United States: HHS Announces Overhaul Of Kickback And Stark Rules

On October 9, 2019, the U.S. Department of Health and Human Services' (HHS') Centers for Medicare and Medicaid Services (CMS) and Office of Inspector General (OIG) announced plans for sweeping changes to rules policing health care fraud and abuse. The proposals extend to rules implementing the federal Anti-Kickback Statute (AKS), the Physician Self-Referral Law (the Stark Law), and the Civil Monetary Penalty (CMP) Law prohibiting beneficiary inducements.¹ Although CMS and the OIG coordinated the release of these proposed rules, OIG also acknowledged that its proposed safe harbors for value-based arrangements are more restrictive than CMS' proposals in order to serve as a backstop to fraud and abuse issues that may arise with arrangements protected by an exception.

HHS's announcement promises to modernize how these laws apply to rapidly evolving aspects of care delivery, organization and reimbursement, including: value-based care; coordinated care; alternative payment systems; telehealth; electronic health records (EHR); personal services and management contracts; and patient engagement. The proposed rules include significant new safe harbors from the AKS and exceptions from the CMP Law and the Stark Law. In the respective announcements, OIG and CMS emphasize the joint purposes of more broadly accommodating value-based payment and care and better coordinating the two agencies' oversight of such matters. The proposals extend far beyond, however, to changes with broad potential consequences for AKS and the Stark Law enforcement. We highlight a few key elements below.

The proposals are expected to publish in the Federal Register on October 17, 2019. Interested parties will then have 75 days for submitting comments.

OIG's Value-Based Purchasing Proposals

To promote coordinated patient care and health outcomes-based payments, OIG proposes three new safe harbors that cover certain money and in-kind remuneration exchanged between or among parties of value-based arrangements, with greater flexibilities provided to parties that assume more downside financial risk for the cost and quality of care: (1) care coordination arrangements that improve quality, health outcomes, and efficiency (§ 1001.952(ee)), including certain in-kind remuneration, including services and infrastructure; (2) value-based arrangements with substantial downside financial risk (§ 1001.952(ff)), which covers certain in-kind and monetary arrangements where a value-based enterprise (VBE) is at substantial downside financial risk from a payor; and (3) value-based arrangements with full financial risk (§ 1001.952(gg)), which covers certain in-kind and monetary arrangements where the VBE is at full downside financial risk from a payor.

The OIG proposes to exclude "device manufacturers" from the definition of "VBE participant" and from protection under the various proposed safe harbors, including the exclusion from participation in outcomes-based payment arrangements. The OIG's proposed definition of "VBE participant" is "an individual or entity that engages in at least one value-based activity as part of a value-based enterprise." The OIG states that the definition "expressly excludes pharmaceutical manufacturers; manufacturers, distributors, or suppliers of durable medical equipment, prosthetics, orthotics or supplies (DMEPOS); and laboratories." The OIG believes that not all device manufacturers play a role in the coordination of care but they note that it may not be possible to distinguish a traditional medical device manufacturer from a health technology company that does assume such role.

The OIG has several proposals for the definition of "medical device manufacturers."

• CMS's definition of "applicable manufacturer" in 42 CFR 403.902, which relates to the "Sunshine" provisions of the ACA.
• The definition will include an entity that manufacturers any item that requires premarket approval by, or premarket notification to, the FDA or that is classified by the FDA as a medical device.
• Whether the item the manufacturer manufactures is eligible for separate or bundled payment from a Federal health care program or other payor or is used in a test that is eligible for separate or bundled payment from a Federal health care program or other payor.
• The definition will include distributors or wholesalers when they are distributing or selling devices manufactured by a device manufacturer.

OIG's Proposed New Safe Harbors to the AKS

42 CFR § 1001.952(hh) Patient Engagement and Support Arrangements. This proposed safe harbor would allow providers to offer patients beneficial tools and supports to improve quality, health outcomes, and efficiency, by promoting patient engagement with their care and adherence to care protocols, without violating beneficiary inducement prohibitions.

42 CFR § 1001.952(ii) CMS-Sponsored Model Arrangements and CMS-Sponsored Model Patient Incentives. The OIG has proposed this new safe harbor to "standardize and simplify anti-kickback statute compliance for CMS-sponsored model participants." This proposal acknowledged CMS's "ability to oversee and monitor CMS sponsored models and initiatives and to embed program integrity protections in such models and initiatives in ways that do not necessarily apply to arrangements outside the models." If finalized, this proposal would eliminate the need for the OIG to provide fraud and abuse waivers to participants on a case-by-case basis.

Other OIG Proposals

• Patient Engagement – a 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 new safe harbor (§ 1001.952(ii)) for certain remuneration provided in connection with a CMS-sponsored model.
• Cybersecurity Technology and Services – a new safe harbor (§ 1001.952(jj)) for donations of cybersecurity technology and services.
• Electronic Health Records Items and Services – 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 – modifications to the existing safe harbor for personal services and management contracts (§ 1001.952(d)) to add more flexibility with respect to outcomes-based payments and part-time arrangements.
• Warranties – modifications to the existing safe harbor for warranties (§ 1001.952(g)) to revise the definition of "warranty" and to provide protection for bundled warranties for one or more items and related services.
• Local Transportation – 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.
• Accountable Care Organization (ACO) Beneficiary Incentive Programs – codification of the statutory exception for ACO Beneficiary Incentive Programs for the Medicare Shared Savings Program (§ 1001.952(kk)).
• Telehealth for In-Home Dialysis – provides a new statutory exception to the prohibition on beneficiary inducements for "telehealth technologies" furnished to certain in-home dialysis patients.

CMS Value-Based Purchasing Proposals

In its proposed rule, CMS proposes several exceptions to the Stark Law for: (1) value-based compensation arrangements between or among physicians, providers, and suppliers; (2) arrangements under which a physician receives limited remuneration for items or services that the physician actually provides; and (3) a new exception for donations of cybersecurity technology and related services. To support the new exceptions, CMS is proposing definitions of key terms in those exceptions. CMS also proposes to amend the existing exception for EHR items and services.

CMS' Proposed Changes to Existing Stark Law Exceptions

Commercially Reasonable: CMS is proposing two alternative definitions for the term "commercially reasonable." CMS is proposing that commercially reasonable means either: (a) the particular arrangement furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangement or (b) arrangement makes commercial sense and is entered into by a reasonable entity of similar type and size and a reasonable physician of similar scope and specialty. Notably, CMS stated in the proposed rule that an arrangement may be commercially reasonable even if the arrangement does not result in a profit for one or both parties. CMS noted that the Stark statute itself does not include a definition of commercially reasonable.

Designated Health Services: CMS is proposing to amend the definition of designated health services "to clarify that a service provided by a hospital to an inpatient does not constitute a designated health service payable, in whole or in part, by Medicare, if the furnishing of the service does not affect the amount of Medicare's payment to the hospital under the Acute Care Hospital Inpatient Prospective Payment System (IPPS)." This proposal is in response to disclosures CMS has received under Self-Referral Disclosure Protocol.

Writing and Signature Requirement: CMS is proposing that the writing requirement or the signature requirements of certain compensation arrangements would be deemed to be satisfied if: (1) the compensation arrangement satisfies all requirements of an applicable exception other than the writing or signature requirement(s); and (2) the parties obtain the required writing or signature(s) within 90 consecutive calendar days immediately after the date on which the arrangement failed to satisfy the requirement(s) of the applicable exception.

Fair Market Value: CMS is proposing three definitions of fair market value for (1) equipment rentals, (2) office space, and (3) FMV in general. All three definitions would reference "general market value," which has its own proposed changes. This proposal is to eliminate the connection to the volume or value standard and "to give parties with ready access to the definition of "fair market value," with the attendant modifiers, that is applicable to the specific type of compensation arrangement at issue."

The Volume or Value Standard and the Other Business Generated Standard: CMS is proposing that compensation would take into account the volume or value or referrals only when the formula used to calculate the compensation includes a referrals or other business generated as a variable. CMS states that there must be a direct correlation between referrals or other business generated and the prospective rate of compensation to be paid.

Other CMS Proposals

CMS is also proposing revisions to the Stark law generally to modernize and clarify the existing regulations and changes that would affect the deeming provision pertaining to interoperability at and provisions related to interoperability and data lock-in. Specifically, the proposal would clarify that donations of certain cybersecurity software and services are permitted under the EHR exception, the sunset provision would be removed, among other changes.

42 CFR § 411.357(z) Limited Compensation to a Physician. CMS is proposing a new exception for limited compensation to a physician of up to $3,500. CMS states that this proposal is in response to arrangements they have reviewed under their Stark Self-Referral Disclosure Protocol. CMS expected that once compensation exceeds the $3,500 threshold, other applicable exceptions would control.

42 CFR § 411.357(bb) Cybersecurity Technology and Related Services. This proposal would protect certain types of donated cybersecurity technology and related services.

Footnotes

1. OIG, Proposed Rule, "Medicare and State Healthcare Programs: Fraud and Abuse; Revisions To Safe Harbors Under the Anti-Kickback Statute, And Civil Monetary Penalty Rules Regarding Beneficiary Inducements", available at https://www.hhs.gov/sites/default/files/oig-nprm.pdf.

CMS, Proposed Rule, "Medicare Program; Modernizing and Clarifying the Physician Self-Referral Regulations", available at https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-22028.pdf.

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