires the drafting of a series of agreements to accomplish the necessary purposes of the arrangement. Although the nature and scope of such agreements may vary slightly based upon preference and applicable state law, below is a brief description of certain key agreements, and their most necessary elements, to ensure the PC’s compliance with CPOM and CPOD laws post-closing. Management Services Agreement The Management Services Agreement (“MSA”) is entered into between the PC and the MSO, which is owned by the PE buyer. Through this agreement, the MSO is responsible for providing and arranging for certain non-clinical administrative, business support, and back-office services on behalf of the PC. The MSA will clearly state that the MSO entity will not play any role in the care of patients and will specify the limitations of the actual services to be provided so as to ensure it will not fall within the applicable state’s definition of the practice of medicine or dentistry. It is also very important that the MSA define the independent contractor nature of this commercial relationship and seeks to avoid creating a de facto partnership between the MSO and the PC.1 Overly lengthy initial contract durations, requirements for minimum operational hours per period, the ability to negotiate payor and other agreements without the PC’s consent, and compensating the MSO through a percentage of the PC’s profits are all commonly mishandled deal points that could create an unintended partnership in the eyes of a regulatory agency.2 As such, legal counsel must carefully tailor these provisions to avoid such a problematic presumption. Equity Transfer Restriction Agreement This agreement establishes a highly restrictive framework which governs the ownership and transfer of the Friendly Provider’s interests in the PC, giving the MSO near-complete control over any change in ownership. As a baseline rule, no transfer of equity—whether voluntary, involuntary, or by operation of law—may occur without the MSO’s prior written consent, which may be granted or withheld in its sole discretion. The central mechanism is a set of transfer events (e.g., death, disability, termination of services, loss of licensure, legal disqualification, divorce, regulatory issues, or breach of agreements), upon which the Friendly Provider’s entire ownership interest is automatically and immediately transferred—without notice or further action—to an MSO–designated transferee. This transfer occurs by operation of contract, is effective upon the triggering event, regardless of administrative formalities and is typically priced at a nominal $1.00. In addition, the MSO typically holds a unilateral call option enabling it to trigger a forced transfer of all equity at any time by delivering notice, which itself constitutes a transfer event and results in the same automatic $1.00 transfer to its designated transferee. Following any such transfer, the Friendly Provider is automatically stripped of all ownership, governance roles, and economic rights in the PC. The agreement further reinforces this control structure through ongoing covenants that prohibit the Friendly Provider and the PC from taking a wide range of corporate, financial, and operational actions without MSO approval, ensuring that both ownership continuity and strategic direction remain fully aligned with the MSO’s interests. Provider Employment Agreement The provider employment agreement is often viewed as the most important by medical professionals who are divesting their interest in the PC. It includes terms and conditions regarding compensation and various restrictive covenants (i.e., non-competition, non-solicitation, confidentiality) that are critical to the clinician’s relationship with the PC. Legal counsel should ensure that the employment agreement also contains specific provisions or guarantees that the clinical professionals will maintain broad autonomy in all clinical decision-making and treatment of patients post-closing.3 Under no circumstances may the PC exercise any undue control over this aspect of their clinical professional employees’ job performance, and expressly stating as such within this agreement may help the arrangement survive future scrutiny.4 Clinical Liaison Agreement Lastly, the Clinical Liaison Agreement (“CLA”), typically entered into by the PE management entity and the Friendly Provider, is a frequently used means to outsource the development and implementation of the medico-administrative services of the PC. As a licensed professional in the state of operation, the Friendly Provider is the only party legally authorized to provide such services as the supervision of clinical staff, the development of clinical policies, and the leadership of patient-related programs and initiatives. The existence of such an arrangement is therefore imperative for the post-closing clinical management of the PC. As with the other agreements, the CLA should involve a reasonable term length and consideration for the Friendly Provider’s time and effort, and it should also protect the Friendly Provider’s necessary autonomy to perform their duties as outlined therein.5 Conclusion As scrutiny of “Friendly PC” transactions continues in light of consumer and legislative concerns over the affordability of health care services, the need for proper separation of clinical and non-clinical management post-closing is likely to be more important now than in years past. As such, PE buyers and their counsel must pay close attention to these frequently overlooked ancillary agreements to ensure the truly independent nature of their post-closing relationships. 1See Warren J. Apollon, D.M.D., P.C. v. OCA, Inc., 592 F. Supp. 2d 906; and OCA, Inc., et al . Kellyn Hodges, D.M.D., M.S., et al., 615 F. Supp. 2d 477. 2Id. 3The definitions of “Practice of Medicine” and “Practice of Dentistry” vary by state, however, guidance provided by the Pennsylvania Board of Medicine provides examples of the types of rights and privileges of licensed providers that must not be interfered with or influenced by unlicensed persons or entities. (See 63 P.S. § 422.1, et seq., 63 P.S. § 120, et seq.) 4Id. 5https://journalofethics.ama-assn.org/article/physician-engagement-private-equity-firms/2025-05
June 15, 2026
Healthcare
The CMS ACCESS Model and FDA TEMPO Pilot: Outcome‑Based Payments and Digital Health Innovation
The Centers for Medicare & Medicaid Services’ ("CMS") Advancing Chronic Care with Effective, Scalable Solutions ("ACCESS") Model is a Center for Medicare and Medicaid Innovation ("CMMI") initiative testing outcome-aligned payments ("OAP") tied to measurable improvements in clinical and patient-reported outcomes for Medicare Part B providers. The Food & Drug Administration’s ("FDA") Technology-Enabled Meaningful Patient Outcomes ("TEMPO") pilot program is aligned with and runs concurrently with ACCESS, creating a digital-health technology for Medicare and supporting the introduction of new digital-health technologies so they can be used to support the measurable outcomes for ACCESS. It is important to note that although technology is a crucial component of these models, care delivery remains the core of the model, with digital tools positioned as enablers rather than substitutes. All ACCESS participants must be Medicare Part B enrolled and in good standing, with no flexibility on this requirement. Participants must also designate a Medicare-enrolled medical director responsible for clinical oversight and patient safety. For many digital-health companies, enrolling as a Medicare provider or supplier could represent a significant shift in compliance requirements, including a commitment to ongoing compliance with state and federal laws, as well as heightened fraud, waste, and abuse risks associated with federal healthcare programs. It is likely that CMS may favor ACCESS applicants with prior patient volume, including Medicare-eligible populations, and geographic reach, particularly those that demonstrate operational readiness and the ability to scale. Participation in ACCESS requires full accountability across clinical tracks and comorbidities. Those organizations which participate must be able to manage all conditions within each selected track and report required clinical data, emphasizing “whole person care” and guideline-based management to account for the fact that many chronic conditions are comorbid and occur in the same beneficiary. Participants must also be able to escalate care when necessary, which CMS frames as a patient-safety feature of the model. ACCESS's payment structure introduces substantive downside risk and favors financially stable organizations by providing quarterly, per-beneficiary payments during a 12-month care delivery period, but only 50% of the OAP is paid upfront. The remaining 50% is withheld and subject to reconciliation. During the reconciliation period, CMS will apply a downward adjustment to the withheld amount based on the larger of: Clinical-outcomes performance (up to a 50% reduction of the full OAP), or Substitute-spend impacts (up to a 25% reduction of the full OAP). This structure allows CMS to support care delivery with predictable payments while maintaining accountability for outcomes and spending. Due to the payment structure, CMS is likely to favor applicants that can absorb the associated financial risk. Under TEMPO, manufacturers may request temporary FDA enforcement discretion for certain regulatory requirements when devices are used in ACCESS, which could allow some digital-health devices to be used within the model prior to full FDA authorization. The FDA is contemplating discretion related to premarket authorization and certain investigational device exemption, informed consent, or institutional review board requirements, but has not indicated that such discretion would extend to core device controls such as quality-system or adverse-event reporting obligations. Manufacturers may email the FDA to express interest, identify their device’s current regulatory status, and specify which requirements from which they are seeking relief. Participation is limited to 10 United States-based manufacturers per clinical track and is only available to manufacturers with devices in the four clinical access areas. Manufacturers must collect and share real-world data with the FDA during the pilot.
April 7, 2026
Healthcare
Telehealth Access for Medicare Patients: Consolidated Appropriations Act Extends Key Policies
Healthcare providers that rely on telehealth to serve Medicare patients can continue to do so as a result of an extension of the Medicare telehealth rules that were originally implemented during the COVID-19 Public Health Emergency (“COVID”). On February 3, 2026, the Consolidated Appropriations Act, 2026, H.R. 7148 was signed into law and, among other features, extends key components of the emergency telehealth requirements and will continue to allow for increased provider eligibility, remote care from home, and relaxed site-of-service, all rules upon which providers have extensively relied since COVID. CMS extended these rules in order to provide greater flexibility and remote health care access. Providers should be aware that this extension will only last through December 31, 2027, unless Congress puts a permanent solution in place.
February 17, 2026
