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

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.  

Explosive Growth in Pot of Gold Opportunity for Bank (and Other) Cannabis Lenders Driving Erosion of the Barriers

Our original article on bank lending to the cannabis industry anticipated that the convergence of interest between banks and the cannabis industry would draw more and larger banks to the industry. Banks were awash in liquidity with limited deployment options, while bankable cannabis businesses had rapidly growing needs for more and lower cost credit. Since then, the pot of gold opportunity for banks to lend into the cannabis industry has grown exponentially due to a combination of market constraints on equity causing a dramatic shift to debt and the ever-increasing capital needs of one of the country’s fastest growing industries. At the same time, hurdles to entry of new banks are being systematically cleared as the yellow brick road to the cannabis industry’s access to the financial markets is being paved, brick by brick, by the progressively increasing number and size of banks that are now entering the market.

2021 EEOC Charge Statistics: Retaliation & Impact of Remote Work

The U.S. Equal Employment Opportunity Commission (EEOC) released its detailed information on workplace discrimination charges it received in 2021. Unsurprisingly, for the second year in a row, the total number of charges decreased as COVID-19 either shut down workplaces or disconnected employees from each other. In 2021, the agency received a total of approximately 61,000 workplace discrimination charges - the fewest in 25 years by a wide margin. For reference, the agency received over 67,000 charges in 2020, and averaged almost 90,000 charges per year over the previous 10 years.

Ohio’s Managed Care Overhaul Delayed – New Implementation Timeline

At the direction of Governor Mike DeWine, the Ohio Department of Medicaid (ODM) launched the Medicaid Managed Care Procurement process in 2019. ODM’s stated vision for the procurement was to focus on people and not just the business of managed care. This is the first structural change to Ohio’s managed care system since the Centers for Medicare & Medicaid Services' (CMS) approval of Ohio’s Medicaid program in 2005. Initially, all of the new managed care programs were supposed to be implemented starting on July 1, 2022. However, ODM Director Maureen Corcoran recently confirmed that this date will be pushed back for several managed care-related programs.

Laboratory Specimen Collection Arrangements with Contract Hospitals - OIG Advisory Opinion 22-09

On April 28, 2022, the Department of Health and Human Services, Office of Inspector General (“OIG”) published an Advisory Opinion[1] in which it evaluated a proposed arrangement where a network of clinical laboratories (the “Requestor”) would compensate hospitals (each a “Contract Hospital”) for specimen collection, processing, and handling services (“Collection Services”) for laboratory tests furnished by the Requestor (the “Proposed Arrangement”). The OIG concluded that the Proposed Arrangement would generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”) if the requisite intent were present. This is due to both the possibility that the proposed per-patient-encounter fee would be used to induce or reward referrals to Requestor and the associated risk of improperly steering patients to Requestor.

Property Owner Protection from Tax Valuation Challenges

New legislation provides significant new protections for commercial property owners against challenges to valuation primarily by local school boards and prohibiting side agreements to avoid tax valuation changes. The Ohio Legislature has approved House Bill 126 which will go into effect July 2022 but will effectively apply to the 2023 tax valuation year.