On October 9, 2019, the Department of Health and Human Services (HHS) released two separate, but related, proposed rules as part of its "Regulatory Sprint to Coordinated Care." The Office of the Inspector General (OIG) released a Proposed Rule, Revisions to Safe Harbors under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements (AKS Proposed Rule),1 and the Centers for Medicare and Medicaid Services (CMS) released a Proposed Rule, Modernizing and Clarifying the Physician Self-Referral Regulations (Stark Proposed Rule).2 The proposed rules were published in the Federal Register on October 17, 2019, and comments are due December 31, 2019.3
In Part I of this Advisory, we describe OIG's and CMS's coordinated proposals to protect from enforcement scrutiny (i) certain value-based arrangements, and (ii) arrangements involving the donation of cybersecurity technology and services and electronic health records (EHR) systems. In Part II of this Advisory, we outline the OIG's other proposals, including new Anti-Kickback Statute (AKS) safe harbors, modifications of existing safe harbors, and a new telehealth technologies exception to the Civil Monetary Penalties (CMP) provisions related to beneficiary inducement. In Part III, we summarize CMS's proposed revisions to the Physician Self-Referral (Stark) Law regulations, including clarifications regarding certain fundamental terminology, amendments to existing exceptions, and a new exception for limited remuneration to a physician.
Understanding the scope of these proposals and their potential impact on health care delivery is critical not only to health care professionals (HCPs) and other providers and suppliers of healthcare items and services, who will be impacted directly by the rules if finalized, but also for manufacturers and other vendors who do business with the HCPs and entities.
I. CMS AND OIG COORDINATED PROPOSALS
A. Value-Based Arrangements
The stated goals of the proposed rules are to incentivize a shift away from reimbursement for healthcare items and services based on volume to payment systems where HCPs and other healthcare provider and suppliers have greater financial accountability for cost-effective, high-quality, coordinated care. To promote the evolution to value-based healthcare delivery and promote care coordination, CMS and OIG (together the Agencies) propose three new safe harbor protections under the AKS and three new exceptions to the Stark Law for certain remunerative arrangements between eligible participants in a "value-based enterprise" (VBE), which is a network of individuals and entities that collaborate to implement one or more value-based activities (VBAs)4 with the intent of achieving at least one of the following four value-based goals:
- coordinating and managing the care of a target patient population;
- improving the quality of care for a target patient population;
- appropriately reducing the costs to, or growth in expenditures of, payors without reducing the quality of care for a target patient population; and
- transitioning from healthcare delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.
In addition, the Agencies would require that the VBE set forth in a written document the purpose and activities of the VBE and establish a governing body that is responsible for monitoring the activities related to its value-based arrangements, among other things.
CMS and OIG generally propose to define a "VBE participant" to include physician practices, hospitals, post-acute providers, payors, as well as other individuals and entities, but propose to expressly exclude certain types of entities, such as pharmaceutical manufacturers; manufacturers, distributors, and suppliers of durable medical equipment, prosthetics, orthotics, or supplies (DMEPOS); and laboratories.5 The Agencies solicit comments on whether certain other entities should be excluded from protection under the proposals, such as device manufacturers, pharmacies, pharmacy benefit managers (PBMs), wholesalers, distributors. Additionally, OIG and CMS solicit comment on precluding some or all protection for arrangements between entities that have common ownership. As with the proposed safe harbors and exceptions, the Agencies intend that the definition of "VBE participant" will be aligned under each of the proposals.
The three proposed safe harbors and exceptions would provide prospective protection for and progressively greater flexibility in designing an arrangement as the VBE takes on greater downside financial risk for costs and quality of care.
At a high level, the three proposed safe harbors and exceptions protect:
- certain in-kind and monetary arrangements where the VBE assumes full downside financial risk from a payor;
- certain in-kind and monetary arrangements where the VBE assumes substantial downside risk from a payor; and
- certain in-kind remuneration exchanged between qualifying VBE participants for value-based activities that are directly connected to care coordination and care management.
CMS and OIG are concurrently developing these proposals to address similar concerns. The Agencies coordinated closely to develop the proposals and intend to do the same with regard to the final rules, with the goal of promoting alignment and easing the compliance burden on regulated entities.
Proposals (1) and (2) listed above likely would be applicable to arrangements between a healthcare entity(ies) and a payor. VBEs falling into Proposal (3) could be arrangements between a healthcare entity and a payor or between/among healthcare entities. In addition to requesting general comments, the Agencies solicit comments on a number of specific aspects of the proposals, such as the permissible types of protected remuneration; the types of safeguards needed to prevent fraud and abuse; and whether protection may be conditioned on the volume or value of referrals or of any other business generated. Below we describe the safe harbors and exceptions, focusing on the key elements of the proposals.
Full Downside Financial Risk
The Agencies propose to protect certain arrangements between VBE participants in a VBE that has assumed full financial risk for the cost of all patient care items and services for each patient in a target patient population. To be protected under the safe harbor or exception, OIG and CMS propose that the VBE must be paid on a prospectively determined basis and assume full financial risk within six months of the commencement of the VBA, and on a prospective basis for the duration of the arrangement.
Both CMS and OIG propose to require that "full financial risk" means that the contract between the VBE and the payor may not allow for any additional payments to compensate for costs incurred by the VBE in providing care to the target population. For example, OIG proposes to exclude from protection an entity that receives a partial capitated payment, be it either: (i) a capitated payment that covers a limited set of items or services or (ii) a payment arrangement where an entity receives a combination of reduced fee for service (FFS) and capitation payments for a defined set of items or services. However, CMS proposes that the proposed definition of "full financial risk" would not prohibit a payor from making payments to offset losses incurred by the VBE above those prospectively agreed to by the parties. The types of financial loss and payments CMS contemplates with its proposal are less clear, as CMS does not explain the potential types of losses a VBE could insure "above those prospectively agreed to by the parties" and does not provide examples. Both Agencies propose to permit a VBE from entering into arrangements, such as global risk adjustments, risk corridors, reinsurance, or stop loss agreements, to protect against catastrophic losses. CMS and OIG seek comment on the proposed definition of "full financial risk," including whether six months is a sufficient amount of time for parties to implement a full financial risk arrangement.
Meaningful/Substantial Downside Financial Risk
The Agencies propose a safe harbor from the AKS and an exception to the Stark Law for value-based arrangements between participants in VBEs that assume meaningful/ substantial downside financial risk6 to protect both monetary and in-kind remuneration. To be protected under the safe harbor or exception, OIG and CMS propose that the VBE must be paid on a prospectively determined basis and assume meaningful/substantial financial risk within six months of the commencement of the VBA, and on a prospective basis for the duration of the arrangement.
For purposes of the proposed AKS safe harbor, OIG proposes to define "substantial downside financial risk" as risk to the VBE in the form of:
- shared savings with a repayment obligation to the payor of at least 40% of any shared losses, where loss is determined based upon a comparison of costs to historical expenditures, or to the extent such data is unavailable, evidence-based, comparable expenditures;
- a repayment obligation to the payor under an episodic or bundled payment arrangement of at least 20% of any total loss, where loss is determined based upon a comparison of costs to historical expenditures, or to the extent such data is unavailable, evidence-based, comparable expenditures;
- a prospectively paid population-based payment for a defined subset of the total cost of care of a target patient population, where such payment is determined based upon a review of historical expenditures, or to the extent such data is unavailable, evidence-based, comparable expenditures; or
- a partial capitated payment from the payor for a set of items and services for the target patient population where such capitated payment reflects a discount equal to at least 60 percent of the total expected FFS payments based on historical expenditures, or to the extent such data is unavailable, evidence-based, comparable expenditures of the VBE participants to the VBAs.
For purposes of the proposed Stark Law exception, CMS proposes to define "meaningful downside financial risk" as arrangement where a physician:
- is responsible to pay the entity no less than 25% of the value of the remuneration the physician receives under the VBA; or
- is financially responsible to the payor or the entity on a prospective basis for the cost of all or a defined set of items and services covered by the applicable payor for each patient in the target patient population for a specified period of time.
CMS elaborates that the physician must be the entity assuming the meaningful downside financial risk. CMS states that it believes that when a physician assumes downside financial risk in an arrangement, the physician has incentive to change his or her practice and referral patterns in a way that "curbs the influence of traditional FFS, volume-based payment." It seeks comment as to whether the physician would have the same behavior-modification incentives if the entity that assumes the meaningful downside financial risk is the entity furnishing DHS. Also with respect to arrangements subject to this exception to the Stark Law, CMS proposes that the methodology used to determine the amount of the remuneration is set in advance of the value-based activities for which the remuneration is paid.
No Downside Financial Risk
The Agencies also propose protections for arrangements between a VBE and one or more of its VBE participants or between VBE participants in the same VBE for the provision of at least one value-based activity for a target population, regardless of the level of risk undertaken by the VBE or any of its participants. These arrangements, however, would be limited to care coordination and care management. In other words, no entity would be required to assume downside financial risk for the exception to be applicable. The stated purpose of this proposal is to encourage physicians and physician groups that are not used to risk-sharing or are too small to absorb downside financial risk to participate in care coordination activities.
With respect to the proposed AKS safe harbor, OIG proposes to protect only in-kind, non-monetary remuneration, and that the recipient of the remuneration must pay at least 15% of the offeror's cost for the in-kind remuneration. In addition, OIG proposes and seeks comment on a requirement that the VBA participants must establish one or more specific evidence-based, valid outcome measures against which the recipient will be measured and which the parties reasonably anticipate will advance the coordination and management of care of the target patient population. To illustrate this arrangement, OIG describes an arrangement in which a hospital might provide a behavioral health nurse to follow designated inpatients with mental health disorders in the event of discharge to a SNF. In this example, the SNF, in turn, might provide certain staff to the hospital to help coordinate designated patients' care through the discharge planning process or might provide office space for the behavioral health nurse. With respect to the proposed Stark exception, CMS proposes that the exception would permit both monetary and non-monetary remuneration, provided that the methodology used to determine the amount of remuneration is set in advance, but seeks comment on whether it should limit the scope of the exemption to non-monetary remuneration.
Additional Key Safeguards in the Proposed Protections for VBAs
|No Downside Risk Required||Substantial Financial Downside Risk Required||Full Financial Risk Required|
|Remuneration funded by, or otherwise resulting from contributions by, an individual or entity outside of the applicable VBE, is excluded.||Yes||Yes||Yes|
|Remuneration does not include the offer or receipt of an ownership or investment interest in an entity or any distributions related to such ownership or investment interest.||No||Safe harbor only||Safe harbor only|
|Remuneration must not take into account volume or value of referrals of patients that are not part of the VBA's target population or business covered under the VBA.||Yes||Yes||Yes|
|The VBA is "commercially reasonable" / "objective and measurable."||Yes||No||No|
|The VBA does not limit independent decision-making or restrict referrals to a particular provider, practitioner, or supplier.||Yes||Yes||Yes|
|The VBA does not direct or restrict referrals to a particular provider.||Yes||Yes||Yes|
|The VBA does not include marketing of items or services or patient recruitment activities.||Yes||Yes||Yes|
|The VBA provides for an operational utilization review program and a quality assurance program.||No||No||Safe harbor only|
|Writing Requirement||Yes||Yes||Safe harbor only|
|Internal monitoring and assessment requirement||Safe harbor only||No||No|
|The offeror does not, and should not, know that the remuneration is likely to be diverted, resold, or used for an unlawful purpose.||Safe harbor only||No||No|
1. Indirect Compensation Arrangements Applicable to Stark Exception for Value-Based Arrangements
CMS recognizes that some VBAs may not involve direct compensation arrangements between a DHS entity and the referring physician but rather there could be an indirect compensation link between the parties. To provide protection for these arrangements under the proposed VBA exceptions, CMS proposes a special rule for indirect compensation arrangements involving value-based arrangements. Specifically, CMS is proposing that, when the value-based arrangement is the link in the chain closest to the physician—that is, the physician is a direct party to the value-based arrangement—the indirect compensation arrangement would qualify as a "value-based arrangement" for purposes of applying the proposed VBA exception. The link closest to the physician must be a compensation arrangement that meets the definition of the VBA—it may not be an ownership interest.
Among the issues about which it seeks comment, CMS asks whether to exclude an unbroken chain of financial relationships between a DHS entity and a physician from the definition of "indirect value-based arrangement" if the link closest to the physician (that is, the VBA to which the physician is a party) is a compensation arrangement between the physician and a pharmaceutical manufacturer; manufacturer, distributor, or supplier of DMEPOS; laboratory; pharmacy benefit manager; wholesaler; or distributor. Or, in the alternative, CMS asks whether the exception should be even more narrowly drawn by excluding an unbroken chain of financial relationships between a DHS entity and a physician from the definition of "indirect value-based arrangement" if one of these entities is a party to any financial relationship in the chain of financial relationships.
2. Price Transparency in Proposed Stark Exceptions
Consistent with HHS's articulated policy to increase price transparency in health care, CMS seeks comments on how to pursue transparency objectives in the context of the Stark Law, including the appropriate time for price information to be disseminated to patients and whether a price transparency requirement should be included in every exception for VBAs under the new proposal at § 411.357(aa). According to CMS, price transparency is important in a health care system that pays for value, and price and quality information is important for patients to make informed decisions when choosing care.
3. Comments are due 75 days after the expected Federal Register publication date of October 17, 2019.
4. "Value-based activity" is defined to include (a) the provision of an item or service; (b) the taking of an action; or (c) refraining from taking an action.
5. For additional information on the proposed exclusions from the definition of "VBE participant" under the AKS Proposed Rule, see HHS OIG's Proposed Rule Revising the AKS Safe Harbors and Beneficiary Inducement CMP Rules: Information for Drug and Device Manufacturers.
6. In its discussion the proposed safe harbor to the AKS, OIG uses the term "meaningful downside financial risk," while in its discussion of the proposed exception to the Stark Law, CMS uses the term "substantial downside financial risk."
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