In an effort to modernize and clarify a statute that looms large in the minds of health care providers across the nation, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) recently published a Notice of Proposed Rulemaking that is designed to dramatically change regulations implementing the federal Anti-Kickback statute (AKS).

Issued simultaneously with CMS’ proposed changes to the Stark Regulations, the OIG’s proposed changes are primarily designed at adding new (and modifying existing) “safe harbors” for coordinated care and value-based arrangements that might otherwise result in criminal and civil penalties.

These changes are further designed to facilitate what HHS has stated is a top priority of transforming the health care system from the traditional fee-for-service payment system to one that pays for value-based care.

The Federal Anti-Kickback statute provides for criminal penalties for whoever knowingly and willfully offers, pays, solicits, or receives remuneration to induce or reward the referral of business reimbursable under any of the Federal health care programs, including Medicare and Medicaid. 42 U.S.C. § 1320a-7b. Violators of the statute also face a civil monetary penalty (CMP) for unlawful beneficiary inducements. 42 U.S.C. 1320a-7a.

To avoid such enforcement actions and have assurance that their business practices will not be subject to CMPs, healthcare providers and others may voluntarily seek to comply with statutory and regulatory “safe harbors.”[1] 42 CFR § 1001.952.

According to Seyfarth health care regulatory attorney William Eck, the proposed additions and modifications to the safe harbors represent the most significant broadening of safe harbor protections in many years.

“If adopted, the proposed regulations may offer significant benefits to health care providers in structuring their business arrangements,” Eck added. “Taken together, the proposed changes to the AKS safe harbor regulations may live up to their billing as advancing the transition to value-based care and modernizing the safe harbor regulations.”

Seyfarth attorney Adam Laughton, who advises clients on a wide range of health care regulatory issues, believes that many of the new safe harbors “are key and long overdue contributions from CMS. The work of transforming American health care from purely fee-for-service to a more quality-based system was given a major push with the Affordable Care Act and MACRA, but antiquated regulatory schemes like the Anti-Kickback Statute left many providers afraid to participate in models and relationships with payors and other providers that had the potential to really move the needle on cost and quality.”

This fear of providers to participate in such models and relationships is not without a basis in reality- the proposed rule change comes even as the Department of Justice (DOJ) continues to seek recovery against alleged AKS violators, resulting in judgments and settlements in the tens to hundreds of millions of dollars.

Recent examples of cases involving DOJ recovery in anti-kickback claims include:

  • September 2019 - pharmaceutical company agreed to pay $15.4 million to resolve claims that it paid illegal kickbacks to doctors, in the form of lavish dinners and entertainment, to induce prescriptions of the company’s drug.
  • March 2019 - DOJ obtained $17 million settlement against provider of vein ablation products for allegedly providing free or discounted practice development and market development support to physicians located in California and Florida
  • May 2018 - DOJ obtained a $114 million judgment after two week trial against three individuals for allegedly paying kickbacks for laboratory referrals.

According to Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division cases such as the March 2019 matter cited above serve “as an important reminder to those in the health care community that unlawful kickbacks come in many forms and are not limited to monetary payments to providers.”

Nevertheless, while designed primarily to protect against fraud and abuse, HHS has conceded that the laws as they are written today, even with its safe harbors, are “potentially inhibiting beneficial arrangements that would advance the transition to value-based care and improve the coordination of patient care among providers and across care settings in both the Federal health care programs and commercial sector.”

Accordingly, OIG has drafted the new and modified safe harbors in a way it hopes will “reduce regulatory barriers and accelerate the transformation of the healthcare system into one that better pays for value and promotes care coordination.”

Proposed New Safe Harbors:

  • Value-Based Arrangements. Three new safe harbors are proposed for certain remuneration exchanged between or among eligible participants in a value-based arrangement that fosters better coordinated and managed patient care:
    • Care Coordination Arrangements to Improve Quality, Health Outcomes, and Efficiency (§ 1001.952(ee));
    • Value-Based Arrangements With Substantial Downside Financial Risk (§ 1001.952(ff)); and
    • Value-Based Arrangements With Full Financial Risk (§ 1001.952(gg)).
  • Patient Engagement. A proposed new safe harbor (§ 1001.952(hh)) for certain tools and supports furnished to patients to improve quality, health outcomes, and efficiency.
  • CMS-Sponsored Models. A proposed new safe harbor (§ 1001.952(ii)) for certain remuneration provided in connection with a CMS-sponsored model (as defined in the proposed rule), which should reduce the need for separate and distinct fraud and abuse waivers for new CMS-sponsored models.
  • Cybersecurity Technology and Services. A proposed new safe harbor (§ 1001.952(jj)) for donations of cybersecurity technology and services.

Speaking to the proposed cybersecurity safe harbor, Laughton notes that “very few developments of the past ten to fifteen years in health care have proved more frustrating to providers that the transition to electronic health records and other connectivity issues. Dealing with these costs is one of the major incentives for provider consolidation in the market, which increases market power for a few and hurts physician independence.”

“Allowing these donations to be made outside of employment and merger/acquisition scenarios is going to do a great deal to further the care coordination goals that were promised by this new technology without placing huge new burdens on physicians,” Laughton added.

Proposed Modifications to Existing Safe Harbors:

  • Electronic Health Records Items and Services. Proposed modifications to the existing safe harbor for electronic health records items and services (§ 1001.952(y)) to add protections for certain related cybersecurity technology, to update provisions regarding interoperability, and to remove the sunset date.
  • Outcomes-Based Payments and Part-Time Arrangements. Proposed modifications to the existing safe harbor for personal services and management contracts (§ 1001.952(d)) to add flexibility with respect to outcomes-based payments and part-time arrangements.
  • Warranties. Proposed modifications to the existing safe harbor for warranties (§ 1001.952(g)) to revise the definition of “warranty” and provide protection for bundled warranties for one or more items and related services.
  • Local Transportation. Proposed modifications to the existing safe harbor for local transportation (§ 1001.952(bb)) to expand and modify mileage limits for rural areas and for transportation for patients discharged from inpatient facilities.

Of perhaps greatest day-to-day significance for practitioners and providers is the elimination of the requirement from the personal services safe harbor that aggregate compensation be set in advance and, separately, the establishment of a new protection for outcomes-based payment arrangements in the safe harbor, Eck said. “If adopted, these will significantly increase the usefulness of the personal services safe harbor.”

According to Laughton, the modifications to the local transportation safe harbor may have particular impact on patients who have the most need in the system: “We see an increasing recognition that there is more to fostering increased access to the health care system than simply providing payment. Patients have to be able to overcome other obstacles and needs in their lives before accessing the systems is truly feasible. Many providers were willing to help their more needy patients, but previous rules tied their hands. Nowhere will this be a more transformative change than in already underserved rural areas with few providers and fewer specialists.”

Changes to what constitutes “remuneration” in the CMP rules:

  • Accountable Care Organization (ACO) Beneficiary Incentive Programs. Codification of the statutory exception to the definition of “remuneration” related to ACO Beneficiary Incentive Programs for the Medicare Shared Savings Program (§ 1001.952(kk)).
  • Telehealth for In-Home Dialysis. A proposed amendment to the definition of “remuneration” in the CMP rules at 42 C.F.R. § 1003.110 interpreting and incorporating a new statutory exception to the prohibition on beneficiary inducements for “telehealth technologies” furnished to certain in-home dialysis patients

According to the OIG, these changes to the rules “are designed to promote coordinated patient care and foster improved quality, better health outcomes, and improved efficiency.”

The proposed rule was published on October 17, 2019, in the Federal Register (84 FR 55694-55765). Comments must be submitted by close of business on December 31, 2019.


[1] HHS has further noted that failure to fit in a safe harbor does not mean that an arrangement violates the anti-kickback statute. Arrangements that do not fit in a safe harbor are analyzed on a case-by-case basis, including whether the parties had the requisite criminal intent.

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