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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.  


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