How Will the Recently Promulgated CMS and OIG Final Rules Affect My Practice?

The Department of Health and Human Services (HHS) recently published the long-awaited new rules related to the Anti-Kickback Statute, Civil Monetary Penalties Law, and the Stark Law (collectively, the “Final Rules”). The Final Rules are part of the Department of Health and Human Services’ Regulatory Sprint to Coordinated Care, which has examined federal regulations that potentially impede the transition from volume-based to value-based care.  

As our team of attorneys continues to study the voluminous Final Rules, we are doing so with an eye toward the anticipated practical impact on our clients. In lieu of simply summarizing the Final Rules, we are publishing a series of articles that pose stakeholder-specific questions to help our clients understand the opportunities presented by the Final Rules, and to mobilize for their implementation.   Answering these questions is outside of the scope of this article, and, in many cases, the answers may not be entirely clear; however, we are raising these questions in order to shed light on the broad-sweeping nature of the Final Rules.

Anti-Kickback Statute and the Civil Monetary Penalties Law (CMP)

The Federal Anti-Kickback Statute (“AKS”) provides for criminal penalties for whoever knowingly and willfully offers, pays, solicits, or receives remuneration to induce or reward, among other things, the referral of business reimbursable under any of the Federal health care programs, including Medicare and Medicaid. Similarly, the Civil Monetary Penalties law provides for the imposition of penalties against any person who offers or transfers remuneration to a Medicare or State health care program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier for the order or receipt of any item or service for which payment may be made by Medicare or a State health care program.

The HHS-Office of Inspector General’s Final Rule, which becomes effective January 19, 2021, adopts several new AKS safe harbors for remuneration exchanged between or among participants in a value-based arrangement:

(i) Care coordination arrangements to improve quality, health outcomes, and efficiency without requiring the parties to assume risk;

(ii) value-based arrangements with substantial downside risk;

(iii) value-based arrangements with full financial risk

Examples of services that the safe harbors will protect include: (i) tools and supports furnished to patients to improve quality, health outcomes; (ii) donations of cybersecurity technology and services; (iii) certain outcomes-based payments and part-time arrangements, pursuant to the existing safe harbor for personal services and management contracts; and (iv) local transportation provided to patients by expanding and modifying existing mileage limits for rural areas and for transportation for patients discharged from an inpatient facility.

Note that laboratories, pharmaceutical manufacturers, wholesalers and distributors, pharmacy benefit managers, and suppliers of durable medical equipment, prosthetics, orthotics, and supplies are ineligible to avail themselves of the AKS safe harbors for value-based arrangements, except in the case of manufacturers of medical devices and DMEPOS suppliers, who are permitted to provide digital health technologies under the care coordination arrangements safe harbor. The rationale for excluding these entities the protection of the safe harbor: the entities do not play a central, frontline role in coordinating and managing patient care.

Question: Will providers who furnish procedures in an ambulatory care setting (e.g., an ASC or imaging facility) be permitted to provide local transportation without running afoul of the AKS under the Final Rule?

Stark Law

The Stark Law prohibits: (i) a physician from making referrals for certain designated health services (“DHS”) payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship (ownership, investment, or compensation), unless an exception applies; and (ii) the entity from presenting, or causing to be presented, claims to Medicare (or billing another individual, entity, or third-party payor) for those referred services. The Stark Law has established a number of specific exceptions to the prohibition, and when the Stark Law applies to an arrangement, the only permissible way to make a referral is to fit squarely within an approved exception. 

The Final Rule promulgated by the Centers for Medicare and Medicaid Services (CMS) relates to the physician self-referral law (also known as the Stark Law) and will become effective on January 19, 2021, except for one provision that relates to group practice compensation arrangements, which will become effective on January 1, 2022.  

Compensation Exception for Qualifying Value-Based Arrangements

The Final Rule creates a new Stark Law compensation exception for certain qualified value-based arrangements. This development addresses the reluctance of some providers to embrace value-based care models out of concern that the compensation will implicate the Stark Law. Historically, the distribution of DHS profits has been subject to a variety of requirements aimed at ensuring that physicians are not compensated based on the volume or value of their DHS referrals. The Final Rule acknowledges that physicians participating in a value-based arrangement – as such term is specifically defined in the Final Rule – may receive direct distributions of profits from their DHS referrals without such distributions being deemed to be based on, or take into account, the volume or value of the individual physician’s referrals.

It is important to note that the availability of the AKS safe harbors and the Stark exceptions depends on several specific definitions clarified in the Final Rules. For example, a Value-Based Enterprise (“VBE”) is defined as including only organized groups of health care providers, suppliers, and other components of the health care system collaborating to achieve the goals of a value-based health care delivery and payment system. A VBE is comprised of two or more participants: (1) collaborating to achieve at least one value-based purpose; (2) each of which is a party to a value-based arrangement with the other, or at least one other VBE participant in the value-based enterprise; (3) that have an accountable body or person responsible for the financial and operational oversight of the value-based enterprise; and (4) that have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-base purpose(s). A VBE may also consist only of the two parties to a value-based arrangement with the written documentation recording the arrangement serving as the required governing document that describes the enterprise and how the parties intend to achieve its value-based purpose(s). Whatever its size and structure, a VBE is essentially a network of participants (such as clinicians, providers, and suppliers) that have agreed to collaborate with regard to a target patient population to put the patient at the center of care through care coordination, increase efficiencies in the delivery of care, and improve outcomes for patients.

 Question: Will this accommodation be afforded to physicians who, as part of an Accountable Care Organization (ACO) or a Clinically Integrated Network (CIN) that includes a shared savings arrangement for an episode of care, participate in the shared savings created by certain DHS, such as the provision of imaging services?

Labs, DME Suppliers, and Others Not Excluded

Citing feedback from its law enforcement partners about potentially abusive arrangements, and ongoing program integrity concerns, CMS considered excluding certain entities such as laboratories, pharmaceutical manufacturers, wholesalers and distributors, pharmacy benefit managers, and suppliers of durable medical equipment, prosthetics, orthotics, and supplies, as from participating in a qualified VBE for purposes of the Final Rule, but ultimately declined to adopt a definition of value-based participants that does not limit these entities from participating.

Question: Taking into account the unavailability of the AKS safe harbors for these entities, does the decision by CMS not to exclude labs, pharmacies, and DME suppliers from the definition of a VBE provide an opportunity for these entities to creatively contract with ACOs and CINs in value-based care models?

How Frier Levitt Can Help

Participants in ventures that implicate the AKS, Stark Law, and/or state analogs should periodically review their business practices to determine whether they are operating in compliance with the applicable laws.  The Final Rules present an occasion to evaluate risks and opportunities, particularly in the value-based care space.  It is important to note that while many aspects of the Final Rules are aligned, an arrangement that qualifies for a Stark Law exception may not fit within an AKS safe harbor (and vice versa) unless additional features are added to the arrangement.