Proposed Stark, Anti-Kickback Statute reforms aimed at improving coordination, quality of care

Category: Stark, Anti-Kickback Statute, OIG, CMS

Proposed Stark, Anti-Kickback Statute reforms aimed at improving coordination, quality of care


To ease restraints on healthcare providers and improve care, the Department of Health and Human Services (HHS) recently proposed changes to two anti-fraud laws, the Physician Self-Referral Law (the “Stark Law”) and the Federal Anti-Kickback Statute.

Currently, the federal laws that govern patient referrals prohibit physicians from referring patients to any institution where the physician has a financial relationship. However, those regulations are viewed by the Trump Administration as obstacles to the Administration’s goal of increased coordination among care providers. With today’s increasingly interconnected medical industry, where coordination of care is essential, the current laws can hinder a provider’s ability to offer efficient and cost-effective care. Thus, in order to better reflect today’s healthcare system, the proposed rules seek to reduce current compliance burdens in order to encourage greater value-based and coordinated care among providers.

Modifications to the rules under the Stark Law and Anti-kickback Statute include exceptions and safe harbors to allow flexibility for health providers to enter into innovative financial arrangements, in which they collaborate to improve care for patients. Notable changes to the Stark Law under the proposed rule include:

  • Permanent, broad exemptions for certain value-based care arrangements based on the level of financial risk involved in the arrangement. In order to qualify for this exception, providers will need to establish a value-based arrangement between two or more entities, must have a body or person responsible for financial and operational oversight, and must memorialize in writing how they intend to achieve its value-based goal to a targeted patient population. The enterprise must focus on at least one value-based purpose, which would include (1) coordination/management of patient care; (2) improving patient care; (3) reducing costs or increases in expenditures for health care; or (4) shifting from a volume to value model. The government has minimal concern with such arrangements because it requires the provider to take on “substantial downside financial risk.”
  • Exception to protect limited remuneration, in an amount that does not exceed an aggregate of $3,500 per calendar year, to a physician for services or items provided by that physician. The compensation paid to the physician may not consider the volume or value of referrals or business from the physician, must not exceed fair market value, and must be commercially reasonable. Additional restrictions apply to the compensation for the lease of office space or equipment.  
  • Exception for donations of cybersecurity software and related services, which allows for nonmonetary remuneration to a physician if certain conditions are met. The technology/services must be necessary and used predominately to establish or bolster cybersecurity, the determination to give the technology/services does not consider the volume or value of any referrals, the physician does not make receipt of the technology services a condition of doing business with the donor, and the arrangement is memorialized in a writing.
  • Includes new definitions of certain key concepts to create clear bright-line rules, including commercial reasonableness, the volume/value standard and fair market value. The new rule also modifies the definition of “designated health service” to only apply to an inpatient hospital service if the service affects the amount of reimbursement the hospital received from Medicare.

Significant changes to the Anti-Kickback statute under the proposed rule include:

  • Replaces the separate fraud and abuse waivers needed for each innovation model sponsored by CMS.
  • Provides safe harbors for remuneration between participants in value-based arrangements that promote coordinated care. The safe harbors protect three types of arrangements: (1) care coordination arrangements which promote quality, health outcomes, and efficiency; (2) value-based arrangements that assume substantial downside financial risks; and (3) value-based arrangements that assume full financial risk.
  • Modifies the existing safe harbors for personal services and management contracts to allow flexibility for certain outcomes-based payments and part-time arrangements by removing the part-time schedule requirement and the requirement that the aggregate compensation be set in advance.
  • Creates safe harbors for certain tools and supports provided under patient engagement arrangements. Only value-based enterprise participants would receive protection under this safe harbor, and the “tool or support” must be an in-kind, preventive item, good or service, such as health-related technology, patient health monitoring, or other items aimed at addressing a patient’s social determinates of health.
  • Modifies the definition of “remuneration” to allow in-home dialysis providers to provide free or discounted telehealth technology to dialysis patients.

On balance, proposals to modernize the Stark Law and the Anti-kickback Statute are positive developments. However, new regulations will in all likelihood require providers to assume the additional economic risk. Smart players are investing now in IT, infrastructure, and personnel to hit the ground running. Further, providers and stakeholders should closely review the proposed rules and pose comments supporting changes with which they agree and providing information/counterarguments for aspects of the rules that would not be beneficial to their interests. Comments must be received by 5:00 PM on December 31, 2019.

Belmont Law student Paige Goodwin contributed to this report.

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