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Value-Based Care Advances – CMS Issues New Final Rules for Stark and Anti-Kickback Statutes

Client Alert

The Centers for Medicare & Medicaid Services (“CMS”) and the Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) issued two highly anticipated (and quite extensive) Final Rules to reform the Stark Law and Anti-Kickback Statute (“AKS”) regulations. The Final Rules generally take effect on January 19, 2021. 

The Final Rules include new safe harbors for the AKS and new exemptions to the Stark Law to allow for greater flexibility. According to the HHS, the goal of updating both laws is to make it easier for providers to engage in care coordination and value-based care programs without running afoul of the statutes.  Please note that this client alert could not cover the full extent of the Final Rule changes so please contact your BMD Healthcare attorney with questions.

Stark Law Final Rule

The Stark Final Rule creates new, permanent exceptions to the Stark Law for value-based arrangements. The Final Rule is meant to enhance innovation by permitting physicians and other healthcare providers to design and enter into value-based arrangements without fear. The exceptions apply regardless of whether the arrangement relates to care furnished to people with Medicare or other patients. In order to qualify for these exceptions, the relationship must be a compensation arrangement between an entity and a physician. Existing value-based arrangements that already comply with an exception are not required to use one of the new exceptions. 

The new Stark Final Rule exceptions include:

  • Full financial risk (§ 411.357(aa)(1))
    • Applies to value-based arrangements in which the participants have assumed “full financial risk” for the cost of all patient care items and services covered by the applicable payor for each patient in the target patient population for a specified time period (e.g., capitation payments or global budget payments from a payor).
  • Value-based arrangements with meaningful downside financial risk to the physician

(§ 411.357(aa)(2))

    • Physicians will qualify for the exception where no less than 10% of the total value of the remuneration the physician receives under the value-based arrangement is at risk.
  • Value-based arrangements § 411.357(aa)(3)
    • Permits monetary and nonmonetary remuneration within compensation arrangements that qualify as value-based arrangements, regardless of the level of risk undertaken by the value-based enterprise. Additional safeguards include the requirement of a signed writing, as well as annual monitoring requirements to track the value-based activities and related impact and progress of such activities.

CMS also finalized at § 411.354(c)(4)(iii) (the Stark indirect compensation exception) that the value-based exceptions are available to protect the physician’s referrals to an entity when an indirect compensation arrangement includes a value-based arrangement to which the physician (or the physician organization standing in the shoes of the physician) is a direct party. Note that the exception only applies if the link closest to the physician is not an ownership interest, and the compensation arrangement must meet the definition of value-based arrangement.

The Stark Final Rule provides additional guidance on several key requirements that must often be met in order for physicians and healthcare providers to comply with the Stark Law. For example, compensation provided to a physician by another healthcare provider generally must be at fair market value. The Stark Final Rule provides guidance on how to determine if compensation meets this requirement. Finally, the Stark Final Rule also provides guidance and updates on fundamental Stark terminology including “designated health services”, “transaction”, “commercial reasonableness”, “indirect compensation arrangement”, payments “set in advance”, and “group practice”, among others.

Anti-Kickback Statute Final Rule

The AKS Final Rule implements seven new safe harbors, modifies four existing safe harbors, and codifies one new exception under the Beneficiary Inducements in Civil Monetary Penalties (“CMP”) law. The AKS Final Rule also expands the new safe harbor for cybersecurity technology and services to cover remuneration in the form of cybersecurity-related hardware.

  • Value-Based Arrangements.
    • Care Coordination Arrangements to Improve Quality, Health Outcomes, and Efficiency (§ 1001.952(ee)) – The exchange of in-kind (not monetary) remuneration is permitted under this safe harbor where the parties establish legitimate outcome measures to advance the coordination and management of care for the target patient population; the arrangement is commercially reasonable; and the recipient contributes at least 15% of either the offeror’s cost or the fair market value of the remuneration.
    • Value-Based Arrangements with Substantial Downside Financial Risk (§ 1001.952(ff)) - In this safe harbor, participants are required to “meaningfully share” in downside risk. The OIG has defined this to mean that the participant must share at least 5% of the risk. If parties use the “Shared Savings and Losses Methodology” of this safe harbor, the risk threshold the parties must assume is 30%. There is a 20% risk threshold for Episodic Payment Methodology. 
    • Value-Based Arrangements with Full Financial Risk (§ 1001.952(gg)) - Full Financial Risk is defined as responsibility for all the costs of all items and services covered by a payor for each patient in the target populations for the term of one year. This safe harbor protects both monetary and in-kind remuneration.
  • Patient Engagement and Support (§ 1001.952(hh)) provides protection for certain tools and supports furnished to patients to improve quality, health outcomes, and efficiency. Protection is limited to in-kind remuneration up to $500 per year provided by value-based enterprises to patients to assist with the patient’s engagement in their care.
  • CMS-Sponsored Models. A new safe harbor (§ 1001.952(ii)) for certain remuneration provided in connection with a CMS-sponsored model, which should reduce the need for separate and distinct fraud and abuse waivers for new CMS-sponsored models.
  • Cybersecurity Technology and Services. A new safe harbor (§ 1001.952(jj)) for donations of cybersecurity technology and services.
  • Electronic Health Records Items and Services. Modifications to the existing safe harbor for electronic health records items and services (§ 1001.952(y)) to add protections for certain cybersecurity technology, to update provisions regarding interoperability, and to remove the sunset date.
  • Outcomes-Based Payments and Part-Time Arrangements. Modifications to the existing safe harbor for personal services and management contracts (§ 1001.952(d)). To be protected, outcome-based payments must be based on the achievement of measures with clinical evidence or credible medical support and that payments for any such arrangement must measurably improve or maintain care or materially reduce costs. In addition, the OIG removed the current safe harbor requirement that the aggregate payment for a management or services arrangement be set out in advance. Now, only the methodology need be set in advance. Finally, the OIG removed the requirement that part-time arrangements have a schedule of services specifically set out in the written agreement.
  • Warranties. Modifications to the existing safe harbor for warranties (§ 1001.952(g)) to revise the definition of “warranty” and provide protection for bundled warranties for one or more items and related services, provided the items and services are all paid for by the same payor and under the same payment.
  • Local Transportation. Modifications to the existing safe harbor for local transportation (§ 1001.952(bb)) to expand and modify mileage limits up to 75 miles for rural areas and eliminated distance requirement for transportation for patients discharged from an inpatient facility or released from a hospital after being placed in observation status for at least 24 hours.
  • Accountable Care Organization (ACO) Beneficiary Incentive Programs. The new safe harbor at 1001.952(kk) protects incentive payments made by an ACO to an assigned beneficiary under a beneficiary incentive program established under Section 1899(m) of the Act if the incentive payment is made in accordance with the requirements found in Section 1899(m) of the Balanced Budget Act of 2018.
  • Final Exception Regulations Under the Beneficiary Inducements CMP. The final exception regulations under the Beneficiary Inducements CMP protect:
    • Telehealth for In-Home Dialysis. An amendment to the definition of “remuneration” in the CMP rules at 42 C.F.R. § 1003.110 interpreting and incorporating a new statutory exception to the prohibition on beneficiary inducements for “telehealth technologies” furnished to certain in-home dialysis patients.

The Final Rules recognize the inherent overlap of the Stark law with the AKS and try to align the two so they can better encourage value-based arrangements.

Please contact BMD Healthcare and Hospital Law Member Jeana Singleton at jmsingleton@bmdllc.com or Attorney Ashley Watson at abwatson@bmdllc.com if you have any questions regarding health care fraud and abuse guidelines and how to ensure your practice can remain compliant.


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