United States: Provider Beware: MACRA Implementation Fraught With Fraud And Abuse Implications

Last Updated: April 6 2017
Article by Elizabeth Scarola

Although the fate of the Center for Medicare and Medicaid Innovation (CMMI) and the mandatory alternative payment models thereunder face threat of repeal under Republican leadership, the Medicare Access and Chip Reauthorization Act (MACRA) passed with overwhelming bipartisan support (passed the U.S. House 392-37; passed the U.S. Senate 92-8), signaling that both Republicans and Democrats back the shift to value-based reimbursement.2

MACRA, which took effect January 1 of this year, sends a dramatic signal that providers must embrace the new value-based paradigm.  Like other value-based initiatives, MACRA requires that providers incur financial risk for clinical outcomes and cost of care.

As participating-providers brace for MACRA's operational impact, healthcare counsel must brace for the legal implications of the legislation.  Depending on the specific facts and circumstances, value-based payment models including those utilized by physicians to meet MACRA standards, may implicate federal fraud and abuse laws.

MACRA Overview

Eligible providers participate in MACRA through one of two tracks: (i) the new Merit-Based Incentive Payment System (MIPS) under which they receive payment rate increases or cuts based on  their ability to meet standards; or (ii) the Advanced Alternative Payment Models (APMs) track, under which they receive bonuses for incurring substantial financial risk in qualifying APMs.

Either track requires providers to assume financial accountability for the health of patients beyond a single out-patient procedure, office visit or inpatient admission.  Thus, formerly independent providers are incentivized to coordinate care with one another in order to align patient care plans and transitions of care.

Logically, providers and health administrators look to financially incentivize providers for care coordination efforts.  However, creating financial incentive models amongst otherwise autonomous providers is a legal hotbed as the Stark Law, Anti-Kickback Statute and Civil Monetary Penalty laws (collectively, "Fraud and Abuse Laws") treat such shared financial incentives as suspect.

Civil Monetary Penalty Law (CMP)

Congress anticipated such conflicts with CMP.  Prior to MACRA, CMP prohibited a hospital from knowingly making a payment directly or indirectly to a physician as an inducement to reduce or limit any services to Medicare or Medicaid beneficiaries under the physician's care.3

As MACRA necessarily induces physicians to limit unnecessary services to Medicare beneficiaries, §512(a) of MACRA amends §§1128A(b)(1) and (2) of the Civil Monetary Penalty Law to prohibit hospitals from knowingly making a payment directly or indirectly to a physician as an inducement to refer or limit medically necessary services to Medicare or Medicaid beneficiaries under a physician's care.

However, MACRA has not altered the Anti-Kickback Statute or Stark Law.  Thus, MACRA incentive programs must meet a safe harbor under the Anti-Kickback Statute and an exception of Stark Law to comply with the law.

The Anti-Kickback Statute

Under the Anti-Kickback Statute (AKS), it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services payable by a Federal health care program.4  Pursuant to AKS, "remuneration" includes the transfer of anything of value, directly or indirectly, overtly or covertly, in cash or in kind.5

Courts have held that AKS covers any arrangement under which one purpose of the remuneration is to obtain money for the referral of services or to induce further referrals.  Thus, financial incentives shared amongst referring providers may be viewed as an inducement for referrals.  For example, MACRA compensation arrangements that distribute cost savings generated by referrals to providers with proven cost-efficient services may implicate AKS.

Although 42 C.F.R.  §1001.952 pro-vides safe harbors for various payment and business practices, no safe harbor specifically exempts cost-saving financial incentive programs tied to MACRA or alternative payment model implementation.  Similarly, the OIG has issued a number of Advisory Opinions approving gainsharing arrangements; however, each Advisory Opinion is limited to the specific set of circumstances presented, and protects only the hospital or provider making the request.6  Although the OIG Advisory Process is available to any provider, it is an arduous, expensive process that may take years to complete.

The Stark Law presents similar barriers to MACRA compensation arrangements.

The Physician Self-Referral Law (Stark Law)

Stark is a strict liability statute, meaning proof of specific intent to violate the law is not required.  The Stark law prohibits a physician from making referrals for "designated health services" (DHS) to an entity with which he or she (or an immediate family member) has a financial relationship (including compensation or ownership) that are payable by Medicare; and prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payer) for DHS furnished as a result of a prohibited referral.7  If a financial relationship exists between a physician and a DHS entity, in order for a physician to refer to the DHS entity and for such entity to bill for the service, an applicable exception must be met.

The Stark Law grants the Secretary of HHS the authority to create regulatory exceptions for financial relation-ships that "pose no risk of program or patient abuse."8  Despite HHS' authority to establish such exceptions for incentive compensation arrangements under MA-CRA, no such exception exists.  HHS has argued that providing such an exception "[w]ould not provide sufficient flexibility for innovative, effective gainsharing and incentive compensation programs."9  The agency added that "[t]he variety and complexity of gainsharing and similar arrangements would make it difficult to craft a "one-size-fits-all" set of conditions that are sufficiently "bright line" to facilitate compliance and enforceability, yet sufficiently flexible to permit innovation without any risk of program or patient abuse."10

Thus, MACRA compensation arrangements must fit into an existing Stark exception, many of which require that the volume or value of a physician's referrals or other business generated between the parties must not be a consideration when determining physician compensation.  Thus, Stark Law presents a particularly difficult obstacle to structuring effective value-based payment programs that necessarily take into consideration the "value" of referrals.

HHS recently admitted the difficulty of structuring MACRA compensation arrangements to comply with Stark Law stating to Congress that "[e]xisting exceptions to the physician self-referral law, while useful, may not be sufficiently flexible to encourage a variety of non-abusive and beneficial gainsharing, P4P [pay for performance], and similar arrangements."11

HHS added that the prohibition on considering "volume or value" of referrals when formulating physician compensation "can pose impediments for the implementation of gainsharing arrangements, because compensation paid to a physician for reducing costs or increasing profits through changes to his or her patient care practice could be interpreted to take into account the volume or value of the physician's referrals of DHS for Medicare beneficiaries."12

Waivers for Medicare Shared Savings Program and Center for Medicare and Medicaid Innovation Initiatives

Recognizing the barriers that AKS and Stark Law pose to implementation of value based payment models, HHS has issued certain waivers of the physician self-referral law and AKS to allow gainsharing and similar arrangements in connection with certain APMs, including an "ACO pre-participation waiver", and an "ACO participation waiver."13

Fraud and Abuse waivers issued to date are available at: 

https://www.cms.gov/Medicare/Fraud-and-Abuse/Phy-sicianSelfReferral/Fraud-and-Abuse-Waivers.html and on the OIG's website.

However, such waivers are only applicable to specific alternative payment and care delivery models, such as the MSSP and bundled payment programs.  Although such waivers are essential for facilitating these programs, the program-by-program waiver approach may not provide sufficient protection from the overall vulnerability of the implication of Fraud and Abuse Laws.

The American Hospital Association and other provider association groups continue to advocate for HHS to grant broad waivers of Fraud and Abuse Laws for new payment models necessary for MACRA implementation.  The American Hospital Association recently wrote, "[t]he fraud and abuse laws need to be adapted to support not hamper the new payment models.  To that end, Congress should create legal safe zones to support and foster arrangements designed to achieve the goals of payment-for-value rather than volume-based programs....  There should be clear and comprehensive protection for arrangements designed and implemented to meet those goals."14

Conclusion

For now, when advising clients on value based payment initiatives, including MACRA, it is best to ensure arrangements are properly structured to satisfy the requirements of an applicable exception to the physician self-referral law and not violate the Federal Anti-Kickback statute.  All provider clients should be warned of the Fraud and Abuse implications of the value-based reimbursement paradigm.

Footnotes

1.Elizabeth "Beth" Scarola is an associate in the Health Care Practice Group of Carlton Fields.  Beth brings an insider's perspective to her health care practice, with a strategic and operational background in health management and policy.  Ms. Scarola counsels health administrators and providers, helping them navigate the complexity of healthcare regulation and policy.

2.Medicare Access and CHIP Reauthorization Act of 2015, H.R. 2, Pub. L. 114-10; 129 Stat. 100 (2015).

3.42 U.S.C. § 1320a.

4.42 U.S.C. § 1320a-7b.

5.Id.

6.See OIG Advisory Opinions 01-01, 05-02, 05-03, 05-04, 05-05, 05-06, 06-22, 07-21, 07-22, 08-09, 08-15, 08-21, and 09-06

7.42 U.S.C. § 1395nn.

8.Id.

9.73 Fed. Reg. 69726, 69793-79794 (Nov. 19, 2008).

10.73 Fed. Reg. 38548.

11.Report to Congress titled "Fraud and Abuse Laws Regarding Gainsharing or Similar Arrangements between Physicians and Hospitals as Required by Section 512(b) of the Medicare Access and CHIP reauthorization Act of 2015," https://www.cms.gov/Medicare/Fraud-and-Abuse/.../11.Report to Congress titled "Fraud and Abuse Laws Regarding Gainsharing or Similar Arrangements between Physicians and Hospitals as Required by Section 512(b) of the Medicare Access and CHIP reauthorization Act of 2015," https:// www.cms.gov/Medicare/Fraud-and-Abuse/.../Report-to-Congress-2015.pdf. 

12.Id.

13.76 Fed. Reg.67992 and 80 Fed. Reg. 66726.

14."Legal (Fraud and Abuse) Barriers to Care Transformation and How to Address Them (2016), www.aha.org/content/16/barrierstocare-full.pdf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions