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PG Bulletin


October 11, 2019

Anti-Kickback Statute Safe Harbor Proposed Rule

Matthew Wetzel (Akin Gump Strauss Hauer & Feld LLP)
Jennifer Bolen (The J. Bolen Group)
Erica Gnilka (McDermott Will & Emery LLP)

This Bulletin is brought to you by AHLA’s Fraud and Abuse Practice Group.

On October 9, 2019, in conjunction with the Department of Health and Human Services’ (HHS) “Regulatory Sprint to Coordinated Care” initiative, the HHS Office of Inspector General (OIG) published a Notice of Proposed Rulemaking (Proposed Rule) relating to the safe harbors under the federal Anti-Kickback Statute (42 USC 1320a-7b(b)) and the civil monetary penalty (CMP) statute (42 USC 1320a-7a(a)(5)) and their associated regulations (collectively, AKS).

As part of the government’s value-based payment reforms, OIG has proposed the addition of six new safe harbors, modifications to four existing safe harbors, and updates to codify certain statutory requirements. OIG indicates its goal is to protect arrangements implemented through a network of participants who have agreed to collaborate to improve care coordination, increase care delivery efficiency, and improve quality of care and outcomes.

Key Terminology

As part of the Proposed Rule, OIG has proposed new defined terms, including:

Value-Based Enterprise (VBE) – A network of participants that collaborates to achieve one or more value-based purposes. A VBE requires (1) two or more participants who each must contribute to the arrangement; (2) an accountable body or person responsible for VBE oversight; and (3) a governing document describing the VBE and its goals.

Value-Based Arrangement – An arrangement for the provision of at least one value-based activity for a target patient population.

Target Patient Population (TPP) – An identified patient population selected by the VBE or its participants in an objective manner using legitimate and verifiable criteria set out in writing in advance of the arrangement.

Value-Based Activity – An activity reasonably designed to achieve a value-based purpose. The VBE must use an evidence-based process to design a value-based activity, which does not include a mere referral and cannot involve “information blocking” – i.e. providing technology that facilitates care coordination but prevents information exchange with other providers to lock-in referrals between VBE providers.

Value-Based Participant – An individual or entity engaging in at least one value-based activity as part of a VBE. OIG expressly excludes pharmaceutical manufacturers; DMEPOS manufacturers, distributors, and suppliers; and laboratories from participating in VBEs, and is considering whether other entities (like medical device manufacturers, PBMs, or pharmacies) should be excluded.

Value-Based Purpose – (1) Coordinating and managing the care of a TPP; (2) improving quality of care for a TPP; (3) reducing costs to payers without reducing quality of care for a TPP; or (4) transitioning from volume-based delivery and payment to quality of care and cost control.

New Safe Harbors

Care Coordination Arrangements (42 CFR § 1001.952(ee)). Would protect in-kind remuneration exchanged between VBE participants to further care coordination.

  • Example: Hospital provides a behavioral health nurse to follow designated inpatients when discharged to a SNF; SNF provides staff to the hospital to help coordinate patients’ care through the discharge process or office space for the nurse.
  • To be protected under the safe harbor, remuneration (1) must be in-kind, not a cash payment; (2) must be used to engage in value-based activities directly connected to the coordination and management of care for the TPP; and (3) cannot be funded by or result from contributions of parties outside the VBE. Further, the recipient of the care coordination must pay at least 15% of the offeror’s cost for the in-kind remuneration.

Value-Based Arrangements with Substantial Downside Financial Risk (42 CFR § 1001.952(ff)). Addresses arrangements in which a VBE assumes a substantial downside financial risk from a payer for providing items/services for a TPP.

  • Substantial downside financial risk” means (1) shared savings plus a repayment obligation to the payer of at least 40% of shared losses; (2) a repayment obligation to the payer under an episodic or bundled payment arrangement of at least 20% of total loss; (3) prospectively paid population-based payment; or (4) a partial capitated payment from the payer for items and services for the target patient population, reflecting a discount of at least 60% of the total expected fee-for-service payments.
  • The safe harbor would protect the exchange of remuneration between a VBE and a VBE participant that meaningfully shares in the VBE’s downside financial risk (e.g., VBE participant is at risk for 8% of the amount the VBE assumes from the payer).

Value-Based Arrangements with Full Financial Risk (42 CFR § 1001.952(gg)). Addresses arrangements in which a VBE assumes the fulldownside financial risk from a payer for providing items/services for a TPP.

  • Full financial risk means the VBE is financially responsible for the cost of all items and services covered by the applicable payer for each patient in the TPP and is prospectively paid by the applicable payer.

  • Example (Safe Harbor Protected): A VBE receives a prospective, capitated payment from a payer for all items and services covered by Medicare Parts A and B for a TPP.
  • The safe harbor would protect the exchange of remuneration between a VBE and a VBE participant – i.e. no requirement for VBE participant to “meaningfully share” in the VBE’s risk. This safe harbor is intended to provide VBEs with the greatest ability to innovate on care coordination in light of their assumption of the highest level of risk contemplated.

Arrangements for Patient Engagement and Support (42 CFR § 1001.952(hh)). Addresses arrangements under which a VBE participant furnishes patient engagement tools and support to improve quality, health outcomes, and efficiency. These tools must be (1) in-kind preventive items/services (e.g., health related technology, patient health related monitoring) and (2) furnished directly to the patient by the VBE participant.

  • Examples: Providing supports to improve patients’ safety during care transitions or to allow providers to communicate more efficiently with patients.
  • Gift cards, cash, or cash equivalents are not protected. All items must advance adherence to a treatment regimen, follow-up plan, or disease management plan determined by the patient’s provider or improvement in measurable outcomes for the patient/population. The aggregate value of tools/support provided to a patient cannot exceed $500 annually.

CMS-Sponsored Models (42 CFR § 1001.952(ii)). Permits remuneration among/between parties to arrangements under CMS-sponsored models, and in the form of incentives and support provided by model participants to patients covered by the model.

  • Removes the need for model-by-model waivers and allows use of existing waivers or restructuring of arrangements to comply with this or other safe harbors or similar.
  • Does not extend to commercial and private insurance arrangements that may operate alongside, but outside, a CMS-sponsored model.
  • Does not prevent commercial and private insurers from implementing arrangements that cover both public and private patients to satisfy other proposed safe harbor protections that do not distinguish between public and private patient populations.
  • Provides CMS-sponsored model parties an additional pathway to protection from sanctions under the AKS and the beneficiary inducements CMP.
  • Contains six specific safeguards to avoid “stinting” on medically necessary care and to reduce inappropriate utilization.
  • The arrangement must begin and end while the parties are operating under an existing CMS-sponsored model.

Cybersecurity Technology and Services (42 CFR § 1001.952(jj)). Intended to remove barriers and protect cybersecurity donations with appropriate safeguards to prevent referral sources becoming beholden to donors.

  • Protected donors include those who play a central role in the health care delivery structure; ancillary service providers or those who indirectly furnish items/ services used in patient care are not protected donors.
  • Recipients cannot condition doing business with the donor on receipt of donation.
  • No restrictions on who can receive donations—patients included with some limitations.
  • Donations must be necessary and used predominately to implement/ maintain effective cybersecurity—multifunctional technology/services not protected.
  • Alternative approach protects cybersecurity hardware reasonably necessary based on a risk assessment of both the donor and recipient organizations and must meet the other conditions of the safe harbor.

Modification of Existing Safe Harbors

Electronic Health Record Items and Services (42 CFR § 1001.952(y)). Among the changes:

  • Provides textual clarifications to “deeming” provision, and aligns definition of “interoperable” with the statutory definition of “interoperability” from the 21st Century Cures Act.
  • Implements the statutory definition of “information blocking,” defines related terms, and sets forth seven exceptions to the information blocking prohibition.
  • Eliminates or extends the electronic health record (EHR) safe harbor sunset provision.
  • Retains the 15% recipient cost-share requirement, but proposes elimination or reduction of it for small or rural practices. The OIG solicits comments to determine whether the cost-share requirement should be eliminated altogether.
  • Eliminates the prohibition on the donation of equivalent items or services (1001.952(y)(7)), and allows donations of replacement EHR technology.

Personal Services and Management Contracts (42 CFR § 1001.952(d)). Among the changes:

  • Eliminates requirement that aggregate compensation be set in advance.
  • Requires advance determination of compensation methodology, which must reflect fair market value, be commercially reasonable, and not directly take into account the volume or value of referrals or business.
  • Eliminates requirement for a specific contract schedule, length, and exact charge for part-time work.
  • Offers added flexibility for “outcome-based payments,” which are payments from a principal to an agent that (i) reward the agent improving/maintaining improvement of a patient or population health by achieving one or more outcome measures that effectively and efficiently coordinate care across care settings, or (ii) achieve one or more outcome measures that appropriately reduce payer costs while improving, or maintaining the improved, quality of care for patients (e.g., shared savings payments, shared losses payments, gainsharing payments, episodic or bundled payments). Additionally, such payments:
    1. Require collaboration to measurably improve quality of patient care appropriately and materially reduce costs while maintaining quality, or both; and
    2. If specific services are to be performed, the agreement must specify all of the services the parties perform (or refrain from performing) to qualify for the outcomes-based payments.
  • EXCLUDES payments made, directly or indirectly, by a pharmaceutical manufacturer; a manufacturer, distributor, or supplier of DMEPOS; or a laboratory.
  • Excludes payments tied solely to the achievement of internal cost savings for the principal.

Warranties Safe Harbor (42 CFR § 1001.952(g)). Would expand the existing safe harbor for warranties to include bundled items and related services, such as product support and educational services. OIG provided examples of services that may be protected under the expanded safe harbor, and considered additional safeguards against the risk of patient harm and inappropriate utilization.

Transportation Safe Harbor (42 CFR § 1001.952(bb)). Would modify the existing safe harbor for local transportation to expand mileage limits for patients residing in rural areas from 50 to 75 miles, and eliminate the distance limit on transportation of discharged patients. The revisions would offer greater protection for hospitals and physician practices who can transport patients to necessary medical appointments in rural areas. OIG is also considering extending safe harbor protection to patient transportation for purposes other than to obtain medically necessary items or services.

Codification of Bipartisan Budget Act of 2018

ACO Beneficiary Incentive Program Safe Harbor (42 CFR § 1001.952(kk)). Would codify the statutory exception to the definition of “remuneration” in the Bipartisan Budget Act of 2018 related to ACO Beneficiary Incentive Programs. Under the Proposed Rule, patient incentives provided by and among parties participating in certain CMS-sponsored shared savings program models would be protected.

CMP Law (42 CFR § 1003.110). Would amend the CMP law’s definition of “remuneration” to exclude telehealth technologies furnished to certain in-home dialysis patients. In proposing this change, OIG interpreted and incorporated the Bipartisan Budget Act of 2018’s statutory exception for the same activity and included a requirement that the telehealth technologies be furnished by a provider currently treating the patient for end-stage renal disease.

Once finalized, the breadth of the changes to the AKS will impact every corner of the health care market. Comments on the Proposed Rule must be submitted to OIG within 75 days following the publishing of the Proposed Rule in the Federal Register.

AHLA thanks Joseph Kahn (Hall Render Killian Heath & Lyman PC) for serving as editor of this Bulletin.

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