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New Stark and Anti-Kickback Rules – A Platform for Innovation Part 2: Defining the Platform

December 22, 2020

Stark Law – Part 2: Defining the Platform

In my prior article introducing the new value-based Stark and Anti-Kickback Rules released by CMS and the OIG on November 20, 2020, I briefly summarized over 1600 pages of new regulations. This series of follow-up articles provides deeper dives (though still brief) into the new rules. This article addresses the Stark rules, as they provide the starting point for any analysis of arrangements under the new rules.One of the stated goals of the new Stark rules was to create a platform for innovation by removing obstacles to arrangements that could potentially reduce health care costs and increase patient value. CMS created new exceptions that essentially acts as a sandbox in which providers can experiment and take risks outside of the previously existing menu of Stark exceptions without the added worry of incurring the severe penalties of strict liability of the Stark law. This first article introduces the boundaries of the sandbox – how CMS defines its platform for innovation – by briefly reviewing the definitions comprising the value-based model, CMS’s comments to the new definitions and practical considerations for providers. 1.       DefinitionsCMS’s new definitions focus on the arrangements, activities, participants and purposes that permeate the new value-based exceptions to the Stark law. The definitions introduce the over-arching concept of a “value-based arrangement”. A value-based arrangement must provide at least one “value-based activity” for a “target patient population”. A value-based arrangement will include a “value-based enterprise” and “VBE participants”. Each of these definitions is set forth in the table below:

Value-based activity means any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise: (1) The provision of an item or service; (2) The taking of an action; or (3) The refraining from taking an action.

Value-based arrangement means an arrangement for the provision of at least one value-based activity for a target patient population to which the only parties are— (1) The value-based enterprise and one or more of its VBE participants; or(2) VBE participants in the same value-based enterprise.

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 a 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 the VBE participants intend to achieve its value-based purpose(s).

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 health care 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.

VBE participant means a person or entity that engages in at least one value-based activity as part of a value-based enterprise.

Target patient population means an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that— (1) Are set out in writing in advance of the commencement of the value-based arrangement; and (2) Further the value-based enterprise’s value-based purpose(s).

2.       CommentaryWhat is a value-based arrangement? CMS ultimately declined to enumerate specific examples of appropriate arrangements, or even to offer an inclusive list. However, CMS offered critical guidance about how to analyze these arrangements. CMS requires that each value-based arrangement is intended to be analyzed separately. For example, parties may create a value-based arrangement through a value-based enterprise with only one VBE participant and thoroughly document its analysis that the arrangement is appropriate under the new rules. However, should a new VBE participant join the enterprise, it is considered a new arrangement, and a separate analysis must be undertaken and documented with respect to the new participant. CMS strongly recommends contemporaneous documentation whenever the arrangement changes or a new arrangement is entered into.What are value-based activities? CMS would not create categorical examples, but it did offer some examples of what could constitute an appropriate value-based activity, assuming the other elements of the definition were satisfied. Care planning, for example, or even undergoing transition activities in the course of establishing a value-based arrangement could work. Importantly, CMS clarified that sending or receiving a referral is not itself a value-based activity.What is a value-based purpose? Again, CMS declined to enumerate specific examples or to further define some of its language, like “coordinating and managing care”. However, CMS did note that while CMS does not expect each enterprise to successfully achieve its purposes, if the enterprise fails to achieve its purposes consistent with the new rules, the arrangement must be modified or terminated or it will no longer enjoy the safety of the new exceptions.Who are value-based participants? Participants include a value-based enterprise and one or more VBE participants. CMS clarified that a value-based enterprise need not be a formal corporate entity. It can be a formal entity or an affiliation, network or collaboration that meets the elements of the definition. The definition of VBE participant is likewise intended to be inclusive. CMS drew an important distinction between participants in the overall Stark analysis – a physician and a DHS entity – and the participants in a value-based arrangement – a much broader group. What is a Target Patient Population? It is critical to note that the population has to be selected in advance of the arrangement, and that CMS will not identify these populations for participants. Participants must identify a target patient population and justify the selection with sound evidence and verifiable criteria. These target populations may be based on age, location/access to care, or diagnosis. However, avoiding high-cost patients (“lemon dropping”) or targeting high-income populations (“cherry-picking”) would not qualify under this definition. Again, this must be done with an eye toward accomplishing a value-based purpose with respect to that population. 3.       Practical ConsiderationsAlthough the definitions are designed to establish the perimeter of the sandbox, CMS chose to do so in very broad terms. As Stark is a strict-liability statute, this puts the onus on the participants in such arrangements to do all they can to demonstrate their arrangements meet these vague criteria. Therefore, prospective participants in value-based arrangements should consider the following at the outset:Documentation. A theme running through CMS’s guidance is that CMS will conduct a fact-specific analysis on a case-by-case basis to determine compliance with the rules. Again and again, CMS urges contemporaneous documentation of each and every element. These will be the facts from which CMS bases its analysis.Clear Analysis. Analysis under this new value-based structure comes in layers. It is important to separate these layers. First, participants must determine whether Stark is even implicated. It is clear from the comments to the rules that many parties still forget to start there. This requires a physician referring Medicare items or services to a DHS entity. Second, participants must examine the arrangement with respect to each participant, not the arrangement as a whole.Time Will Tell. Finally, although CMS predicts this platform for innovation will relieve the pressure on participants seeking to move from fee-for-service arrangements to coordinated care and value-based arrangements, it is still unclear how effective this new platform will be. As discussed above, strict liability still looms overhead, and it is unclear what enforcement may look like while participants are digesting the rules and experimenting with different arrangements. Lawyers, associations and providers are still slowly working their way through all of the possible implications. Will we see an increase in acquisition activity, formation of various entities and contractual arrangements in 2021? Will we see enforcement activity trends that are soft on those experimenting with these new rules? Time will tell. What is clear, especially with the release of new proposed rules under HIPAA, is that coordinated care is a priority, so, while many questions remain, we should expect an influx of additional guidance.Additional Articles in the SeriesPart 1 – New Stark Rules – A Platform for Innovation: Introducing 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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