Rose J. Willis, JD

The Department of Health and Human Services (the “Department”) has proposed long-awaited revisions and updates to the Stark and Anti-Kickback Laws (the “Laws”). These changes would address concerns that the Laws as they currently exist (1) prevent participation in value-based arrangements and (2) are overly burdensome to non-abusive arrangements. For example, arrangements such as a hospital’s provision of care coordinators to physicians, which could currently violate the Laws, may become acceptable under the rules proposed by the Office of Inspector General and the Centers for Medicare and Medicaid Services (the “Proposed Rules”).

A significant portion of the Proposed Rules is dedicated to participation in value-based and coordinated care arrangements. These sections propose a complex framework of new exceptions and safe harbors that must be met before a value-based arrangement (“VBA”) could qualify. The new exceptions and safe harbors are tied to multiple newly defined terms and focus heavily on the existence of financial risk within the VBA including the new concept of a “value-based enterprise” (VBE). Overall, 4 new exceptions were proposed within the Stark Law and 4 new safe harbors were proposed within the Anti-Kickback Law for VBAs. 

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Careful attention to all value-based factors and definitions would be necessary in order to be confident that an arrangement falls within these exceptions and/or safe harbors. However, when finalized, they will offer parties greater flexibility to participate in these innovative arrangements. For example, a specialist could share its data analytic services with a primary care physician to improve care coordination without violating the Laws. A hospital could offer new technology to remotely monitor patients for possible healthcare intervention needs. Although these arrangements could violate the Laws currently, they are within the scope of the government’s intent to promote care based on value rather than volume.

The Proposed Rules revise various other aspects of the Laws to promote VBAs. For example, Stark Law group practice rules would allow distribution of profits to physicians in a manner directly attributable to their participation in a VBE. Proposed changes to the personal services safe harbor to the Anti-Kickback Statute would remove limiting language surrounding part-time arrangements and allow parties to set in advance a methodology for calculating compensation rather than a specified compensation number, in order to meet the safe harbor. Part-time arrangements could now fall within this safe harbor even without setting in advance the exact schedule of the part-time intervals.

Another significant portion of the Proposed Rules addresses the unnecessary burdens created by the Laws including responses to the Department’s request for information issued over a year ago. One such proposal would clarify the definition of “commercially reasonable” clarifying that an arrangement does not have to be profitable to make it commercially reasonable. For example, a hospital service line that operates at a loss may still be commercially reasonable if it fills a vital need in the community. 

Additionally, the Proposed Rules would set forth a bright line test to the Stark Law’s “volume or value of referrals” standard and separate it from the definition of “fair market value”. The new volume or value standard would prohibit any linkage between referrals and compensation. For example, physician compensation based on personally performed wRVUs would be considered based on the volume or value of referrals if the wRVU multiplier is tiered based on the number of referrals made by the physician. The definition of fair market value would incorporate the concept of “general market value” and be re-organized for clarity into 3 definitions-one for general application, another for rental of equipment, and a third for rental of office space, due to the heightened risk involved in equipment and space leases. For example, a hospital proposing to employ a specialist who is the top specialist in the entire country might be permitted to pay this top specialist a salary that is significantly higher than what independent salary surveys would otherwise indicate appropriate if the general market value of the specialist is higher, and still fall within fair market value. 

The Proposed Rules would help ease the transition to value based care while addressing many undue burdens of the Laws. Although we await the final version of these rules, we can be sure adding value and reducing burdens will remain a common theme.

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Four new exceptions and four new safe harbors proposed.