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New Stark and Anti-Kickback Rules – A Platform for Innovation Part 1: Introducing the Platform

November 30, 2020

The Wait is Over: New Value-Based Stark and Anti-Kickback Final Rules ReleasedPart 1 of a Four Part Series

In their efforts to remove regulatory obstacles to arrangements that reward providers based on value to, as opposed to volume of, patients Both the Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services Office of the Inspector General (OIG), issued final rules to the Physician Self-Referral regulations (Stark) and the Anti-Kickback Statute (AKS) safe harbor regulations. Although the releases amount to hundreds of pages of text, this article is intended merely as an introduction to the announced changes. Subsequent articles will be published offering a brief analysis of new issues raised by these regulations. As noted in the released materials, prior Stark and AKS regulations were developed during an era of volume based delivery of healthcare services, in which the motivation of profit created the risk of making medical decisions based on self-interest rather than patient interest. However, new delivery systems emerged to address increased costs to healthcare providers by created better care coordination, quality and efficiency. The new final rules are responses to demands for regulations to modernize and facilitate value-based delivery and payment systems and protect patient choice while keeping in place safeguards to fraud and abuse. For the most part, the new final rules modernize Stark and AKS through new exceptions or safe harbors, and through new and clarified defined terms. The ultimate aim of the new rules is to create a platform to innovate new value-based arrangements.1. STARK FINAL RULEStark essentially prohibits (i) physicians from referring patients to any entity with which the physician has a direct or indirect financial relationship, (ii) such entity from filing claims with Medicare for services resulting from a prohibited referral. This is a strict liability statute, meaning the parties to not have to intend to take such actions. From the existing rules, we are accustomed to exceptions requiring common elements, such as the requirement that compensation be set at fair market value, and not determined in a manner that takes into account the volume or value of referrals. In contrast, the new final rule introduces three new exceptions with requirements and definition reflecting a value-based paradigm, where exceptions are based on participants assuming some level of financial risk:Full Financial Risk Exception. This exception applies to participants in a value-based enterprise that has assumed the full financial risk for the cost of items and services and provided to patients and covered by the applicable payors. Value-Based Arrangements with Meaningful Downside Financial Risk to the Physician Exception. This exception protects remuneration paid under a value-based arrangement where the physician accepts the risk for no less than 10% of the total value of the remuneration. The nature and extent of the physician’s risk must be in writing. Value-Based Arrangements Exception. Unlike the other two exceptions, this exception does not incorporate a specific risk threshold for any of the participants. Therefore, it includes additional safeguards, such as a signed writing and annual monitoring requirements.2. AKS FINAL RULEAKS prohibits any form of remuneration, whether monetary or in-kind, in exchange for referrals of government payor business by any person or entity. Unlike Stark, AKS is an intent-based criminal statute. If even one purpose of remuneration is to influence or obtain referrals for services paid for by Medicare, Medicaid, or Tricare, the AKS is implicated, though not necessarily violated. Falling within a safe harbor, however, will ensure that an arrangement will not constitute a violation of the AKS. Just as the safe harbors generally aligned with the Stark exceptions under the existing rules, the new final rules attempt to align, as much as possible, the underlying policies and terminology. Unlike Stark, however, contains restrictions on the parties eligible to take advantage of these safe harbors. Parties who are ineligible include pharmaceutical and medical device manufacturers, distributors and wholesalers, with some exceptions. Among other things, the new final rule introduces three safe harbors:Care Coordination Arrangements to Improve Quality, Health Outcomes, and Efficiency. This safe harbor protects only in-kind remuneration. The parties to this arrangement must establish legitimate outcome measures to advance the coordination and management of care for the target patient population. The arrangement must be commercially reasonable. In addition, the recipient contributes at least 15% of either the offeror’s cost or the fair market value of the remuneration. Value-Based Arrangements with Substantial Downside Risk. This exception protects both in-kind and monetary remuneration paid under a value-based arrangement where a participation assumes a meaningful downside risk. The amount of risk depends upon the methodology used.Value-Based Arrangements with Full Financial Risk. This safe harbor provides the greatest flexibility but requires the most risk. This safe harbor protects both in-kind and monetary remuneration.3. CONCLUSIONWhile the final rules issued by CMS and OIG introduce new exceptions and safe harbors, they also clarify, modify and create additional protections and definitions, the goal of these new final rules attempts to remove obstacles. However, the full impact of these new final rules remains to be seen. A complete paradigm shift to value-based arrangements over volume-based arrangements is a tall order, but one demanded in recent years by providers and patients alike.The text to the Stark Final Rule can be found here.The text to the AKS Final Rule can be found here.Additional Articles in the SeriesPart 2 – New Stark Rules – A Platform for Innovation: Defining the PlatformPart 3 – New Stark Rules – A Platform for Innovation: Facilitating InnovationPart 4 – New Stark Rules – A Platform for Innovation: Anti-Kickback as an Innovation Backstop


Attorney Author

Joseph M. Miller

Joseph Miller is an Attorney at Shuttleworth. His work primarily focuses on representing both companies and individuals in matters relating to business and health care. Some of the health law services he provides include compliance training and programs, HIPAA compliance planning (Business Associate Toolkit, Stark and anti-kickback analysis, CHOW analysis for business transactions, and review of employment and recruitment agreements). Joseph’s business law services include M&A, securities and venture capital, and corporate formation (nonprofits, commercial contract review and outside general counsel). Helping people is the central focus of Joseph’s career. He is licensed to practice in Iowa and Arizona, and is fluent in Spanish.

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