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Last week, regulators released proposed rules that, if adopted, would provide healthcare stakeholders with much needed regulatory relief as the industry moves toward a value-based payment system.

On October 9, 2019, the Centers for Medicare and Medicaid Services (CMS) released proposed updates to the Physician Self-Referral Law, also known as the Stark Law. On the same day, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) announced proposed changes to the Federal Anti-Kickback Statute and the Civil Monetary Penalty Law (CMP). The Stark Law prohibits a physician from referring patients for certain designated health services (DHS) to an entity in which that physician (or the physician’s family member) maintains a financial interest, unless an exception applies. The AKS is a criminal law that prohibits the payment of remuneration to induce or reward referrals or other business payable by a federal healthcare program. The CMP authorizes civil monetary penalties for certain fraud and abuse violations, including the provision of free or discounted items or services that may influence Medicare or Medicaid beneficiaries to receive services from a particular provider.

When these laws were first enacted decades ago, they were meant to eliminate conflicts of interest related to physician referrals and to protect against overutilization of healthcare services payable by federal healthcare programs. At that time, providers were economically incentivized to provide additional care as they were primarily compensated on a fee-for-service basis. But, as the industry has shifted from volume-based, fee-for-service reimbursement models toward value-based care, providers are increasingly incentivized to improve outcomes while minimizing cost.

This shift is happening rapidly, and regulations have not kept pace with the push toward value over volume. These new rules come as part of what HHS describes as a “regulatory sprint” to catch up to the changing payment systems and “support value-based and coordinated care.” Through this sprint, CMS and the OIG are loosening restrictions and providing regulatory relief to healthcare providers to open avenues for healthcare providers and payers to coordinate patient care and remove barriers to innovation.

Sweeping Changes

The two proposed rules address a wide variety of potential changes. Significantly, there are new Stark Law exceptions and Anti-Kickback Statute safe harbors that would allow healthcare providers and payers to design and enter into value-based arrangements without fear of running afoul of the fraud and abuse laws. CMS has proposed new exceptions to the Stark Law for value-based care arrangements that meet certain requirements, depending on whether the parties to the arrangement bear full financial risk, significant downside risk, or a lesser degree of risk. Likewise, the OIG has proposed three new safe harbors to the AKS to protect certain remuneration exchanged among the parties to a value-based arrangement.

CMS and the OIG have also proposed a new exception and safe harbor to protect arrangements involving the donation of certain cybersecurity technology and related services to an individual physician or physician practice. From a CMP perspective, the OIG has proposed an exception that would allow renal dialysis centers to provide telehealth services to a patient receiving home dialysis without risk of penalty, which could help pave the way for continued adoption of telemedicine in this area of the industry.

Additionally, in response to the receipt of over 1,100 submissions to the CMS Voluntary Self-Referral Disclosure Protocol (SRDP), which allows providers to self-disclose actual or potential violations of the Stark Law, CMS has further loosened certain so-called “technical” Stark Law requirements. These include a new 90-day allowance for satisfying the writing requirement for a particular exception (in addition to the existing 90-day allowance for satisfying the signature requirement for a particular exception) and an exception for limited remuneration ($3,500) paid to a physician during a calendar year. CMS is also proposing a series of definitional and conceptual revisions to clarify concepts such as fair market value, commercial reasonableness, volume/value requirements, and the definition of “group practice” (here, more restrictively clarifying that group practices may not distribute DHS profits on a service-by-service basis to a DHS-specific subset or “pod” of physicians).

The OIG is also loosening restrictions regarding waivers of fraud and abuse laws in connection with CMS-sponsored models. Currently, the OIG issues waivers of such laws in connection with certain innovative payment programs like the Medicare Shared Savings Program. The new proposed rule would create a new safe harbor for certain CMS-sponsored programs, eliminating the need for a “patchwork” of fraud and abuse waivers.

A Win for the Industry

The proposed rules demonstrate that regulators are listening to industry stakeholders and are committed to amending laws to keep up with advances in payment models and technological innovations. If finalized, these rule changes would signal that CMS and the OIG recognize that the payment landscape supporting the healthcare industry is changing rapidly and must be governed by more flexible regulation to facilitate partnerships and programs that help drive more efficient delivery of quality healthcare.  

The proposed rules are currently scheduled for publication in the Federal Register on October 17, 2019. CMS and the OIG are accepting comments on the proposed changes until December 31, 2019. Please contact us with any questions regarding the proposed rules, and if you would like assistance preparing comments for CMS or the OIG.