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PG Bulletin


October 24, 2019

CMS and OIG Publish Proposed Rule Modifying Anti-Kickback Safe Harbors and Stark Law Exceptions Related to Shift Away from Fee-For-Service Reimbursement

Adam M. Walters (Walters Law PC, Savannah, GA)

This Bulletin is brought to you by AHLA’s Physician Organizations Practice Group.

Sweeping changes have been proposed to the Anti-Kickback Statute (AKS) and Medicare physician self-referral law (Stark Law) as a result of the Department of Health and Human Services (HHS) Regulatory Sprint to Coordinated Care. This Bulletin summarizes the key changes.

On October 9, 2019, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule that would update certain exceptions to the Stark Law with the goal of accommodating a shift away from fee-for-service towards value-based payment and delivery of health care. Concurrently, HHS’ Office of Inspector General (OIG) issued a proposed rule to create new safe harbors and modify others aimed at value-based arrangements, in addition to creating a new safe harbor for the beneficiary inducements CMP. The two proposed rules may be found at 84 Fed. Reg. 55699 and 84 Fed. Reg. 55766. Comments to each rule will be due by 5:00 p.m. on December 31, 2019.

Anti-Kickback Statute

OIG has proposed seven new safe harbors aimed at promoting coordinated care and improving the quality of patient care. The first three safe harbors, which track the proposed Stark Law exceptions, protect remuneration exchanges between certain individuals and value-based entities in a value-based arrangement.

Before summarizing the value-based safe harbors, it is important to understand the key terminology used in each of them. “Value-based" refers to value created through improved care coordination or health outcomes, lower cost or reduced cost growth for patients or payers, and improved efficiencies in care delivery. A “value-based enterprise” (VBE) includes a network of participants—e.g providers, payers—who have agreed to collaborate for value-based purposes, and who have an accountable body or person and a governing document describing how the VBE will achieve its value-based purposes. While the proposed rule does not explicitly list entities/persons who qualify as participants, it does exclude pharmaceutical manufacturers; manufacturers, distributors, or representatives of DMEPOS; and laboratories. A “value-based activity” would mean any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the VBE: (1) The provision of an item or service; (2) the taking of an action; or (3) the refraining from taking an action.” A “value-based arrangement” is “an arrangement for the provision of at least one value-based activity for a target patient population between or among: (A) the value-based enterprise and one or more of its VBE participants; or (B) VBE participants in the same value-based enterprise.” Finally, “target patient population” is “an identified patient population selected by the VBE or its VBE participants using legitimate and verifiable criteria that: (A) Are set out in writing in advance of the commencement of the value-based arrangement; and (B) further the value-based enterprise's value-based purpose(s).”

The first three safe harbors are as follows:

Care-coordination arrangements. This safe harbor (1001.952(ee)) will protect certain care coordination arrangements between qualified entities or individuals who meet all of the conditions of the safe harbor. It is limited to in-kind remuneration.

Value-based arrangements with Substantial Downside Financial Risk. This safe harbor (1001.952(ff)) protects remuneration, both monetary and in-kind, between value-based entities. Substantial downside risk includes certain shared savings and bundled payment repayment obligations, as well as population and service-based capitation payments.

Value-based arrangements with Full Financial Risk. This safe harbor (1001.952(gg)) is the most flexible and protects remuneration when a value-based entity assumes full financial risk from a payer.

Each “value-based” safe harbor has its own specific qualifications for protection. These three safe harbors do not protect ownership or investment interest, or distributions. Nor do they protect remuneration from parties outside the value-based enterprise.

The remaining four safe harbors are as follows:

Patient engagement. This safe harbor (1001.952(hh)) protects certain tools and supports provided to patients if used to coordinate and manage care, specifically targeting social determinants of health that affect the patient. Under this safe harbor, the aggregate annual value of the tools and supports could not exceed $500.00, with a limited exception for individualized determinations of the patient’s financial need.

CMS-Sponsored Models. This safe harbor (1001.952(ii)) would protect certain renumeration provided in connection with a CMS-sponsored model. "CMS-sponsored models" are defined as Phase I and II Center for Medicare and Medicaid Innovation (CMMI) models and the Medicare Shared Savings Program.

Cybersecurity Technology and Services. This safe harbor (1001.952(jj)) would protect certain donations of cybersecurity technology and services, provided that the cost of the technology or services is not shifted to a federal health care program. The OIG is also seeking comments on whether to include protections for donations of hardware where the donor conducts a risk-assessment of both its own organization and that of the recipient.

ACO Beneficiary Incentive Programs. This safe harbor (1001.952(kk)) protects incentive payments by an ACO to assigned beneficiaries under the Medicare Shared Savings Program.

The proposed rule also proposes modifications for four existing safe harbors:

Electronic Health Records Items and Services. The proposed modifications to the electronic health records items and services safe harbor (1001.952(y)) would add protections for certain cybersecurity technology, update provisions regarding interoperability, and remove the sunset date.

Outcomes-based Payments and Part-Time Arrangements. This would modify the personal services and management contracts safe harbor (1001.952(d)) to add flexibility for outcomes-based payments and part-time arrangements. In addition, the OIG proposes to revise the meaning of set-in-advance to no longer necessitate that total payments be determined when entering into the arrangement, which makes this more consistent with the Stark Law.

Warranties. The proposed rule would modify the 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.

Local Transportation. This would modify the safe harbor for local transportation (1001.942(bb)) to expand the mileage limit for rural areas to 75 miles and for patients discharged from inpatient facilities.

Stark Law

CMS has proposed several changes to the Stark Law, including new definitions, new exceptions for value-based arrangements, and guidance on existing exceptions.

First, CMS has proposed the following definitions, which are critical to the application of the new exceptions: value-based activity, value-based arrangement, value-based enterprise, value-based purpose, value-based participant, and target patient population. These definitions largely track the OIG’s definitions above.

Second, CMS has proposed three new exceptions related to value-based arrangements, which are summarized below.

Full Financial Risk Exception. This new exception (411.357(aa)(1)) would apply to value-based arrangements between value-based participants in a VBE that is financially responsible on a prospective basis for the cost of all patient care items and services covered by the applicable payer for each patient in the target patient population for a specified period of time.

According to the proposed rule, full financial risk may take the form of capitation payments or global budget payments from a payer compensating the VBE with a fixed reimbursement amount for a fixed period for the target patient population.

Value-based Arrangements with Meaningful Downside Risk to the Physician. This new exception (411.357(aa)(2)) would protect remuneration paid under a value-based arrangement if the physician is at meaningful downside financial risk for failure to achieve the value-based purpose(s) of the VBE during the entire duration of the value-based arrangement.

Value-based Arrangements. This new exception (411.357(aa)(3)) would protect any value-based arrangement, regardless of the level of risk undertaken by the VBE or any of its VBE participants, but it must meet certain requirements.

The Proposed Rule also includes a new exception (411.357(z)) for arrangements where an entity pays a physician less than $3,500 in a calendar year for items or services, provided that the compensation is consistent with fair market value and the terms are commercially reasonable. Notably the new exception would not require it to be in writing, signed, or set in advance.

The proposed rule also made revisions to existing exceptions.

In addition, the proposal would broaden the definition of “EHR” to include donated items, expand the current 90-day grace period for signatures to include a 90-day grace period for the written document itself, and decouple compliance with an exception with compliance with the AKS.

Finally, the Proposed Rule would provide guidance on fair market value, commercial reasonableness, and the prohibition on “taking into account” the volume or value of a physician referral.

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