July 15, 2019

July 15, 2019

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Three Tips for Tackling Risk in Digital Health

Digital health companies face a complicated regulatory landscape. While the opportunities for innovation and dynamic partnerships are abundant, so are the potential compliance pitfalls. In 2018 and in 2019, several digital health companies faced intense scrutiny—not only from regulatory agencies, but in some cases from their own investors. While the regulatory framework for digital technology in health care and life sciences will continue to evolve, digital health enterprises can take key steps now to mitigate risk, ensure compliance and position themselves for success.

  1. Be accurate about quality.

Ensuring that you have a high-quality product or service is only the first step; you should also be exactingly accurate in the way that you speak about your product’s quality or efficacy. Even if a product or service does not require US Food and Drug Administration clearance for making claims, you still may face substantial regulatory risk and liability if the product does not perform at the level described. As demonstrated in several recent public cases, an inaccurate statement of quality or efficacy can draw state and federal regulatory scrutiny, and carries consequences for selling your product in the marketplace and securing reimbursement.

Tech companies and non-traditional health industry players should take careful stock of the health sector’s unique requirements and liabilities in this area, as the risk is much higher in this arena than in other industries.

  1. Factor the regulatory environment into your business plan.

The regulatory landscape has meaningful implications for business planning—both for securing initial funding and for growing revenues over time. Early-stage companies face mounting pressure to demonstrate growth and revenue, but doing so at the expense of careful legal and regulatory compliance is a dangerous approach.

For example, if a business plan inadvertently relies on illegal referral patterns, the company can run into substantial problems with regulators, and potential investors or acquirers may decide the investment is not worth the risk. To avoid these pitfalls, make sure your business plan takes full account of today’s legal, regulatory and reimbursement realities.

  1. Implement—and update—robust oversight structures.

It is difficult to overstate the importance of oversight in today’s environment. A little bit of careful planning goes a long way toward ensuring a growing and viable business that will attract investors. From day one, digital health companies should have structures in place to provide serious compliance and governance oversight, and these structures should be updated as the company grows and its operations evolve.

If a digital health company enters into a partnership, for example, oversight structures should be enhanced to address the changing business model. The importance of robust oversight in partnership arrangements was demonstrated in 2018, in a widely publicized US Department of Justice investigation of a telemedicine and e-prescribing arrangement that resulted in a multi-million dollar settlement.

Effective reporting mechanisms as part of an overall oversight program can help digital health companies avoid problematic relationship and referral arrangements.

© 2019 McDermott Will & Emery

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About this Author

Dale Van Demark, health care, attorney, McDermott Will, law firm
Partner

Dale C. Van Demark is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Washington, D.C., office.  He focuses his practice on a broad array of merger, acquisition, investment, and strategic structuring transactions, with clients in the health industry. He has extensive experience in health system affiliation and restructuring transactions and regularly represents for-profit and tax-exempt clients in a variety of transactions, including strategic transactions with physicians and hospitals. He regularly advises clients regarding the opportunities...

202-756-8177
Lisa Schmitz Mazur, Health Law Attorney, McDermott Will Law Firm
Partner

Lisa Schmitz Mazur is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  Lisa maintains a general health industry practice, focusing on the representation of hospitals and health systems and other health industry providers.

Lisa’s representation of hospitals and health systems includes providing guidance on not-for-profit corporate governance matters, tax-exemption issues, conflict of interest compliance and overall corporate compliance effectiveness.  In addition, Lisa regularly assists hospital and health system clients to develop and negotiate physician compensation programs, and prepare agreements with physicians and helps to guide governing boards and committees in the review and approval of such arrangements. 

Digital Health

Lisa advises a variety of healthcare providers and technology companies involved in “digital health” – the intersection of health software applications, analytical tools, medical technology and electronic data assets enabled by the Internet and mobile devices – on the applicable legal and regulatory infrastructure, with a particular focus on telehealth, telemedicine, mobile health and consumer wellness programs. For example, Lisa has assisted numerous clients in developing and implementing telemedicine programs by advising on issues related to professional licensure, scope of practice, informed consent, prescribing and reimbursement. Lisa assists her clients to identify and understand the relevant legal issues and develop and implement practical, forward-thinking solutions and strategies that meet the complex and still-evolving digital health regulatory landscape.

In addition to writing extensively on matters related to her digital health practice, Lisa has spoken at numerous conferences on a variety of digital health topics. She is the co-editor of McDermott’s Of Digital Interest  blog, co-chairs the Interstate Collaboration in Healthcare Stakeholder Group and chairs the Illinois Telehealth Law Forum Program Planning Committee

Lisa also co-leads the Firm’s Digital Health affinity group, which brings together McDermott lawyers from within and outside the Health Industry Advisory Practice Group to develop thought leadership, share information and collaborate on best practices.

312-984-3275