A Summary of the New Antikickback Safe Harbors and Stark Law Exceptions
On December 2, 2020, Department of Health and Human Services (HHS) published two final rules including important changes to the Anti-kickback Statues (AKS) and Physician Self-Referral Law (Stark Law) regulations. The Office of Inspector General (OIG), responsible for enforcing AKS, issued a final rule addressing changes to the AKS and revisions to Civil Monitory Penalty rules regarding Beneficiary Inducement. The Center for Medicare & Medicaid Services (CMS), responsible for enforcing the Stark Law, issued the final rule addressing changes to the Stark Law.
In addition to introducing new definitional terms relating to value-base arrangements, the final rules established three new AKS safe harbors, and four new Stark Law exceptions that protect eligible participants in a qualifying value-based arrangement. Hospitals and physician groups are the beneficiaries under the new value-based safe harbors and exceptions, while the rules, for the most part, left out manufacturers, pharmacy benefit managers, laboratories, and pharmacies.
In this article we will first discuss the new value-based terminology introduced by the final rules for the new AKS safe harbor and Stark Law exceptions. We will then briefly discuss each of the new AKS safe harbors and Stark Law exceptions.
Value Based Terminology.
Because each of the new AKS safe harbors and Stark Law exceptions require implementation of value-based care, the final rules introduced a host of new value-based terminology, understanding of which is required for the application of the new safe harbors and exception. Fortunately, the value-based definitions in the OIG final rules are nearly identical to those defined in the CMS final rule.
The following new terms have been defined by the final rules:
(1) value-based activity;
(2) value-based arrangement;
(3) value-based enterprise;
(4) value-based purpose;
(5) VBE participant; and
6) target patient population.
Value-based activity means (1) the provision of an item or service, (2) the taking of an action, or (3) the refraining from taking an action; provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise.
For the purpose of a value-based activity, CMS revised the definition of “referral” to affirm the policy that, as a general matter, referrals are not items or services for which a physician may be compensated under the Physician Self-Referral Law.
Value-based arrangement means an arrangement for the provision of at least one value-based activity for a target patient population between or among: (1) the value-based enterprise and one or more of its VBE participants; or (2) VBE participants in the same value-based enterprise.
All parties to a value-based arrangement must be VBE participants in the same value-based enterprise and the value-based arrangement must be a compensation arrangement and not another type of financial relationship to which the physician self-referral law applies.
Value-based enterprise 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 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).
Whatever its size and structure, a value-based enterprise is essentially a network of participants (such as clinicians, providers, and suppliers) that have agreed to collaborate with regard to a target patient population to put the patient at the center of care through care coordination, increase efficiencies in the delivery of care, and improve outcomes for patients.
Value-based purpose means (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 is an individual or entity that engages in at least one value-based activity as part of a value-based enterprise.
With respect to the Stark Law exceptions, although, CMS has expressed some concerns about compensation arrangements between physicians and DHS entities, VBE participant does not expressly exclude any of the DHS entities, such as laboratories, DMEPOS suppliers, pharmaceutical manufacturers, manufacturers and distributors of DMEPOS, pharmacy benefit managers (PBMs), wholesalers, and distributors.
For the purposes of the new AKS safe harbors, however, OIG has expressly excluded laboratories, DMEPOS suppliers, pharmaceutical manufacturers, manufacturers and distributors of DMEPOS, pharmacy benefit managers (PBMs), wholesalers, and distributors. The OIG final rule does, however, allow devices or medical supplies and DMEPOS to receive protection of certain digital technology arrangements using a separate pathway under the care coordination arrangement safe harbor for manufacturers.
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 are set out in writing in advance of the commencement of the value-based arrangement, and further the value-based enterprise’s value-based purpose(s).
AKS Safe Harbor and Stark Law Exceptions.
Both the safe harbors and the Stark Law exceptions are broken down by the amount of financial risk assumed from the payor under the value-based arrangement, and the more risk assumed, the more flexibility offered under the safe harbors and exceptions.
New AKS Safe Harbors.
OIG designed three (3) new safe harbors for value-based arrangements. Below is a summary of each of these safe harbors.
A. Care Coordination Arrangements to Improve Quality, Health Outcomes, and Efficiency Safe Harbor
This safe harbor allows in-kind remuneration by a first VBE participant of a value-based enterprise to a second VBE participant, where the second VBE participant assumes no or less than substantial downside financial risk. The in-kind remuneration must be used predominately to engage in value-based activities that are directly connected to care coordination for a target patient population. The safe harbor further imposes administerial, contribution and documentation requirements that must be met to properly apply this exception. For example, under the administerial requirements, participants must maintain written documentation of the relationship, retain records, and monitor outcome measures to mitigate risk of abuse.
B. Value-Based Arrangements with Substantial Downside Financial Risk Safe Harbor
This safe harbor protects payment of anything in value, including in-kind and monitory remuneration to a VBE participant with substantial downside financial risk. The safe harbor provides three methods for calculating whether a VBE is assuming substantial downside financial risk. The exception further requires that VBE participants of a VBE enter written agreements, for a period of no less than a year and the VBE participant must be at risk for a “meaningful share” of the VBE’s substantial downside financial risk.
It should be noted that remuneration may not include an offer or receipt of ownership or investment interest in an entity and may not be exchanged or used to market items or services furnished by the VBE or a VBE participant to patients or for patient recruitment activities.
C. Value-Based Arrangements with Full Financial Risk Safe Harbor
As the most flexible of the three, this safe harbor also protects payment of anything in value, including in-kind and monitory remuneration to a VBE participant with substantial downside financial risk. However, the level of risk required under this safe harbor is very high and to qualify, a VBE must prospectively pay for the costs of all items and services covered by a payor for each patient in the target population for a term of one year.
New Stark Law Exceptions.
CMS implemented four (4) new Stark Law Exceptions for value-based arrangements. These exceptions offer protection for remuneration exchanged between eligible participants in a qualifying value-based arrangement and only apply to compensation arrangements that qualify as value-based arrangements. Furthermore, the exceptions may be accessed only by those parties that qualify as VBE participants in the same value-based enterprise.
None of these exceptions require that compensation must be set in advance, consistent with FMV, and not determined in any manner that takes into account the volume or value of a physicians' referrals or other business generated by the physician for the entity. Yet, all compensation arrangements must be “commercially reasonable.”
A. Full Financial Risk Exception
Under this exception, value-based participants in a VBE must assume full financial risk for the cost of all patient care items and services covered by the payor for each patient in the target population during the entire duration of the value-based arrangement. The VBE must retain records related to the methodology for determining remuneration and the actual amount of remuneration paid.
B. Meaningful Downside Financial Risk to the Physician Exception
This exception applies when remuneration is pursuant to a value-based arrangement where the physician has a “meaningful downside financial risk” for failure to achieve the value-based purpose for the entire term of the value-based arrangement. “Meaningful downside financial risk” means assuming financial responsibility for no less than 10% of the total value of the remuneration.
C. Exception for Value-Based Arrangements Regardless of the Level of Risk Undertaken by the Physician
This exception potentially applies to arrangements where no financial risk has been assumed by the physician. Because of this lack of assumption of a financial risk, CMS has set forth more onerous and stringent monitoring requirements for this exception, as compared to the Full Financial Risk Exception.
To properly use this exception, parties must monitor the value-based arrangement at least annually to determine proper provision and continuation of the value-based activities of the VBE. If the monitoring indicates that a value-based activity is not expected to further the value-based purpose(s) of the VBE, the parties must terminate or modify the value-based arrangement. Simultaneously, VBE or one of the parties to the arrangement must monitor progress toward achieving the outcome measure(s), if any. If the monitoring indicates that an outcome measure is unattainable during the remainder of the arrangement, the parties must terminate or modify within a specified timeframe.
D. Exception for Indirect Compensation Arrangements that Include a Value-Based Arrangement
This exception renders value-based exceptions applicable to indirect compensation arrangements that include a value-based arrangement to which the physician or physician organization is a direct party.
The content of this article is intended to provide a general guide to the subject matter only and does no constitute legal advice.
