On October 9, 2019, The Centers for Medicare and Medicaid Services (CMS) and the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued two highly anticipated proposed rules to reform the Physician Self-Referral Law (the “Stark Law”) and the Federal Anti-Kickback Statute (AKS) regulations.
The proposed rules come after HHS announced its “Regulatory Sprint to Coordinated Care” initiative, signaling the Administration’s priority to modernize and clarify the fraud and abuse laws. The proposed reforms are intended to better facilitate innovative arrangements for coordinated care consistent with a shift to a value-based healthcare system. HHS expects the proposals to ease the compliance burden for healthcare providers, while maintaining strong safeguards to protect patients and programs from fraud and abuse.
The Stark Law generally prohibits physicians from making referrals for certain healthcare services payable by Medicare if the physician (or an immediate family member) has a financial relationship with the entity performing the service. In recent years, healthcare reform efforts have resulted in the implementation and introduction of many value-based healthcare delivery and payment systems, intended to incentivize the quality of patient care, in order to address rising costs in the traditional volume-based system. In its current form, the Stark Law prohibits many arrangements that are designed to enhance care coordination, improve quality, and reduce waste.
The federal AKS provides criminal penalties for whoever knowingly and willfully offers, pays, solicits, or receives remuneration to induce or reward the referral of business reimbursable under a Federal health care program, including Medicare and Medicaid. Providers may seek to comply with statutory and regulatory safe harbors so that they have assurance their business practices will not be subject to an enforcement action.
The Civil Monetary Penalty (CMP) statute prohibits beneficiary inducements and provides for the imposition of CMPs against any person who offers or transfers remuneration to a Medicare or State healthcare program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of the particular provider, practitioner, or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or a State healthcare program.
CMS published Request for Information (RFI) on June 25, 2018, seeking stakeholder input to address regulatory barriers to a value-based healthcare payment and delivery system under the Stark Law. The OIG issued a RFI from stakeholders regarding the AKS and CMP beneficiary inducement rules in August 2018. CMS and the OIG considered stakeholder input from these RFIs in drafting the proposed rules.
Proposed Changes to the Stark Law
Stakeholders responding to CMS’s RFI stressed that providers are largely unwilling to enter into innovative arrangements that would improve focus on quality outcomes, as there is currently no clear exception or safe harbor for such activities, and penalties for violations of the Stark law are significant. The proposed modifications to Stark would create new exceptions for value-based arrangements. CMS has also proposed revised definitions for terms such as “fair market value” and “commercially reasonable” to offer more clarity in response to feedback from providers.
Proposed Changes to the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements
The AKS proposed rule would create the following new safe harbors for certain remuneration exchanged between or among eligible participants:
(1) care coordination arrangements aimed at improving quality and outcomes;
(2) value-based arrangements with substantial downside financial risk; and
(3) value-based arrangements with full financial risk.
The OIG has also proposed a new safe harbor to the AKS for innovation models sponsored by CMS, which it says will reduce the need for separate fraud and abuse waivers in the future. The rule also proposes modifications to the existing and widely used safe harbor for personal services and management contracts, which should add flexibility for outcomes-based payments and part-time arrangements.
The AKS proposal also includes the following:
- a safe harbor for certain tools and supports furnished to patients to improve quality, outcomes and efficiency;
- proposed modifications to the existing safe harbor for local transportation; and
- proposed amendment to the definition of “remuneration” that incorporates a new exception for telehealth efforts furnished to in-home dialysis patients.
CMS and the OIG have attempted to incentivize cyber-security efforts by proposing a new safe harbor and exception for donating cyber security technology and services, and removing the sunset date for the existing safe harbor and exception for electronic health records.
Next Steps for the Proposed Rules
The agencies are accepting comments to the proposed rules through December 31, 2019. After the comment period closes, the agencies will review comments and consider them in its formulation of its final rules. The final rules may differ in substance than the proposed rules, however, they must be a “logical outgrowth” of the issues and solutions discussed in the proposed rules. While it may still be some time before HHS is ready to implement changes to fraud and abuse laws, the issuance of the proposed rules certainly signals a step in the direction of increased clarity and assistance for provider compliance.
Written by the attorneys in the Health Law Practice Group at Friday, Eldredge & Clark, LLP, this information is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of our Health Law Attorneys.
Lynda M. Johnson has practiced in the health law area since 1986, representing a wide variety of healthcare providers including hospitals, physicians, physician groups, nursing homes, and home health agencies. Recently, her practice has focused on the representation of hospitals and physicians in HIPAA compliance efforts and other areas of regulatory compliance. Her practice also includes issues involving Stark I and II and Anti-Kickback compliance, Medicare/Medicaid reimbursement, corporate compliance issues, physician and hospital organization issues, managed care, healthcare and hospital law, long-term care and home health.
Timothy Ezell practices primarily in the area of healthcare law, representing hospitals, physician groups and other medical service providers in various corporate and compliance matters. His experience covers matters relating to HIPAA, Stark, fraud and abuse, anti-kickback, EMTALA, Medicare reimbursement, compliance, joint ventures, provider sales and acquisitions, medical staff bylaws and credentialing issues.
Amie K. Alexander joined the firm after earning her law degree from the University of Arkansas at Little Rock William H. Bowen School of Law. Her practice is focused in the area of healthcare where she works primarily on various corporate and compliance matters. She drafts and reviews policies to ensure compliance with federal healthcare regulations such as HIPAA, Stark I and Stark II, Anti-Kickback and Medicare/Medicaid reimbursement.