Health Care

The Trump administration has decertified and defunded Hawaii’s Medicaid Fraud Control Unit (MFCU), withholding $3 million in federal funds. As detailed in a previous post, in May, the Office of Inspector General for the Department of Health and Human Services (HHS-OIG) informed every state of its intent to review the activities of its MFCU. On June 4, 2026, HHS-OIG escalated further and followed through with its threats by formally denying recertification of Hawaii’s MFCU based on its failure to pursue Medicaid fraud effectively. 

The Office of the Inspector General (OIG) continues to focus on Medicare Advantage (MA) risk adjustment payments, issuing a report this week detailing its audit of MA risk adjustment payments based on acute stroke diagnosis codes that do not have corroborating hospital records. OIG found that submissions for 97 out of 100 sample enrollees were not supported in the enrollee’s medical records, estimating $462 million in potential net overpayments in 2021. Unlike prior OIG audits assessing various high-risk diagnoses submitted by a single MA plan, this report focuses on a single condition across multiple plans. While the audit is not without its limitations, it is another signal that MA organizations should consider implementing proactive measures to ensure the accuracy of acute stroke diagnosis codes (in addition to other high-risk diagnosis codes) prior to submission to Centers for Medicare & Medicaid Services (CMS) and expect to continue seeing code-level audits from OIG.

On May 15, 2026, the California Office of Health Care Affordability (OHCA) released proposed regulations implementing Assembly Bill (AB) 1415 which took effect on January 1, 2026 (see our prior posts here and here). The new legislation expands the state’s health care material change transaction notice (MCN) process and requires private equity groups, hedge funds, management services organizations (MSOs), and certain newly created entities to give OHCA direct notice of proposed material change transactions involving a health care entity. Before formal rulemaking, OHCA issued Frequently Asked Questions providing high-level guidance for AB 1415 implementation, leaving many operational details for the proposed and final regulations. The proposed regulations were presented at OHCA’s Health Care Affordability Board meeting on May 27, 2026, and will remain open for informal public comment at [email protected] through June 11, 2026. In July 2026, the proposed regulations will be submitted for emergency rulemaking with a formal five day public comment period prior to an August 2026 effective date. Below is a summary of the key changes.

The Civil Division of the US Department of Justice (DOJ) recently issued a memorandum outlining unprecedented reforms aimed at accelerating the review and pursuit of certain qui tam complaints filed under the False Claims Act (FCA). Among other things, DOJ has announced that it will complete its review of new “benefits fraud” complaints — those alleging fraud against “federally funded, state-administered benefits programs” — within 120 days. Although the new policy seems based on unrealistic expectations, health care companies and providers should be prepared for a new normal in the pace of certain FCA investigations and an increase in litigation led by relators rather than the federal government. 

The PBM industry continues to evolve through legislative action, litigation, and voluntary industry changes. Below is a brief round-up of recent developments including new federal and state legislation targeting vertical integration, an ERISA preemption challenge to California’s PBM reform law, and a new pharmacy care model announced by Optum Rx.

The Trump administration has stepped up its Medicaid fraud enforcement efforts, as demonstrated through a variety of agency actions taken over the past few months. The focus on Medicaid fraud undoubtedly will result in increased scrutiny of Medicaid providers and Medicaid managed care organizations (MCOs) by state and federal enforcement authorities.  

On May 18, the Supreme Court denied all six petitions for certiorari filed by drug manufacturers challenging the IRA’s Medicare Drug Price Negotiation Program, bringing much of the first wave of constitutional challenges to a close.

The May 2026 edition of FDA in Flux highlights significant developments shaping the regulatory landscape for medical, life sciences, and consumer product sectors.

On May 13, 2026, the Centers for Medicare & Medicaid Services (CMS) issued a press release and a Federal Register notice announcing a nationwide moratorium on the enrollment of new home health agencies (HHAs) and hospices, effective immediately. Under the moratorium, new providers are barred from enrolling in Medicare as HHAs or hospices for a six-month period.

As previously reported, the Department of Labor (DOL) released a proposed rule (Proposed Rule) on January 30, 2026, targeting ERISA disclosure obligations applicable to PBMs. The public comment period closed on April 15, following a 15-day extension, with 564 comments submitted. Below is a summary of some of the key themes we noticed in the comments.

On April 13, 2026, Maine enacted two significant pieces of legislation affecting health care transactions. Chapter 661 (H.P. 1481), effective July 14, 2026, requires health care entities with a threshold presence in Maine to file copies of any premerger notifications required under the Hart-Scott-Rodino (HSR) Act with the Maine Attorney General (Premerger Notification Law). Chapter 690 (H.P. 1480), effective January 1, 2027, establishes a framework for reviewing “material change transactions” involving the acquisition of health care entities by private equity companies, hedge funds, or certain management services organizations (Material Transactions Review Law). 

On April 8, 2026, the Department of Health and Human Services’ Office for Civil Rights (OCR) released an educational video, Risk Management Under the HIPAA Security Rule, detailing the risk management requirements under HIPAA as well as findings and conclusions from OCR’s investigations. While framed as an educational outreach video, it sends a clear enforcement message: risk management is mandatory, ongoing, and increasingly scrutinized by OCR. Drawing on recent investigations, OCR emphasized that risk management is not a one-time compliance exercise or paperwork obligation. Rather, regulated entities must implement, maintain, and document security measures that actually reduce risks to electronic protected health information (ePHI). When entities are aware of risks but do not act on them, they are left exposed, both to cyberattacks and enforcement actions. In this blog post, we provide an overview of the HIPAA Security Rule risk management requirements and highlight key takeaways from OCR’s video.

The April 2026 edition of FDA in Flux highlights significant developments shaping the regulatory landscape for medical, life sciences, and consumer product sectors.

In McKee Foods Corp. v. BFP Inc., decided April 7, 2026, the Sixth Circuit affirmed that ERISA preempts two Tennessee laws intended to prevent pharmacy benefit managers (PBMs) from steering patients to affiliated pharmacies. The court reasoned that the laws constituted impermissible interference with ERISA plan design and administration, a conclusion it reached by distinguishing the Tennessee statutes from the state laws the Supreme Court found permissible in Rutledge v. PCMA (2020). This case raises questions about the enforceability of the growing body of state legislation regulating PBMs. 

While federal and state legislators contemplate the next wave of PBM and drug pricing reform, legislatures in Virginia and Ohio have already sent significant legislation addressing prescription drug pricing and pharmacy benefit manager oversight to their respective governors in early 2026. 

Despite the flurry of reform activity throughout the first quarter of 2026, the pace of new PBM regulation and drug pricing reforms shows no sign of tapering off. Instead, both federal and state legislatures continue to target PBMs and drug pricing practices.

Washington’s Governor signed House Bill 2548 (Chapter 222, Laws of 2026) into law on March 25, 2026, to take effect June 11, 2026, to amend the state’s health care transaction review law at Chapter 19.390. The current law requires pre-transaction notice for certain material transactions involving hospitals, hospital systems, or provider organizations. 

Federal Trade Commission (FTC) Chairman Andrew Ferguson announced the launch of a Healthcare Task Force on March 20, 2026, signaling a significant escalation in the FTC’s approach to healthcare oversight. The directive aligns with President Trump’s February 25, 2025 Executive Order, Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information (Executive Order), and reflects FTC’s intent to institutionalize and broaden healthcare enforcement while shaping policy moving forward. 

The first week of March 2026 brought coordinated congressional oversight targeting the Trump administration's most-favored-nation (MFN) drug pricing initiative. Congressional leaders sent several letters to President Trump and pharmaceutical manufacturers requesting details about the MFN agreements such manufacturers struck with the administration, demonstrating the budding congressional scrutiny of the MFN pricing initiatives, where the impact on patients and state budgets still remains uncertain.

PBM Reform 2026 explained. Watch this webinar on CAA 2026 PBM changes, DOL proposed rules, FTC enforcement, and compliance priorities.