Overview
This issue of McDermott Will & Schulte’s Healthcare Regulatory Check-Up highlights regulatory activity for February 2026, including two False Claims Act (FCA) settlements, a new Office of Inspector General (OIG) advisory opinion, and the US Department of Health and Human Services’ (HHS’s) 2027 Notice of Benefit and Payment Parameters proposed rule. We also discuss recent actions from the Centers for Medicare & Medicaid Services (CMS), including the agency’s moratorium on certain Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) supplier enrollments; the deferment of millions in Medicaid funding to Minnesota over fraud, waste, and abuse concerns; and the agency’s joint pledge with health plans to launch a new payment program aligned with CMS’s ACCESS model. This issue also covers recent activity by the Health Resources and Services Administration (HRSA) and the US Food and Drug Administration (FDA).
Read below for an overview of this month’s regulatory and enforcement activity roundup. For a deeper dive, subscribe to the newsletter to get our detailed analysis of all updates.
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Notable enforcement resolutions and activities
HHS TERMINATES 340B REBATE MODEL PILOT PROGRAM
Following a successful lawsuit filed by the American Hospital Association alleging that HRSA’s 340B rebate model pilot program violated the Administrative Procedure Act, HRSA agreed to rescind the previously approved rebate models.
DOJ AND SLEEP SPECIALIST SETTLE FCA ALLEGATIONS
A sleep specialist practice, two physicians, and a medical supply company agreed to pay more than $750,000 to resolve three sets of allegations stemming from a whistleblower lawsuit.
SURGICAL HOSPITAL AGREES TO PAY $5.6M TO RESOLVE FCA LIABILITY FOLLOWING SELF-DISCLOSURE
An Arizona surgical hospital agreed to pay $5.6 million to resolve FCA allegations that from 2011 through 2018, the hospital made improper financial contributions to a physician group that referred patients to the surgical hospital.
CMS regulatory updates
CMS DEFERS $259.5M IN MEDICAID FUNDING TO MINNESOTA OVER FRAUD CONCERNS
Following a review of Minnesota’s Medicaid spending in the fourth quarter of fiscal year 2025, CMS announced it will defer nearly $259.5 million in federal matching funds to Minnesota’s Medicaid program until the agency is satisfied with the state’s corrective action plan to address ongoing program integrity concerns.
CMS ANNOUNCES NATIONWIDE MORATORIUM ON CERTAIN MEDICARE DMEPOS ENROLLMENTS
On February 27, 2026, CMS published a notice in the Federal Register announcing a six-month moratorium on Medicare enrollments for certain DMEPOS suppliers, effective immediately.
CMS RELEASES UPDATED MEDICARE OUTPATIENT OBSERVATION NOTICE
On February 20, 2026, CMS released an updated Medicare Outpatient Observation Notice (MOON), which hospitals and critical access hospitals are required to provide to Medicare beneficiaries who receive observation services as outpatients for more than 24 hours.
HHS PROPOSES SWEEPING CHANGES TO ACA EXCHANGE POLICIES
In the 2027 Notice of Benefit and Payment Parameters proposed rule, published in the Federal Register on February 11, 2026, HHS pitched an expansive set of changes to the standards that qualified health plans participating in the Affordable Care Act (ACA) marketplace must comply with and new requirements for state-based exchanges, brokers, and agents.
OIG updates
OIG ISSUES FAVORABLE ADVISORY OPINION 26-02 ON LAB SERVICES ARRANGEMENT
On February 12, 2026, OIG issued Advisory Opinion 26-02, concluding that a proposed arrangement in which an urgent care management entity would provide laboratory services to its affiliated urgent care centers would not generate prohibited remuneration under the AKS.
OIG ISSUES AUDIT REPORTS FOR MISSOURI, WEST VIRGINIA ON FAILURE TO OBTAIN REBATES FOR MEDICAID OUTPATIENT DRUGS
Two recent OIG audits conducted in Missouri and West Virginia resulted in recommendations that the states refund the federal government for their failure to obtain rebates from manufacturers for certain Medicaid physician-administered drugs.
Other notable developments
HRSA REQUESTS INFORMATION ON 340B REBATE PROGRAM
After withdrawing the previously approved 340B rebate models earlier this month, the HRSA issued an RFI seeking stakeholder input on the potential use of rebates to “effectuate the ceiling price under the 340B Program, including the standards and procedures that should govern the approval of manufacturer rebate plans and the impacts on all stakeholders.”
FDA TO DROP TWO-STUDY REQUIREMENT FOR NEW DRUG APPROVALS
On February 18, 2026, FDA Commissioner Marty Makary and a top deputy, Vinay Prasad, published an article in the New England Journal of Medicine announcing FDA’s plan to drop its two-study requirement for new drug approval with the goal of reducing sponsor costs and speeding drugs to market.
FDA ISSUES UNTITLED LETTER TO JANSSEN BIOTECH FOR FALSE OR MISLEADING ADVERTISING
On February 6, 2026, FDA sent an untitled letter to Johnson & Johnson’s Janssen Biotech unit regarding its advertising of the ulcerative colitis drug Tremfya.
CMS ANNOUNCES PLEDGE BY HEALTH PLANS TO LAUNCH DIGITAL PAYMENT MODELS
Health plans representing 165 million beneficiaries across Medicare Advantage, Medicaid managed care, and private insurance signed a pledge with CMS to adopt an outcomes-based payment model aligned with CMS’s Advancing Chronic Care with Effective, Scalable Solutions (ACCESS) model, according to an announcement from CMS.
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