Earlier this month, the Centers for Medicare & Medicaid Services (CMS) and the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) released proposed rules that offer a glimpse at a new and modernized federal fraud and abuse landscape. Issued in connection with the HHS “Regulatory Sprint to Coordinated Care,” the rules seek to address regulatory burdens associated with the transformation of healthcare payments from fee-for-service to value-based and to provide clarity on and some relief from certain technical requirements of the federal physician self-referral (Stark) regulations, anti-kickback statute (AKS) and civil monetary penalties (CMP) law.

Brief highlights of the proposed Stark rule and AKS rule are outlined below. Stay tuned for a deeper dive into the proposed rules and their potential impacts on the healthcare industry.

Stark Proposed Rules

Perhaps the most notable changes in the proposed Stark rule are the addition by CMS of three new exceptions (Valued-Based Care Exceptions), with corresponding new definitions, designed with the overarching goal of removing barriers to “value-based arrangements” and encouraging a transition to value-based payment models. These new exceptions apply to compensation arrangements, including indirect compensation, and are applicable to Medicare beneficiaries, non-Medicare patients or both.

  • Full Financial Risk. Protecting certain value-based arrangements where the value-based enterprise accepts the “full financial risk” from payers, which risk includes all costs related to patient care items and services for a specific target population. Full financial risk may take the form of capitation, global budget or some other form of payment.
  • Meaningful Downside Financial Risk. Protecting certain value-based arrangements where the physician is exposed to meaningful downside financial risk for failure to achieve the value-based purpose of the enterprise. Meaningful downside financial risk is present where the physician is responsible for at least 25% of the value of the remuneration received pursuant to the arrangement.
  • Value-Based Arrangements Generally. This exception applies to all other value-based arrangements that do not meet the full financial risk or meaningful downside financial risk, and it provides for the least amount of flexibility of the three exceptions. Under this exception, the following conditions must be met: (1) the arrangement is in writing, signed by the parties to the value-based enterprise and includes certain details, and (2) the standards in place for measuring the performance of the recipient of remuneration are objective and measurable.

Other notable newly proposed exceptions under the proposed Stark rule are exceptions designed to permit, in CMS’ words, “flexibility for certain arrangements … that safeguard the integrity of the healthcare ecosystem, regardless of whether the parties operate in a fee-for-service or value-based payment system,” such as the donation of certain cybersecurity technology.

CMS also proposes additional guidance and clarification in an attempt to provide “bright line guidance” on several key requirements that must be met in order for healthcare providers and suppliers to comply with the Stark Law, including guidance on how to determine whether a compensation arrangements is fair market value, clarifications of the “volume or value” standard as it relates to group practices and the distribution of profits, and productivity bonuses and revenue, as well as guidance on numerous other technical compliance requirements designed to reduce administrative burden.

AKS and CMP Law Proposed Rules

Consistent with the federal government’s push to support industry-led innovation that will lead to an increase in care coordination, the OIG proposes six new AKS safe harbors, modifications to four existing AKS safe harbors and other miscellaneous updates to statutory requirements.

Much like the Stark proposed rule, the AKS proposed rule creates three new safe harbors that provide regulatory protection for certain value-based arrangements, aiming to foster better-coordinated and -managed patient care. Under these proposed rules, those parties that assume greater downside financial risk for the cost of patient care and quality are afforded greater flexibility by the OIG under the proposed rules.

  • Care Coordination Arrangements. Protect arrangements where in-kind remuneration is exchanged between participants of a value-based enterprise for the purpose of encouraging care coordination; contains several requirements, including that (1) the remuneration be in-kind, (2) the remuneration be used to further value-based activities and (3) the remuneration not result from contributions made by parties outside the value-based enterprise.
  • Value-Based Arrangements With Substantial Downside Financial Risk. Protecting arrangements in which a value-based enterprise takes on substantial downside financial risk.
  • Value-Based Arrangements With Full Financial Risk. Protecting arrangements in which a value-based enterprise carries the full financial risk for items or services provided to a patient.

Notably, the OIG proposed to carve out from the safe harbor protection any potential value-based arrangements with durable medical equipment suppliers, pharmaceutical manufacturers, laboratories, and other manufacturers and distributors.

The OIG also proposed three additional safe harbors for the following types of arrangements:

  • Arrangements for Patient Engagement and Support. Intended to remove barriers presented by the AKS and beneficiary inducement prohibitions under the CMP law, this safe harbor provides protection for arrangements in which a value-based enterprise provides tools intended to improve the beneficiary experience for patients. Items such as gift cards, cash or cash equivalents will not receive protection under this proposed model.
  • CMS-Sponsored Models. Protecting arrangements where remuneration is exchanged pursuant to arrangements (e.g., distribution of capitated payments, shared savings or loss distributions) structured under CMS-sponsored models.
  • Cybersecurity Technology and Services. Protecting donations of cybersecurity technology and services.

The AKS proposed rule also proposes to modify four existing safe harbors (Electronic Health Record Items and Services, Personal Services and Management Contracts, Warranties, and Transportation) and modifies the definition of “remuneration” under the CMP law to exclude telehealth services provided to qualifying patients receiving in-home dialysis.