Reversing its prior ruling (discussed in our April 23 client e-communication), the Travis County District Court issued a final judgment yesterday afternoon determining that machinery and equipment used to extract oil and gas from wells was subject to sales tax in that the manufacturing exemption did not apply.

In the last two years, the U.S. Environmental Protection Agency (EPA) has issued a series of regulations targeting greenhouse gas (GHG) emissions under the Clean Air Act.

The effective date of the recently issued Stark II Phase II regulations is July 26, 2004. CMS is currently taking the position that all agreements must be in compliance by that date. This would include agreements that have already been executed and are in effect, notably, physician recruitment arrangements (e.g., the new rules do not permit a group to impose a noncompete on the recruited physician and limit the amount of group expenses that can be funded by the hospital).

On July 1, 2004, CMS issued an interim final rule codifying four payment provisions for Medicare covered ambulance services contained in the Medicare Prescription Drug, Improvement and Modernization Act of 2003. See Fed. Reg. 40,288. This rule will impact all ambulance providers and suppliers to the extent that it authorizes higher payments to those furnishing Medicare-covered ambulance services to Medicare beneficiaries.

The Texas General Land Office has initiated a program to foster economic development by investing public school funds in real estate assets that will produce additional employment opportunities in Texas.

On May 28, the United States General Accounting Office ("GAO") released a special publication containing highlights of the GAO's January 2004 Health Care Forum. Participants concluded that U.S. wealth and other factors drive up health care spending, which could induce adverse economic implications if not contained, and that the nationwide variation in use of medical services suggests that there are quality and efficiency problems in the current healthcare system.

The Justice Department has announced its intention not to appeal the March 4, 2004 jury verdict preserving the tax-exempt status of St. David's Health Care System, Inc. The decision by the Justice Department brings to a close the ongoing litigation between the Internal Revenue Service and St. David's regarding St. David's participation in a whole hospital joint venture with HCA, Inc.

The House Energy and Commerce Subcommittee on Oversight and Investigations will hold hearings next week on "A Review of Hospital Billing and Collection Practices." The hearing is currently scheduled for June 23 and June 24.

CMS soon will begin to provide $1 billion, at $250 million a year for the next four years, to hospitals and other emergency care providers to defray the costs of unpaid emergency care furnished to undocumented aliens. Under Medicare Modernization Act Section 1101, two-thirds of the monies will be allocated to all states and one-third to those states with the largest number of apprehensions of undocumented aliens.

Health and Human Services Secretary Tommy Thompson announced at a Senate hearing on Thursday that Medicare is dropping language stating that obesity is "not an illness," although it is not formally recognizing obesity as a disease.

Following up on a prior initiative in the early 2000's, the Texas Medical Foundation, under a contract with CMS, is currently evaluating every acute care hospital's data for certain specific indicators, such as DRGs 127, 143, 079, and 416.

In OIG Advisory Opinion 04-03, the OIG examined whether a marketing company working on behalf of pharmaceutical firms could pay physicians a dollar for their efforts at completing surveys relating to drug labeling and product information. The OIG questioned whether the surveys were actually marketing or promotional activities, which would imply that the one dollar payment was actually intended to induce referrals.

The Office of Inspector General has issued supplemental compliance program guidance for hospitals containing expanded discussions of risk areas and offering compliance recommendations for reduction of risk. The guidance is issued as a draft with a 60 day comment period.

Texas Attorney General Abbott has issued an opinion concluding that section 285.201 of the Texas Health and Safety Code permits, but does not require, a hospital district to provide nonemergency public health services to undocumented aliens.

The Centers for Medicare and Medicaid Services ("CMS") has reissued its one-time transmittal setting the date by which providers must choose the cost reporting period to be used in determining whether they are below their cap.

CMS announced in a February 27, 2004, Change Transmittal that Medicare reimbursement claims in non-standard HIPAA format would be subject to a 13-day delay from the 14-day window for compliant claims. This 27-day delay was implemented starting July 6, 2004.

A Mississippi trial lawyer who participated in the legal assault on the tobacco industry has set his sights on tax-exempt hospitals.

The OIG is sending letters to a large number of teaching hospitals requesting information on whether the hospital had written agreements in place for rotations to nonprovider settings for academic year 2004, purportedly pursuant to a requirement in the Medicare Prescription Drug, Improvement and Modernization Act ("MMA").

On June 22, 2004, Richard Scruggs expanded his class action litigation against nonprofit hospitals. After targeting thirteen nonprofit hospitals in eight different states two weeks ago, Scruggs has now extended his assault against tax-exempt hospitals in Arizona, Colorado, Illinois, Missouri, and Texas.

On May 13, 2004, the Justice Department filed an appeal notice to maintain its ability to appeal the March 4, 2004, jury decision that St. David's Health Care System, Inc., continues to be tax-exempt notwithstanding its decision to contribute substantially all of its operating assets into a joint venture with HCA, Inc. While the notice is not a formal appeal of the jury's decision, it does preserve the government's ability to pursue an appeal.