HHS Finalizes Stark Law, AKS Changes to Reduce Burdens on Healthcare Providers

November 23, 2020

For more information – to review additional guidance on the final rules discussed in this alert, see the following McGuireWoods legal alerts:


On Nov. 20, 2020, the U.S. Department of Health and Human Services (HHS) published two long-awaited final rules significantly amending the Physician Self-Referral Law (Stark Law), the federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalties (CMP) Law. These new rules are a direct result of HHS’ Regulatory Sprint to Coordinated Care, and largely adopt the proposed rules discussed in an Oct. 10, 2019, McGuireWoods client alert.

As discussed in a Sept. 26, 2018, McGuireWoods client alert, the Regulatory Sprint has the goal of reducing regulatory burdens on the healthcare industry and incentivizing coordinated care, by examining federal regulations that impede coordinated care efforts. HHS Secretary Alex Azar praised the rules’ release for assisting in “delivering a system that pays for outcomes rather than procedures.” The final rules are seen as a necessary step in this direction as they provide protections of various value-based arrangements and patient care coordination activities that could have been deemed problematic under the current law.

The final rules, respectively released by HHS’ Centers for Medicare & Medicaid Services (CMS) and the HHS Office of Inspector General (OIG), have, among other changes, added new value-based exceptions to the Stark Law and additional safe harbors under the AKS, and largely take effect in January 2021.

These rules focus on building a system that delivers value, with CMS stating in its rule that it has the goal of “pioneering bold new models in Medicare and Medicaid and removing government burdens that impeded care coordination.” Indeed, for value-based arrangements, CMS and OIG respectively have enacted three largely consistent exceptions to the Stark Law and safe harbors to the AKS to protect remuneration between participants in value-based arrangements. These three proposals vary by the types of remuneration protected, level of financial risk assumed by the parties and types of safeguards: (i) value-based arrangements where participants take full financial risk, which have the fewest regulatory requirements; (ii) value-based arrangement with substantial downside risk (in addition to upside rewards), which have some additional regulatory requirements; and (iii) care coordination arrangements to improve quality health outcomes and efficiency, which do not need to carry financial risk and which carry the most significant regulatory burden.

OIG finalized two other value-based arrangement safe harbors: (1) the Patient Engagement and Support safe harbor for a provider’s furnishing of certain tools and supports to patients to improve quality, health outcomes and efficiency, such as in-kind items and services to support patient compliance with discharge and care plans and services and supports to address unmet social needs affecting health (although OIG removed its enumerated list of examples to be agnostic as to the type of tools and support that are offered); and (2) the CMS-Sponsored Models safe harbor for remuneration provided in connection with CMS-sponsored payment models.

OIG finalized additional changes to the AKS safe harbors, including the following:

  • Adding a Cybersecurity Technology and Services safe harbor for donations of cybersecurity technology and services.
  • Modifying the Electronic Health Records Items and Services safe harbor to update the provision regarding interoperability, and to remove the sunset date.
  • Modifying the Personal Services safe harbor to add flexibility with respect to outcomes-based payments and part-time arrangements. In addition, OIG revised the set-in-advance requirement to no longer necessitate that total payments be determined when entering into the arrangement and instead require the methodology to be determined, which makes this more consistent with the Stark Law.
  • Modifying the existing Warranties safe harbor to revise the definition of “warranty” and provide protection for bundled warranties for one or more items and related services.
  • Modifying the Local Transportation safe harbor for local transportation (discussed in a Jan. 11, 2017, client alert) to expand and modify mileage limits for rural areas to 75 miles and to allow more transportation for patients discharged from an inpatient facility or released from a hospital after being placed in observation status for at least 24 hours.
  • Codifying a statutory exception to the definition of remuneration under AKS related to Accountable Care Organization Beneficiary Incentive Programs.

With respect to the CMP Law, OIG amended the definition of “remuneration” in the CMP interpreting and incorporating a new statutory exception to the prohibition on beneficiary inducements for “telehealth technologies” furnished to certain in-home dialysis patients.

Similar to OIG, in its Stark Law final rule, CMS finalized the value-based arrangements discussed above, as well as a modification to its existing exception for electronic health records items and services. CMS added protections for financial arrangements related to cybersecurity technology, to update and remove interoperability requirements and to remove the electronic health records exception’s sunset date. OIG also updated its similar safe harbor provisions in an almost identical manner.

CMS includes new Stark Law exceptions for the following:

  • Limited Remuneration to a Physician. Arrangements where a physician receives remuneration limited to no more than $5,000 per calendar year (up from $3,500 as proposed), adjusted annually for inflation, in a fair market value exchange for items or services actually provided by the physician.
  • Cybersecurity Technology and Related Services. The donation of nonmonetary technology and related services used predominately to implement, maintain or re-establish cybersecurity to a referring provider, similar to the AKS safe harbor finalized by OIG.

The Stark Law final rule also revised certain existing exceptions and provided guidance for industry stakeholders whose financial relationships are governed by the Stark Law, specifically providing new definitions and/or further guidance of key terms used throughout various Stark Law exceptions. CMS clarified that its intent in interpreting and implementing Stark Law has always been to “interpret the [referral and billing] prohibitions narrowly and the exceptions broadly, to the extent consistent with statutory language and intent.” As such, the overall intention of these clarifications was stated as “reduc[ing] the burden of compliance with the [Stark Law], provid[ing] clarification where possible and achiev[ing] the goals of the Regulatory Sprint.” These clarifications and updates include the following, among a long list of others:

  • Defining “commercially reasonable” to mean that the particular 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. The final regulation also states that an arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.
  • Establishing special rules to identify the universe of compensation formulas that are considered to be determined in a manner that takes into account the “volume or value” of a physician’s referrals or the “other business generated” by a physician.
  • Clarifying when compensation is considered to be “set in advance” for purposes of satisfying the requirements of the exceptions to Stark.
  • Revising the definition of “fair market value” and “general market value” to provide additional specificity based on the type of financial arrangement being valued.

Through these two final rules, HHS seeks to remove Stark Law and AKS key burdens on providers, without creating substantial risk of increased fraud and abuse. While many providers will likely support these changes and the added flexibility, existing provider arrangements may need to be adjusted, reformed or terminated to comply with the amendments.

Given the significance of these changes and their impact on the healthcare industry, McGuireWoods plans to provide additional in-depth analysis on these proposals in the coming weeks.

The final rule changes are effective Jan. 19, 2021, with one exception on the Stark Law’s definition of group practice, to take effect Jan. 1, 2022. Please do not hesitate to contact a McGuireWoods attorney or one of the authors of this alert for more information regarding these final rules or for assistance in assessing various financial arrangements in light of the new rules.

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