On November 20, 2020, the Centers for Medicare & Medicaid Services (“CMS”) released the final rules amending two (2) of the primary bodies of federal law governing commercial conduct in the healthcare industry, the physician self-referral prohibitions (known as the “Stark Law”) and the Anti-Kickback Statute (“AKS”). The Stark Law and AKS were initially created for a fee-for-service healthcare system, where there are financial incentives to provide more services to patients. Efforts to clarify these outdated laws began in 2018, with the goal of accommodating changing financial arrangements triggered by the shift from fee-for-service to value-based care in the U.S. healthcare system.
The Stark Law, was initially enacted to prohibit physicians from making referrals to entities with which they had a financial relationship (i.e., ownership interest, compensation arrangement). The final rule creates exceptions for specific value-based payment arrangements among and between various providers and suppliers, and offers new guidance for providers with a financial relationship governed by the Stark Law. Under the rule, a value-based arrangement is one that provides at least one (1) value-based activity to a patient between the value-based enterprise and at least one of its participants, or the participants in the same value-based enterprise. A value-based activity can mean the provision of a service, an action, or refraining from taking an action, so long as the activity reasonably related to the achievement of a value-based purpose.
The final rule creates three (3) new exceptions to the Stark Law:
- Value-based arrangements for participants in a value-based enterprise that is financially responsible for, and assumes the entire prospective financial risk, for the cost of all related patient care items and services for every patient;
- Value-based arrangement remuneration to physicians at meaningful downside financial risk of failing to reach the value-based purpose of the enterprise; and
- Value-based compensation arrangements, no matter the risk undertaken by the enterprise or participants. This exception also allows for monetary and nonmonetary remuneration among the parties.
The AKS is a criminal statute, focused on the intent of the provider, that prohibits intentional remuneration, in cash or in kind, in exchange for referrals of items and services reimbursable by a Federal healthcare program. This final rule adds new safe harbors to protect specific payment practices and business arrangements from AKS penalties to allow for improved coordination and patient care management and value-based care. Under the final rule, three (3) new AKS safe harbors are created:
- Care coordination arrangements that enhance quality, health outcomes, and efficiency, without necessitating that the participants assume risk. Protected remuneration under this safe harbor must be mainly used to engage in value-based activities directly associated with coordination and management of patient care;
- Value based arrangements involving the exchange of remuneration among a value-based entity that has substantial downside financial risk from a payor and a value-based participant that meaningfully shares in this financial risk; and
- The protection of remuneration between value-based entity and value-based participant in a value-based arrangement in which the entity assumes full financial risk for the cost of items and services covered by the payor for each patient.
These new Stark Law exceptions and AKS safe harbors are receiving mixed reviews from healthcare providers. Hospital industry groups such as the American Hospital Association and the Federation of American Hospitals were optimistic about the regulatory changes, while physician groups such as the American Medical Group Association expressed some degree of skepticism. ______________________________________________________________
Law Offices of George W. Bodenger, LLC is a boutique legal practice providing sophisticated legal services to various types of healthcare providers. The Firm plans to issue additional commentary on these important changes to the Stark Law and the AKS. Please contact George W. Bodenger at 610-212-5031 or firstname.lastname@example.org if you have any questions regarding these matters or if you would like additional information about the Firm.