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CLIENT ALERT: Proposed New Rules to both the Stark Law and the Anti-Kickback Statute

Client Alert

On October 9, 2019, as part of the “Regulatory Sprint to Coordinate Care,” the Centers for Medicare and Medicaid Services (“CMS”), along with the US Department of Health and Human Services, Office of Inspector General (“OIG”), proposed new rules to both the physician self-referral law (“Stark Law”) and the Anti-Kickback Statute (“AKS”). Rule changes are aimed at fostering innovative arrangements for coordinating care consistent with a shift to a value-based system. Both proposed rules are expected to be published to the Federal Register on October 17, 2019. Public comments are due 75 days after publication. 

Stark Law Proposed Rule

Stark law, absent an exception, prohibits a physician from referring a federal healthcare program beneficiary, for the provision of designated health services (“DHS”), to any entity in which the physician (or an immediate family member) has a financial relationship. “Financial relationship” is broadly defined to include any direct or indirect ownership or investment interest.

The proposed rule from CMS would modify the regulatory framework of Stark by creating new exceptions and new defined terms. The first proposal is a new exception for value-based care arrangements. The following terms will be added to accompany this value-based exception: value-based activity, value-based arraignment, value-based enterprise, value-based purpose, VBE participation, and target patient population. The next proposed exception centers around limited remuneration to a physician, where compensation agreements not exceeding an aggregate of $3,500 per calendar year, if other certain conditions are met, will not be seen as a Stark violation. Finally, CMS is proposing a new exception to protect arrangements involving the donation of certain cybersecurity technology.

CMS is also redefining certain key concepts of Stark Law.

First, CMS is proposing two alternative definitions for the term “commercially reasonable:” (1) the particular arrangement furthers a legitimate business purpose of the parties and is on; or (2) the arrangement makes commercial sense and is entered into by a reasonable entity of similar type and size and a reasonable physician of similar scope and specialty.

Second, CMS is looking to clarify the value/volume standard by proposing objective tests for determining whether compensation takes into account the volume or value of referrals or the volume or value of other business generated by the physician.

Third, CMS is proposing to modify the definition of “fair market value” to include a general definition, a definition applicable to the rental of equipment, and a definition applicable to the rental of office space. The general definition of fair market value would mean the value in an arm's-length transaction with like parties and under like circumstances, of assets or services, consistent with the general market value of the subject transaction. With respect to the rental of equipment, fair market value would mean the value, in an arm's-length transaction with like parties and under like circumstances, of rental property for general commercial purposes (not taking into account its intended use), consistent with the general market value of the subject transaction. With respect to the rental of office space, fair market value would mean the value in an arm’s length transaction, with like parties and under like circumstances, of rental property for general commercial purposes (not taking into account its intended use), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction.

Finally, CMS is proposing a variety of other changes to Stark, including the following:

  1. Modifying the definition of DHS to clarity that an inpatient hospital service is only DHS if the furnishing of the service affects the amount of Medicare’s payment to the hospital under the Inpatient Prospective Payment System;
  2. Clarifying the definition of a “group practice” to make clear that a group practice may not use DHS-specific pods for purposes of distributing DHS profits;
  3. Loosening restrictions on various exceptions; and
  4. Expanding the 90-day grace period for certain writing requirements. A full version of the proposed rule is available here.

Anti-Kickback Statue Proposed Rule

The Anti-Kickback Statue, absent an applicable exception, is a broad prohibition on the exchange of remuneration (anything of value) for referrals for services that are payable by a federal health care program. This statute applies to both the payers of any kickback, as well as the recipient of the kickback.

The proposed rule creates new AKS safe harbors, modifies existing safe harbors, and creates new Civil Monetary Penalties Law (“CMPL”) exceptions. Similar to the proposed Stark exceptions above, OIG first proposes three new safe harbors that would protect certain value-based arrangements. Second, OIG is proposing to protect the furnishing of certain tools and support provided to patients that would improve the quality, health outcomes, and efficiency of services. Finally, the OIG is proposing exceptions that would protect remuneration provided in connection with certain models sponsored by CMS and is proposing to create a protection for the donation of cybersecurity technology.

Along with the newly created exceptions, the OIG is proposing to add flexibility to the part-time and outcomes-based arrangements and expand and modify the mileage limits applicable to rural areas and for transportation related to patients discharged from inpatient facilities. Finally, the OIG is proposing to codify the Bipartisan Budget Act of 2018 statutory exception for ACO Beneficiary Incentive programs for the Medicare Shared Savings Program and is proposing to interpret and incorporate the Bipartisan Budget Act of 2018 statutory exception for furnishing telehealth technologies to certain in-home dialysis patients. A full version of the proposed rule is available here.

Conclusion

Both CMS and the OIG are looking to make substantial changes to Stark Law and AKS in an attempt to center the regulatory framework around a value-based healthcare system. The two proposed rules add new exceptions related to the value of care and will provide opportunities for new types of arrangements. While Stark and AKS are quite distinct from one another, they often operate in tandem. It is important for any provider to understand and appreciate both sets of regulations.

If you have any questions about these proposed rules, Stark Law and AKS in general, or any other health care related question, please contact a member of the BMD Health Law Department.  


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.