October 11, 2019
AHLA Weekly
Julie E. Kass and Kristin M. Bohl, BakerOber Health Law, practice group of Baker Donelson
The
Department of Health and Human Services (HHS) continued its efforts to
have a major impact on innovation in health care by releasing extensive
and significant proposed rules governing the Stark Self-referral
prohibition[1] (Stark) and the Medicare Anti-Kickback Statute[2]
(AKS) on October 9. The proposed regulations are part of HHS'
Regulatory Sprint to Coordinated Care and are intended to remove
regulatory barriers to coordinated care and value-based care to improve
the quality of care, health outcomes, and efficiency, all allowing for
significant innovation in our country's health care system. These
proposed regulations, issued by the Centers for Medicare & Medicaid
Services (CMS) and the Office of Inspector General (OIG), consider
comments received in response to Requests for Information (RFI) from OIG
and CMS published in the summer of 2018. The proposed rules currently
are on display at the Federal Register. Comments to the regulations will be due 75 days after the proposed rules are published in the Federal Register.
Anti-Kickback Statute
The
OIG proposes both new safe harbors and modifications to existing safe
harbors. The OIG indicates that it drafted the rules with the following
principles in mind: (1) to allow for beneficial innovations in health
care delivery; (2) to avoid regulations that limit innovation to certain
arrangements that may not reflect the most current understanding in
medicine, science, and technology; and (3) to provide safe harbor
protection that will be useful for a wide range of provider types and
sizes. The OIG goals are ambitious, trying to balance the competing
challenges of the flexibility needed for change and innovation versus
the safeguards necessary to protect federal health care programs and
patients. The OIG indicates that it has endeavored to create rules that
are clear, objective, flexible, and easy to implement while at the same
time that also include adequate safeguards. The OIG stresses that it has
not made a final determination that the regulations strike the right
balance. The proposed safe harbors are prospective only and subject to
possible material change until a final rule is issued. Indeed, much of
the preamble to the proposed rules is made up of requests by the OIG for
further feedback on the proposed rules or potential alternatives.
Value-Based Enterprise Safe Harbors
The
proposed rule includes three new safe harbors encompassing a variety of
arrangements for "value-based enterprises" (VBE) intended to "foster
better care at lower cost through improved care coordination for
patients." VBEs can take many forms. They are generally networks of
individuals or entities (at least two) that collaborate to achieve a
value-based purpose. VBEs include all the entities that would
participate in arrangements that would be eligible for safe harbor
protection. The VBE is also the body that is accountable for making sure
that all of the criteria of the safe harbor are met.
The VBE safe harbors are:
- Care coordination arrangements to improve quality, health outcomes, and efficiency (1001.952(ee));
- Value-based arrangements with substantial downside financial risk (1001.952(ff)); and
- Value-based arrangements with full financial risk (1001.9529gg))
Each
of these safe harbors protects a variety of arrangements. They share a
common terminology, such as VBE Participant, Value-Based Arrangement,
and Value-Based Activity. While the OIG has stated that the definitions
will be similar to those in the Stark proposed rules, whenever
appropriate, the OIG has also indicated that the proposed safe harbors
are more restrictive than the CMS proposals in various respects. A key
example of this is the definition of VBE Participant. The safe harbor
definition excludes pharmaceutical manufacturers, manufacturers,
distributors, DMEPOS suppliers, and laboratories. The parallel CMS
preamble defines a VBE Participant as an individual or entity that
engages in at least one value-based activity as part of a value-based
enterprise. Rather than excluding certain types of entities, CMS merely
considers whether to exclude pharmaceutical manufacturers; manufacturers
and distributors of DMEPOS; pharmacy benefit managers (PBMs);
wholesalers; and distributors from the VBE Participant definition.
Notably, laboratories are not included in this list.
The Care
Coordination safe harbor protects only in-kind remuneration, does not
require the participants to take on risk, but does require that the
arrangement be measured based on at least one evidence-based outcome
measure, along with several other safeguards that ensure transparency.
Notably, the recipient must pay at least 15% of the offeror's cost of
the in-kind remuneration.
The safe harbor for Value-Based
Arrangements with Substantial Downside Risk protects both in-kind and
monetary remuneration. In this safe harbor, VBE Participants are
required to "meaningfully share" in downside risk; participants must be
at risk for at least 8% of the amount for which the VBE is at risk; the
arrangement must be a partial or full capitation payment; or for
physicians, must meet the Stark exception for valued-based arrangements
with meaningful downside risk. The safe harbor also requires VBE
arrangements to meet many of the same requirements as the Care
Coordination safe harbor.
The final VBE safe harbor for
Value-Based Arrangements with Full Financial Risk also protects in-kind
and monetary remuneration. Full Financial Risk is defined as
responsibility for all the costs of care for a specific patient
population. The OIG states that this safe harbor provides the greatest
flexibility, as the parties to the arrangements have taken on full
financial risk.
In addition to the VBE safe harbors, the OIG has
added a separate safe harbor to protect CMS-sponsored models, such as
those designed by the CMS Innovation Center. This safe harbor is
intended to replace the current model-by-model fraud and abuse waiver
process for each new CMS innovation program.
A related new safe
harbor provides protection for certain patient engagement tools
(1001.952(hh)). The Patient Engagement and Support safe harbor protects
arrangements with beneficiaries from both the Anti-Kickback Statute and
the Civil Money Penalty (CMP) for Patient Inducement. This proposed safe
harbor is intended to address medically necessary care and other
non-medical, but health-related items and services that patients might
need to adhere to treatment regimens. Its protection is limited to
in-kind remuneration provided by VBE Participants to patients to assist
with patient engagement in their care. Covered patient engagement tools
are limited to "in-kind, preventative items, goods or services such as
health related technology, patient health-related monitoring tools and
services and supports or services designed to identify and address a
patient's social determinants of health that have a direct connection to
the coordination and management of care of the target patient
population." Excluded are gift cards, cash, and any cash equivalent.
Personal Services and Management Safe Harbor
The
OIG also proposes to modify the personal services and management
contracts safe harbor to include the protection of certain
outcomes-based payment arrangements, such as payments from a hospital to
a physician who improves certain clinical measures, such as infection
rates. The safe harbor requires that payments for any such arrangement
must be for measurably improving care and materially reducing costs.
Outcomes-based payments that relate only to internal cost savings for
the party paying the remuneration are excluded from safe harbor
protection. Payments from a pharmaceutical company, manufacturer,
distributor, DMEPOS supplier, or laboratory are also excluded.
In addition, the OIG removes the current safe harbor requirement that the aggregate
payment be set out in advance and replaces it with the requirement that
the methodology need only be set in advance. This is consistent with
the parallel Stark exception. Further the OIG removes the criteria that
if an arrangement is part-time, the schedule of services be specifically
set out in the written agreement.
Cybersecurity and Electronic Health Record Donation Safe Harbors
The
OIG acknowledges the increased use of technology in patient care and
the need for the safe protection of patient information. Therefore, the
proposed rule includes a new safe harbor for the provision of
cybersecurity technology to potential referral sources. It also modifies
the safe harbor for donation of electronic health records safe harbor,
most notably removing any sunset of the safe harbor and updating
provisions to create consistency with Office of National Coordinator for
Health Information Technology proposed rules related to
interoperability.
Modification to the Warranty Safe Harbor
The
OIG proposes changes to the Warranty safe harbor to allow protection
for one or more items and related services; exclude beneficiaries from
the reporting requirements for buyers and directly define warranty
rather than relying on the reference to 15 U.S.C. § 2301(6). The changes
to the safe harbor do not extend protection to warranty of service-only
arrangements. Moreover, there are additional safe harbor criteria that
must be met for protection of bundled warranties.
Modification to Local Transportation Safe Harbor
The
OIG proposes to modify the local transportation safe harbor to expand
the distance allowed for residents in rural areas as well as remove any
distance requirement for inpatients on discharge. The OIG also clarifies
that ride-sharing arrangements are permissible under the safe harbor.
ACO Beneficiary Incentive Program Safe Harbor
The
Balanced Budget Act of 2018 included a statutory provision excluding
from remuneration incentive payments made to a beneficiary who receives
such payments as part of the ACO Beneficiary Incentive Program under
Section 1899(m) of the Statute. The OIG is codifying the Balanced Budget
Act provision as a new safe harbor without any modification from the
statute.
Civil Money Penalty Exception
Statutory Exception for Telehealth Technologies for In-Home Dialysis
The
Creating High-Quality Results and Outcomes Necessary to Improve Chronic
Care Act of 2018 included a provision to permit individuals with
end-stage renal disease that receive home dialysis treatment to be
provided monthly clinical assessments through telehealth and created an
exception from the definition of remuneration under the CMP for
telehealth technologies provided to those patients. The OIG proposes
certain safeguards for such telehealth technologies to implement the
statutory provision.
Physician Self-Referral (Stark) Law
In
this proposed rule, CMS not only created new exceptions for value-based
arrangements, but also addressed many areas in the existing regulations
that have prompted requests for clarification and guidance. CMS notes
that many of its proposals are intended to reduce the undue impact of
the physician self-referral statute and regulations on parties that
participate in alternative payment models and other novel financial
arrangements and to facilitate care coordination among such parties.
While responding to the concerns raised by respondents to the RFI, CMS
was intentional in establishing proposals that not only maintain program
integrity, but also ensure compliance with the Stark Law is achievable,
as well as offer the flexibility required by participants in
value-based health care delivery and payment systems.
Value-Based Enterprise Proposed Exceptions
The
proposed exceptions were drafted with a focus on several corresponding
goals: to remove regulatory barriers, real or perceived; to create space
and flexibility for industry-led innovation in the delivery of better
and more efficient coordinated health care for patients and improved
health outcomes; and in support of the Secretary's priorities. CMS noted
the historical trend toward improving health care through better care
coordination and the increasing adoption of value-based models in the
health care industry, and sought to propose exceptions that will create
incentives for the industry to move away from volume-based health care
delivery and payment and toward population health and other
non-fee-for-service payment models.
To support expansion of
value-based arrangements, CMS proposed three new exceptions as well as
new definitions, that when read together provide the requirements for
protection from the Stark Law's prohibition on referrals and claims
submission. CMS notes that these proposed exceptions would apply
regardless of whether the arrangement includes care furnished to
Medicare beneficiaries, non-Medicare patients, or a combination of both.
Additionally, CMS notes that the proposal of the new exceptions is not
intended to imply that any existing value-based arrangements that
currently satisfy an exception are in danger of noncompliance.
The
new definitions for the proposed value-based exceptions include:
value-based activity; value-based arrangement; value-based
enterprise(VBE); value-based purpose; VBE participant; and target
patient population. The proposed exceptions would apply only to
compensation arrangements that qualify as value-based arrangements, that
is between a VBE and one or more of its VBE participants or between
parties in the same VBE. CMS notes that a determination of whether one
of the new exceptions applies to an arrangement will be based on the
activities that serve as the basis for the compensation arrangements.
Although identifying those activities that are specifically responsible
for a value-based outcome can be challenging, CMS explicitly states that
the act of referring patients for designated health services is itself
not a value-based activity.
The proposed exceptions include:
- Full Financial Risk § 411.357(aa)(1)
- Value-Based Arrangements with Meaningful Downside Financial Risk to the Physician § 411.357(aa)(2)
- Value-Based Arrangements Proposed § 411.357(aa)(3)
The
Full Financial Risk exception applies to value-based arrangements
between VBE participants in a value-based enterprise that has 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. The VBE is financially
responsible on a prospective basis 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 period of time. CMS
explained that full financial risk may take the form of capitation
payments or global budget payments from a payor that compensates the
value-based enterprise for providing all patient care items and services
for a target patient population for a predetermined period of time but
is not limited to only these approaches. This exception is similar to
the risk-sharing arrangements exception but is not limited to
"risk-sharing compensation." CMS does not propose a writing requirement
for this exception.
The Value-Based Arrangements with Meaningful
Downside Financial Risk to the Physician exception would protect
remuneration paid under a value-based arrangement where the physician is
at meaningful downside financial risk for failure to achieve the
value-based purpose(s) of the value-based enterprise (the "meaningful
downside financial risk exception"). CMS proposes to define "meaningful
downside financial risk" as the physician is responsible to pay the
entity no less than 25% of the value of the remuneration the physician
receives under the value-based arrangement. The proposal requires the
nature and extent of the physician's financial risk to be set forth in
writing.
The proposed Value-Based Arrangements exception addresses
compensation arrangements that qualify as value-based arrangements,
regardless of the level of risk undertaken by the value-based enterprise
or any of its VBE participants (the "value-based arrangement
exception") and would permit both monetary and nonmonetary remuneration
between the parties. This proposed exception has additional safeguards,
including the requirement of a signed writing that the other two
value-based exceptions do not have.
CMS did not include a separate
proposed exception to protect CMS-sponsored models like the OIG did.
CMS believes that the exceptions proposed at § 411.357(aa) would be
applicable to the compensation arrangements between parties in a
CMS-sponsored model, program, or other initiative (provided that the
compensation arrangement at issue qualifies as a "value-based
arrangement"). Although CMS hopes that the new value-based exceptions
would eliminate the need for any new waivers of Section 1877 of the Act
for value-based arrangements, parties may elect to use the waivers
applicable to the CMS-sponsored models.
Indirect Compensation Arrangements to which the Exceptions at Proposed § 411.357(aa) Are Applicable (Proposed § 411.354(c)(4))
Under
the current regulations, if an indirect compensation arrangement
exists, the only exception available for protection under the Stark Law
is the indirect compensation exception at § 411.357(p), although parties
to an arrangement may opt to apply an applicable exception in § 411.355
to protect individual referrals of and claims for designated health
services. CMS raised the issue of indirect compensation arrangements
that are part of an unbroken chain of financial relationships in a
value-based arrangement. The newly proposed exceptions at § 411.357(aa)
are less restrictive than the current indirect compensation exception
and an arrangement could be an indirect value-based compensation
arrangement and not be able to meet the existing indirect compensation
exception because value-based arrangements do not have to meet certain
of the criteria of the existing exception. To address this, CMS proposes
that, when the value-based arrangement is the link in the chain closest
to the physician—that is, the physician is a direct party to the
value-based arrangement—the indirect compensation arrangement would
qualify as a "value-based arrangement" for purposes of applying the
proposed exceptions at § 411.357(aa) and would not have to satisfy the
indirect compensation exception.
Price Transparency
CMS
sought comments on price transparency in the RFI and received mixed
responses regarding the role of transparency in the context of the Stark
Law. While CMS continues to support patient access to price
information, the agency is seeking additional comments on how to
incorporate price transparency objectives while overcoming the
technical, operational, legal, cultural, and other challenges to
including price transparency requirements in the physician self-referral
regulations.
Fundamental Terminology Requirements
In
addition to the proposed value-based arrangement exceptions,
definitions, and related changes, CMS responded to many of the concerns
and questions raised in the RFI and through self-referral disclosure
protocol (SRDP) submissions, as well as other sources.
Commercially Reasonable
Several
statutory and regulatory exceptions include a requirement that the
compensation arrangement is "commercially reasonable." In considering a
clarifying definition for the term, CMS considered whether the
arrangement makes sense as a means to accomplish the parties' goals. As
the specific facts to an arrangement matter, this consideration must be
made based on the perspective of the particular parties involved in the
arrangement. CMS highlights that a commercial reasonableness
determination is not one of valuation and it is not based on
whether the arrangement is profitable. CMS provides helpful explicit
clarification that arrangements that do not result in profit for one or
more of the parties may nonetheless be commercially reasonable.
The
proposal includes two alternative definitions for the term
"commercially reasonable": (1) that the arrangement furthers a
legitimate business purpose of the parties and is on similar terms and
conditions as like arrangements, or (2) that 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.
Volume or Value Standard and the Other Business Generated Standard
CMS
proposes two separate special rules for the volume or value standard
and two special rules for the other-business-generated standard. To
provide the bright-line test requested by commenters, CMS proposes to
define when compensation will be considered to take into account the
volume or value of referrals or take into account other business
generated between the parties rather than deeming compensation under
certain circumstances not to have been determined in a manner that takes
into account the volume or value of referrals or takes into account
other business generated between the parties.
CMS reaffirmed its position from the Phase II regulations:
With
respect to employed physicians, a productivity bonus will not take into
account the volume or value of the physician's referrals solely because
corresponding hospital services (that is, designated health services)
are billed each time the employed physician personally performs a
service. We are also clarifying that our guidance extends to
compensation arrangements that do not rely on the exception for bona fide employment
relationships at § 411.357(c), and under which a physician is paid
using a unit-based compensation formula for his or her personally
performed services, provided that the compensation meets the conditions
in the special rule at § 411.354(d)(2). That is, under a personal
service arrangement, an entity may compensate a physician for his or her
personally performed services using a unit-based compensation
formula—even when the entity bills for designated health services that
correspond to such personally performed services—and the compensation
will not take into account the volume or value of the physician's
referrals if the compensation meets the conditions of the special rule
at § 411.354(d)(2) (see 69 FR 16067).
Patient Choice and Directed Referrals
In
an effort to ensure that patient choice and physicians' professional
medical judgment are protected and to avoid interference in the
operations of a managed care organization, even with proposed changes to
the volume or value standard, CMS proposes to add an element to certain
exceptions that would require the compensation arrangement to meet the
conditions of the special rule at § 411.354(d)(4). Under the special
rule, an entity is permitted to direct referrals to a particular
provider, practitioner, or supplier for a physician who is a bona fide employee,
independent contractor, or party to a managed care contract, as long as
the compensation arrangement meets specified conditions designed to
preserve patient choice, comply with insurer's determinations, and
protect the physician's judgment as to the patient's best medical
interests. The exceptions CMS is considering for this additional element
include: § 411.355(e) for academic medical centers, § 411.357(c) for
bona fide employment relationships, § 411.357(d)(1) for personal service
arrangements, § 411.357(d)(2) for physician incentive plans, §
411.357(h) for group practice arrangements with a hospital, § 411.357(l)
for fair market value compensation, and § 411.357(p) for indirect
compensation arrangements.
Fair Market Value
CMS
proposed to define fair market value to 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. Additionally, CMS proposed to change the definition
of "general market value," currently included within the definition of
fair market value at § 411.351 to equate it to "market value," the term
used uniformly in the valuation industry.
Modifications to Group Practice
In
addressing comments received related to clarification of the group
practice rules, CMS focused on changes that apply to the purposes of the
proposed rule—the proposed definitions and special rules for
"commercially reasonable" compensation arrangements, "fair market value"
compensation, and the volume or value standard applicable throughout
the physician self-referral law and regulations; and the transition from
a volume-based to a value-based health care system. The proposed
changes apply to clarifying the application of the "volume or value
standard" and revisions to the special rules for profit shares and
productivity bonuses. CMS proposed to clarify that where § 411.352(i)
states that a physician in a group practice may be paid a share of
overall profits of the group practice, provided that the share is not
determined in any manner that is directly related to the volume
or value of referrals by the physician, is interpreted to mean "takes
into account" the volume or value of referrals. For the special rules
for profit shares and productivity bonuses, CMS proposes to add a
deeming provision related to the distribution of profits from designated
health services that are directly attributable to a physician's
participation in a value-based enterprise. This distribution would be
deemed not to directly take into account the volume or value of the
physician's referrals and would enable physicians in a group practice
who are participating in value-based arrangements to be rewarded for
their participation in such models in compliance with these special
rules.
Recalibrating the Scope and Application of the Regulations
CMS
noted it has reconsidered its position and no longer believes that it
is necessary or appropriate to include requirements pertaining to
compliance with the AKS and federal and state laws or regulations
governing billing or claims submission as requirements of the exceptions
to the physician self-referral law. CMS proposes to remove from the
exceptions in 42 C.F.R. pt. 411, subpt. J the requirement that the
arrangement does not violate the AKS or any federal or state law
governing billing or claims submission wherever such requirements
appear.
CMS also proposes clarifications to several definitions
including: (i) designated health services (clarifying that a service
provided by a hospital to an inpatient does not constitute a designated
health service payable, in whole or in part, by Medicare, if the
furnishing of the service does not affect the amount of Medicare's
payment to the hospital under the Acute Care Hospital Inpatient
Prospective Payment System (IPPS)), (ii) physician, (iii) referral, (iv)
remuneration, and (v) transaction. CMS also proposes to delete in their
entirety the rules on the period of disallowance.
Electronic Health Records (EHR)
CMS
and OIG are both proposing changes to the EHR exception and safe
harbor, respectively. These proposals focus on interoperability and the
"deeming provision," information blocking, and data lock-in. They
clarify that donations of certain cybersecurity software and services
are permitted under the EHR exception, remove the sunset provision, and
modify the definitions of "electronic health record" and "interoperable"
to ensure consistency with the 21st Century Cures Act.
Flexibility for Non-abusive Business Practices
To
address other arrangements that CMS believes do not raise a risk of
program or patient abuse, CMS proposes two new exceptions. The first is
an exception for limited remuneration to a physician. This would permit
the provision of limited remuneration to a physician if certain
requirements are met including instances when the amount of, or a
formula for, calculating the remuneration is not set in advance of the
provision of items or services and the remuneration does not exceed an
aggregate of $3,500 per calendar year.
Another proposed exception
addresses the donation of cybersecurity technology and related services
which would protect nonmonetary remuneration in the form of certain
types of cybersecurity technology and related services.
Conclusion
The
proposed rules from CMS and OIG contain a great deal to consider. As
they have done in the past, CMS and OIG worked cooperatively with each
other in drafting the proposed regulations and have produced a
thoughtful and far-reaching proposal. The proposed rules recognize the
inherent overlap of the Stark Law with the AKS and highlight some of
those areas where CMS and OIG align with each other in their proposals,
and where, due to the focus and application of the different laws, the
analysis differs. It is critical that the industry takes the time to
study the proposals and the potential impacts on existing value-based
arrangements and take advantage of the opportunity to respond to these
proposals.
About the Authors:
Julie Kass,
the co-chair of the Health Law Practice Group at BakerOber, is a
recognized authority in the field of Medicare and Medicaid fraud and
abuse. Her practice deals with the regulatory aspects of structuring
arrangements under the Stark and Anti-Kickback laws. She often serves as
defense counsel in DOJ and OIG matters and has worked on a variety of
voluntary disclosures to CMS and OIG. Julie's clients involve the full
spectrum of health care providers across the U.S. Julie is a former
Senior Counsel in the U.S. Department of Health and Human Services,
Office of Inspector General. Julie was the recipient of the Baker
Donelson Susan E. Rich Award for excellence in the promotion of and
commitment to women in the legal profession in 2018. She is listed in Best Lawyers in America® in Health Care Law (2018, 2019) and as a top lawyer Nationwide and in Maryland by Chambers USA: America's Leading Business Lawyers in
Healthcare (2017 – 2019). Julie is a Member of the Board of Directors
of the Jewish Federations of North America and Co-Chair of the Health
and Long-Term Care Subcommittee.
Kristin Bohl is
a Shareholder in the Health Law Practice Group at BakerOber. Ms. Bohl
advises hospitals, health care systems, and providers in compliance and
regulatory issues with particular emphasis on fraud and abuse matters as
well as recently implemented Medicare payment models. Drawing on her
experience in the federal government, she counsels clients on actual and
potential compliance concerns that arise on a day-to-day basis as well
as offers assistance navigating more serious concerns that require a
more extensive plan of action to address. She regularly assists clients
with analysis of issues involving the Stark physician self-referral
statute, the anti-kickback statute, and Medicare payment policy. Ms.
Bohl advises clients on arrangements among health care
providers, internal compliance issues, communication with the federal
government related to compliance issues–including the submission and
resolution of voluntary disclosures to the OIG and CMS self-disclosure
protocols when necessary. She provides guidance on the legal aspects of
health systems operations and drafts and implements compliance programs
and policies.
Endnotes:
[1] 42 U.S.C. § 1395nn.
[2] 42 U.S.C. § 1320a-7b(b).
