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New Stark Law and Anti-Kickback Statute Final Rules: Part 1 — Key Items


Stark and AKS Final Rules focus on value-based care. This is Part I of a three-part series.

Stark and AKS Final Rules focus on value-based care. This is Part I of a three-part series.

On November 20, 2020, the Centers for Medicare and Medicaid Services (CMS) issued a Final Rule related to the Medicare Physician Self-Referral Law (Stark Law). Nearly simultaneously, the Office of the Inspector General, Department of Health and Human Services (HHS-OIG), released a Final Rule, which amends various safe harbors to the Federal Anti-Kickback Statute (AKS).

The intent behind the Final Rules appears to be the shift toward value-based healthcare delivery and payment systems, which emphasizes the coordination of care among physicians and other healthcare providers across both the government and private sectors. Introduced as part of the Affordable Care Act (ACA), CMS describes value-based programs as those that, “reward health care providers with incentive payments for the quality of care they give to people with Medicare. These programs are part of our larger quality strategy to reform how health care is delivered and paid for. Value-based programs also support our three-part aim: better care for individuals; better health for populations; [and] lower cost.” In turn, this leads to provider payment systems based on quality, rather than the quantity of care that patients are provided.

Some examples of value-based provider payment systems include the following:

  • The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which repealed the Sustainable Growth Rate Formula, changes the way Medicare rewards clinicians for value over volume, streamlines various quality programs under the Merit Based Incentive Payments System, and provides bonus payments for participation in select alternative payment models;
  • Merit Based Payment System (MIPS) – a unique program whereby clinicians are included if they meet certain eligibility criteria and meet a low volume threshold, which is a combination of allowed charges for professional services under the Medicare Physician Fee Schedule and the number of Medicare Part B patients, who receive covered services under the Medicare Physician Fee Schedule; and
  • Advanced Alternative Payment Models (AMPs) – an alternative form of reimbursement than MIPS.

As this is the first installment in this series, I wanted to highlight a key aspect from each Final Rule. A key aspect to the Stark Law Final Rule is the concept of “VBE participant.” Some key definitions must be understood:

  • A Value-based enterprise (VBE) means two or more VBE participants: (1) Collaborating to achieve at least one value-based purpose; (2) Each of which is a party to 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 VBE participants intend to achieve its value-based purpose(s).
  • A VBE participant is defined as “a person or entity that engages in at least one value-based activity as part of a value-based enterprise.”
  • A Value-based purpose means any of the following: (1) Coordinating and managing the care of a target patient population; (2) Improving the quality of care for a target patient population; (3) Appropriately reducing the costs to or growth in expenditures of payors without reducing the quality of care for a target patient population; or (4) Transitioning from healthcare delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.

For Stark Law purposes, CMS stated the following:

In addition, due to our (and our law enforcement partners’) ongoing program integrity concerns with certain other participants in the health care system and to maintain consistency with policies proposed by OIG, we stated that we were also considering whether to exclude the following providers, suppliers, and other persons from the definition of “VBE participant”: pharmaceutical manufacturers; manufacturers and distributors of DMEPOS; pharmacy benefit managers (PBMs); wholesalers; and distributors. At final §411.351, “VBE participant” is defined to mean a person or entity that engages in at least one value-based activity as part of a value-based enterprise. The definition of “VBE participant” finalized here does not exclude any specific persons, entities, or organizations from qualifying as a VBE participant.” (emphasis added).

By way of contrast, HHS-OIG stated that the following entities do not qualify for value-based safe harbors known as the “ineligible entity list”:

  1. Pharmaceutical manufacturers, distributors, and wholesalers (referred to generally throughout this preamble as “pharmaceutical companies”);
  2. PBMs;
  3. Laboratory companies;
  4. Pharmacies that primarily compound drugs or primarily dispense compounded drugs (sometimes referred to generally in this rule as “compounding pharmacies”); (v) manufacturers of devices or medical supplies; (vi) entities or individuals that sell DMEPOS, other than a pharmacy or a physician, provider, or other entity that primarily furnishes services, all of which remain eligible (referred to generally throughout this preamble as “DMEPOS companies”); and (vii) medical device distributors or wholesalers that are not otherwise manufacturers of devices or medical supplies (for example, some physician-owned distributors).

For providers and industry participants alike, it is critical to note the distinctions between the Stark Law exclusions and the AKS safe harbors, including how VBE participants are impacted. Having read through both of these Final Rules, there are still ways that persons can be held accountable under the False Claims Act, which is how it should be because the AKS, Stark Law and value-based initiatives eschew premising referrals on the volume of patients or an alternative definition of value – total revenues. The key is to focus on patient care and adhere to every aspect of the each law’s exclusions and safe harbors. 

About the Author

Rachel V. Rose, JD, MBA, advises clients on compliance and transactions in healthcare, cybersecurity, corporate and securities law, while representing plaintiffs in False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website,

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