Recently enacted federal law expanding criminal liability for kickbacks related to all payors, and increased government enforcement activity in behavioral health (see press release), has heightened the importance of clinical due diligence for private equity investors targeting deals and acquisitions in the emerging behavioral health space.  PE firms continue to target behavioral health opportunities as federal and commercial insurance coverage expands for mental health, including substance abuse treatment and telehealth services.  Such commercial coverage will only become more commonplace after a federal court this month found United Behavioral Health improperly denied benefits for treatment of mental health and substance use disorders to plan participants because United’s guidelines did not comply with the terms of its own insurance plans and state law.[1]  PE firms entering the behavioral health market, though, particularly opportunities related to substance abuse treatment and laboratory services, should carefully review a company’s compliance with the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”).
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After a protracted legal battle resolved in the favor of Teladoc, Inc. (Teladoc) on Dec. 31, 2014, (see Teladoc, Inc. v. Texas Medical Board, No. 03-13-00211-CV, Tex. App. 3rd, Austin) and clarifying that Teladoc physicians could prescribe dangerous drugs based on a telephonic evaluation, the Texas Medical Board (TMB) wasted no time in issuing an emergency rule Jan. 16, 2015, that significantly limits the use of telephones in the practice of medicine.
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