HHS Issues Final Rules Implementing Stark Law and Anti-Kickback Statute Reforms

King & Spalding

On Friday of last week, HHS published two long-awaited final rules implementing significant changes to the regulations under the Stark Law and Anti-Kickback Statute (AKS). The two final rules are: (i) Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements (AKS Final Rule), issued by OIG; and (ii) Modernizing and Clarifying the Physician Self-Referral Regulations (Stark Law Final Rule), issued by CMS.

As part of the Regulatory Sprint to Coordinated Care, these updates are intended to facilitate financial arrangements among providers engaged in care coordination and activities to improve quality of care for shared patients. In addition to implementing new rules to address value-based care arrangements, the AKS Final Rule includes new protections for certain patient engagement activities. In addition, the Stark Law Final Rule modifies some key requirements in exceptions for compensation arrangements (such as fair market value), eases restrictions in the interpretation of some existing exceptions, and adds a few new exceptions, all aimed at clarifying and modernizing the interpretation of this law as healthcare moves away from a fee-for-service environment to value-based reimbursement.

Set forth below is a high-level overview of these changes. Please stay tuned in the coming days for a King & Spalding Client Alert with a more detailed analysis of these changes and their implications for providers.

AKS Final Rule

The principal changes codified in the AKS Final Rule are as follows:

  • The addition of three new AKS safe harbors designed to protect certain arrangements entered into with, or by, a value-based enterprise (VBE) and its eligible participants for a number of value-based network arrangements:
  • Care coordination arrangements to improve quality, health outcomes, and efficiency, without requiring assumption of risk, where in-kind renumeration such as technology or services are exchanged between VBE participants used to engage in value-based activities directly connected to care coordination for target patient population.
  • Value-based arrangements involving both monetary and in-kind renumeration between a VBE and VBE participants where the VBE assumes “substantial downside financial risk” for providing or arranging for the provision of items and services for the target patient population, and the VBE participants assume a “meaningful share” of that risk.
  • Value-based arrangements involving both monetary and in-kind renumeration between a VBE and VBE participants where the VBE assumes “full financial risk” for all items and services covered by a payor for each patient in the target population for a term of one year.
  • The terms of these safe harbors vary by the type of remuneration protected, the type of entities eligible to rely on the safe harbors, and the types of safeguards included as safe harbor conditions. The value-based safe harbors exclude pharmaceutical manufacturers, distributors, and wholesalers; PBMs; pharmacies that primarily compound or dispense compounded drugs; laboratories; medical device and supply manufacturers; medical device distributors and wholesalers; DMEPOS suppliers; and physician-owned medical device companies. The care coordination safe harbor can be accessed by medical device and DMEPOS manufacturers to protect digital technology arrangements under certain conditions.
  • A new safe harbor added for patient engagement tools and supports to improve care quality, outcomes and efficiency, furnished by a VBE participant or “eligible agent” to a patient in a “target patient population,” subject to a $500 annual cap, with an inflation adjuster. This safe harbor includes the same general exclusions as outlined above but allows medical device and supply manufacturers to provide some digital health technology.
  • A new safe harbor is added for CMS-sponsored model arrangements and CMS-sponsored model patient incentives that is expected to reduce the need for separate fraud and abuse waivers for new CMS-sponsored models.
  • A new safe harbor is added to protect non-monetary donations of certain cybersecurity technology, including both software and hardware, and related services. This safe harbor permits the donation of cybersecurity technology to physician groups or other providers so long as the technology is “necessary and used predominantly to implement, maintain, or reestablish cybersecurity.” The safe harbor limits donors from making donation decisions considering volume or value of referrals or other business generated between the parties.
  • Certain existing safe harbors are modified:
    • The electronic health records (EHR) safe harbor will be modified to update provisions regarding interoperability, remove the prohibition on donation of equivalent technology, and provide clarification to protections for cybersecurity technology and services included in an electronic health records arrangement. The existing sunset provision will also be removed.
    • The personal services and management contracts safe harbor will be modified to increase flexibility for part-time or unpredictable compensation arrangements, and to provide new protection for outcome-based payment arrangements, with the same entity-exclusions that are applied to the new value-based safe harbors.
    • The warranty safe harbor is modified to revise to definition of “warranty” and provide protection for warranties for one or more items and related services.
    • The OIG is also modifying an existing safe harbor for local transportation to increase mileage limits from 50 to 75 miles for rural areas, and to eliminate distance limitations for transporting patients discharged home from an inpatient or observation setting.
  • The Final Rule will also add new exceptions to the civil monetary penalty provision prohibiting inducements to beneficiaries codified at 42 U.S.C. § 1320a-7a(a)(5) (Beneficiary Inducements CMP) based on some of the new and modified safe harbors – the arrangements that fit into the new safe harbors for patient engagement and support, and modified local transportation safe harbor. The new rule also will implement a statutory exception to the Beneficiary Inducement CMP for “telehealth technologies” furnished to certain in-home dialysis patients.

The AKS Final Rule will become effective January 19, 2021.

Stark Law Final Rule

The principal changes codified in the Stark Law Final Rule are as follows:

  • New exceptions for value-based arrangements are added at §411.357(aa) to permit value-based arrangements that satisfy certain requirements based on the level of financial risk undertaken (full financial risk, meaningful downside financial risk, or no risk).
  • A new definition of “commercially reasonable” is added to §411.351, which requires that an arrangement “furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty” and clarifies that an arrangement may be commercially reasonable even if it does not result in a profit for one or more of the parties.
  • New “taking into account” rules are added at §411.354(d)(5)–(6), which specify that compensation will be considered to take into account the volume or value of a physician’s referrals or other business generated if the formula used to calculate compensation includes referrals or other business generated as a variable.
  • The definition of “indirect compensation arrangement” is revised at §411.354(c)(2)(ii) to apply when aggregate compensation to the physician varies with the volume or value of referrals or other business generated, and the individual unit of compensation to the physician either (i) is not fair market value; or (ii) includes the physician’s referrals or other business generated as a variable.
  • The definition of “designated health services” at §411.351 is revised to remove inpatient hospital services ordered by a physician who was not the referring physician.
  • The definitions of “fair market value” and “general market value” at §411.351 are revised to eliminate references to the “volume or value” standard.
  • The rule at §411.354(d)(4), which sets forth the conditions under which an employed physician can be required to make referrals to a particular provider, practitioner, or supplier, is modified to prohibit conditioning the existence of a compensation arrangement or the amount of compensation on the number or value of the physician’s referrals.
  • A new rule is added at §411.354(e)(4), which codifies a longstanding policy that electronic signatures are valid for purposes of the signature requirement in various exceptions.
  • The exceptions at §411.357(a)–(b) for rental of office space and equipment are revised to clarify that multiple lessees are allowed.
  • The recruitment exception at §411.357(e) is revised to provide that the signature requirement does not apply to a practice that does not financially benefit from a hospital–physician recruitment arrangement.
  • The exception for fair market value compensation at §411.357(l) is revised to permit using the exception to protect arrangements for rental of office space.
  • The EHR exception at §411.357(w) is revised in a manner largely consistent with the revisions to the EHR safe harbor under the AKS Final Rule. These changes include permitting certain donations of replacement EHR technology and cybersecurity software, clarifying that physicians’ required contribution payments can be collected at reasonable intervals, and removing the sunset provision, making the exception permanent.
  • The exception at §411.357(x) for assistance to compensate a nonphysician practitioner (NPP) is revised to clarify certain timing issues.
  • A new exception is added at §411.358(bb) to protect non-monetary donations to physician groups or other providers of certain cybersecurity technology, substantially similar to the new AKS safe harbor described above.
  • A new exception is added at §411.357(z) to permit certain arrangements involving limited remuneration to a physician that does not exceed $5,000 per calendar year, which does not impose any requirement to have contemporaneous documentation.

The regulations in the Stark Law Final Rule will become effective January 19, 2021. Certain provisions relating to value-based care arrangements will not be effective until January 1, 2022.

A press release from HHS announcing the Final Rules is available here. Please click here for the full text of the AKS Final Rule and here for a copy of the Stark Law Final Rule. These Final Rules are set for publication on December 2, 2020, and when published, will be available in official form through these same links.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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