On November 20, 2020, the Department of Health and Human Services (HHS) finalized a set of sweeping changes to the regulatory framework that governs fraud and abuse in the Medicare and Medicaid programs. Among other changes, these reforms remove historical barriers to collaboration between providers and health tech companies on digital health initiatives, including those that promote care coordination and drive value-based efficiencies.

This update provides examples of digital health partnerships that could potentially qualify for protection under the newly finalized rules, which are scheduled to take effect on January 19, 2021. See here for a more detailed discussion of HHS’s newly finalized rules.

Addressing Long-standing Barriers to Innovative Digital Health Initiatives

When providers and digital health companies provide something of value—such as health IT hardware, software, remote monitoring devices, mobile devices, data analytics or related services—to health systems or other providers, federal law often requires that the recipient pay “fair market value” for the items or services received. This requirement limits arrangements that could otherwise promote care coordination or improve quality of care, such as a large provider subsidizing the cost of health IT for smaller providers that share a common patient pool, or a digital health company providing its platform or device to a provider for free or at a price below fair market value.

This restriction arises under the Anti-Kickback Statute, a federal law that generally prohibits anyone from offering or accepting “remuneration” with the purpose of inducing or rewarding referrals in federal healthcare programs. HHS has defined a number of “safe harbors” to protect various arrangements deemed benign or beneficial, but the safe harbors had not been updated in some time and did not reflect increasing adoption of value-based care models.

HHS’s new regulations include several new and modified safe harbors that could help to facilitate digital health arrangements. If a given arrangement meets all the criteria for a safe harbor, then the parties are shielded from liability even if they are exchanging “remuneration” within the meaning of the Anti-Kickback Statute. Because violations of the Anti-Kickback Statute can result in substantial civil and criminal penalties, providers often avoid arrangements that do not fit squarely within a safe harbor.

Examples of Newly Permissible Arrangements

HHS’s newly finalized regulations allow providers and health IT companies to collaborate on initiatives that would previously have created risks under the Anti-Kickback Statute. Critically, these safe harbors allow parties to exchange health IT technology and other in-kind benefits at less than fair market value, as long as certain requirements are met. Depending on the circumstances, the recipient may be able to receive the benefit for free, or may be required to contribute at least 15% of the total cost.

Examples of initiatives that may be newly permissible so long as other requirements of the Anti-Kickback Statute are met include the following:

• A physician practice establishes an enhanced remote patient monitoring program for patients with diabetes in partnership with a health tech company that provides diabetes management services. The practice offers its patients, free of charge, a connected glucose monitoring device, access to an interactive online disease management platform, and, for patients who lack a suitable device, a tablet that enables access to the platform. The practice receives a heavy discount on the fees required for its physicians to use the interactive platform.
• To expand access to specialist services in a rural area, a large academic health system provides telehealth carts, a telehealth software platform and training to physicians at a rural community hospital, thereby enabling remote specialist consultations for the community hospital’s patient population.
• A data analytics company has developed a product that enhances the accuracy of cancer screenings. The company provides this product free of charge to a group of providers in order to demonstrate proof of concept in a real-world setting. The parties enter into a value-based arrangement with defined outcome measures.
• A health system subsidizes health IT costs for local physician practices, including hardware, software, staff training, and support services related to electronic health records (EHR) and cybersecurity.
• To improve health outcomes for patients with end-stage kidney disease, a nephrologist at a dialysis facility furnishes a patient with technology capable of monitoring the patient’s health and enabling two-way, real-time interactive communication between the patient and physician. In addition, the facility could equip the physicians with data analytics software to help them monitor patients’ health outcomes.

Providers and digital health companies interested in pursuing innovative arrangements should seek legal counsel to ensure that their new initiative satisfies all the requirements for protection under the new Anti-Kickback Statute safe harbors.