HHS Proposed Rules Seek to Remove Stark Law, Anti-Kickback Burdens on Providers

October 10, 2019

On Oct. 9, the Department of Health and Human Services announced two proposed rules to significantly amend the Physician Self-Referral Law (Stark Law), the federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalties (CMP) Law. The proposed rules intend to further incentivize value-based arrangements and patient care coordination by expressly permitting certain activities that could be deemed problematic under current law. The proposed rules, respectively released by HHS’ Centers for Medicare & Medicaid Services (CMS) and the HHS Office of Inspector General (OIG), would add new value-based exceptions to the Stark Law and additional safe harbors under the AKS.

These proposals stem from HHS’ Regulatory Sprint to Coordinated Care. 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. As part of this effort, HHS committed to examining federal regulations that impede coordinated care efforts. This effort has generated widespread interest. In response to a June 2018 request for public comments on the need for revisions to the Stark Law, CMS received 375 responses, and in response to an August 2018 request for comments on the need for revisions to the AKS, OIG received 359 responses.

HHS stated yesterday that these proposed rules “provide greater certainty for healthcare providers participating in value-based arrangements and providing coordinated care for patients” and would “ease the compliance burden for healthcare providers across the industry, while maintaining strong safeguards to protect patients and programs from fraud and abuse.” Indeed, for value-based arrangements, CMS and OIG respectively propose 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. For example, value-based arrangements where participants take full financial risk will have fewer regulatory requirements, while more regulatory requirements will be imposed on arrangements where only substantial financial risk downside (i.e., not just upside rewards) is accepted. The most significant regulatory burden will be imposed on other care coordination models where participants do not take any financial risk.

OIG’s proposed AKS and CMP rule provides for two other value-based arrangement safe harbors. OIG proposes a new 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. OIG also proposes a new safe harbor for financial arrangements between providers in connection with CMS-sponsored payment models. OIG proposes additional changes to the AKS, including the following:

  • Cybersecurity Technology and Services. Providing a new safe harbor for donations of cybersecurity technology and services.
  • Personal Services and Outcomes-Based Payments and Part-Time Arrangements. Modifying the existing personal services and management contracts safe harbor to add flexibility with respect to outcomes-based payments and part-time arrangements. In addition, OIG proposes to revise the meaning of set-in-advance to no longer necessitate that total payments be determined when entering into the arrangement, which makes this more consistent with the Stark Law.
  • Warranties. Modifying the existing safe harbor for warranties to revise the definition of “warranty” and provide protection for bundled warranties for one or more items and related services.
  • Local Transportation. Modifying the existing 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 inpatient facilities.

OIG proposes the following with respect to the CMP Law:

  • Accountable Care Organization Beneficiary Incentive Programs. Codifying a statutory exception related to Accountable Care Organization Beneficiary Incentive Programs for the Medicare Shared Savings Program.
  • Telehealth for In-Home Dialysis. Interpreting and incorporating a new statutory exception to the prohibition on beneficiary inducements for “telehealth technologies” furnished to certain in-home dialysis patients.

CMS noted that, in addition to the Regulatory Sprint, its proposed Stark Law rule stems from its Patients Over Paperwork initiative discussed in a July 8, 2019, client alert. From these initiatives, CMS proposes the value-based arrangements discussed above, as well as modifying its existing exception for electronic health records items and services. CMS proposes to add protections for financial arrangements related to cybersecurity technology, to update interoperability requirements and to remove the electronic health records exception’s sunset date. OIG also proposes to update 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 $3,500 per calendar year in exchange for items or services actually provided by the physician.
  • Cybertechnology. The donation of cybersecurity technology and related services to a referring provider, similar to the AKS safe harbor proposed by OIG.

The proposed Stark Law rule promises to provide “critically necessary” guidance for industry stakeholders whose financial relationships are governed by the Stark Law. Some of the most helpful guidance appears to be revising or adopting new definitions for key terms used throughout various Stark Law exceptions — including “commercially reasonable,” “volume or value” standards, “other business generated” standards and the “fair market value” definition — to include discussion of “general market value.”

In addition, changes are proposed with respect to periods of disallowance for billing when there is a noncompliant arrangement, grace periods for signatures and writing during the first 90 days of an arrangement, and clarifications of exclusive use under the rental exceptions. Finally, CMS proposes to clarify that group practices have to pool all DHS profit in profit share pools (either the entire group or subsets of five or more physicians), and not create separate pools for different DHS categories. Note that these proposals come on the heels of proposed revisions to the Stark Law advisory opinion process, as discussed in an Aug. 26, 2019, alert.

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Through these two proposed rules, HHS seeks to remove Stark Law and AKS key burdens on providers, without creating substantial risk of increased fraud and abuse. Both CMS and OIG noted the “close nexus” of the two laws, and synchronized requirements between the two laws where they could, but also noted that the AKS often acts as a “backstop” to the Stark Law such that some of OIG’s proposals are stricter. Overall, many providers will likely support these proposed changes, notwithstanding that existing provider arrangements may need to be adjusted, reformed or terminated to comply with the amendments.

Given the significance of these proposed changes, McGuireWoods plans to provide additional in-depth analysis on these proposals in the coming weeks. Alerts in this series include:

  • Part 1: Proposed Changes to Anti-Kickback Safe Harbors
  • Part 2: Civil Monetary Penalty Law Changes, In-Home Dialysis Telehealth
  • Part 3: Flexibility for EHR Items and Services, Donated Cybersecurity Tech
  • Part 4: Proposed Revisions to the Stark Law
  • Part 5: CMS Proposes Value-Based Arrangement Stark Exceptions

The proposed changes are subject to a public comment period, open until Dec. 31, 2019. Please do not hesitate to contact a McGuireWoods attorney or one of the authors of this alert for more information regarding these proposed rules or for assistance in preparing a comment to these rules.