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Extensive Changes to Stark and Anti-Kickback Regulations

The Department of Health and Human Services OIG and CMS seek to modernize and clarify the Anti-Kickback and Stark Statutes

The Department of Health and Human Services (HHS) Office of Inspector General (OIG) and the Centers for Medicare and Medicaid Services (CMS) have issued two highly-anticipated and significant final rules (scheduled to be published today, December 2, 2020) that seek to modernize and clarify the Anti-Kickback Statute (AKS) and Physician Self-Referral Statute (Stark). These final rules are part of the HHS Regulatory Sprint to Coordinated Care Initiative which aims to remove certain regulatory barriers and administrative burdens that hindered the shift to a value-based health care system and the development by providers of innovative arrangements to improve the coordination of patient care. Both OIG and CMS emphasized that the final rules offer health care providers greater flexibility to coordinate and improve care while maintaining important safeguards against overutilization and inappropriate incentives. The final rules will go into effect on January 19, 2021.

The OIG and CMS worked together to develop these final rules. Although overall the two final rules are consistent, OIG and CMS did not completely align the AKS safe harbors and Stark exceptions set out in the final rules. Outlined below is a brief overview of the major provisions in the final rules.

New and Modified Stark Exceptions

  1. Value-Based Arrangement Exceptions: CMS finalized three new exceptions for value-based arrangements between a physician and an entity that pays physicians based on the quality of patient care delivered rather than the volume of services provided. The value-based exceptions include:
    • Full financial risk exception in which the value-based enterprise assumes the full financial risk for the cost of all patient care for each covered patient for a specified time period
    • Meaningful downside financial risk exception where the physician is at meaningful downside financial risk (at least 10% of remuneration) for failure to achieve the value-based goals
    • Value-based arrangements exception regardless of the level of risk undertaken that permits both monetary and non-monetary remuneration between the parties
  2. Cybersecurity Exception: CMS finalized a new exception that permits the donation to physicians of cybersecurity hardware, software, and services that are necessary and used to implement, maintain, or reestablish cybersecurity. Unlike the existing Stark exception for electronic health records, there is no requirement for the physicians to share in the cost of such hardware or software.
  3. Limited Remuneration Exception: CMS finalized a new exception that permits limited remuneration (not more than $5,000 per calendar year) to a physician including instances where the amount or formula for calculating the remuneration is not set in advance.
  4. Clarification of Commercial Reasonableness, Volume, or Value Standard and Fair Market Value Requirements: CMS’s final rule clarifies these three requirements that are found in most of the Stark exceptions. Commercial reasonableness is defined to mean that the arrangement furthers a legitimate business purpose of the parties and is sensible, considering the size, type, scope, and specialty of the parties. It is not based on whether the arrangement is profitable or not. Under the new rule, the amount of compensation will be considered to take into account the volume or value of referrals only when the formula used to calculate compensation includes the volume or value of referrals as a variable that caused compensation to increase or decrease directly with referrals. The new rule further defines fair market value as the value in an arm’s length transaction (between a well-informed buyer and seller that are not in a position to refer to each other) consistent with the general market value of the subject transaction.
  5. Indirect Compensation Arrangement Exception: The modifications to this Stark exception provide that the value-based arrangements exceptions will protect a physician’s referrals to the entity when an indirect compensation arrangement includes a value-based arrangement to which the physician is a party.
  6. Direct Referrals: CMS added the specific conditions required under the existing special rule for directed referrals (that require patient preference, insurer determinations, and the patient’s best medical interest to override any requirement to refer to a specific provider) to the following Stark exceptions: academic medical centers, bona fide employment arrangements, personal services arrangements, physician incentive plans, group practice arrangements with a hospital, fair market value compensation, and indirect compensation arrangements.
  7. Clarification of Set in Advance Requirement: CMS modified the definition of set in advance used in many Stark exceptions to allow modification of compensation during the term of an arrangement (including in the first year) if the modified compensation is not based on the volume or value of referrals. The modification (or formula) must be set forth in writing prior to the furnishing of services but need not remain in place for a year. There is no limit on the number of times that compensation may be modified.
  8. Group Practice Special Rule for Profit Shares and Productivity Bonuses: CMS modified the special rule for profit shares and productivity bonuses to provide that distribution of profits from designated health services directly attributable to a physician’s participation in a value-based arrangement are deemed not to take into account the volume or value of the physician’s referrals, thereby enabling physicians in a group practice to be rewarded for their participation in a value-based arrangement.
  9. Electronic Health Records: CMS modified the Stark EHR exception to allow donations of cybersecurity software and services, to remove the December 31, 2021, sunset provision, to remove the requirement that donors ensure they are not replacing equivalent EHR technology already owned by physicians, and to allow the physicians to pay their portion of the EHR at reasonable intervals (as opposed to upfront).

New and Modified Anti-Kickback Statute Safe Harbors

  1. Value-Based Arrangement Exceptions: OIG finalized three new safe harbors for remuneration exchanged between eligible participants in a value-based arrangement that fosters better coordinated and managed patient care. The three value-based safe harbors are similar in some respects but not identical to the Stark exceptions and include:
    • Care coordination arrangements to improve quality, health outcomes, and efficiency that does not require the participants to take on risk but protects only in-kind remuneration
    • Value-based arrangements with substantial downside financial risk (at least 5%)
    • Value-based arrangements with full financial risk for the cost of all items or services covered by a payor for each patient in the target population for a term of one year
  2. Patient Engagement and Support Safe Harbor: OIG finalized a new safe harbor for certain tools and supports furnished to patients to improve quality, health, outcomes, and efficiency.
  3. CMS Sponsored Models: OIG finalized new safe harbor for certain remuneration provided in connection with a CMS-sponsored model, which reduces the need for separate and distinct fraud and abuse waivers for new CMS-sponsored models.
  4. Cybersecurity Technology and Services: OIG finalized a new safe harbor for donations of cybersecurity technology and services essentially the same as the Stark Cybersecurity Exception described above.
  5. Electronic Health Records Items and Services: OIG modified the safe harbor for electronic health records items and services to allow donations of certain related cybersecurity technology to update provisions regarding interoperability, and to remove the December 31, 2021, sunset date.
  6. Outcomes-Based Payments and Part-Time Arrangements: The final rule modifies the AKS safe harbor for personal services and management contracts to add flexibility for certain clinical outcomes-based payments and to eliminate the requirement that part-time arrangements have a schedule of services specifically set out in the agreement.
  7. Warranties: OIG modified the safe harbor for warranties to revise the definition of warranty and provide protection for bundled warranties for one or more items and related services provided they are paid for under the same payment.
  8. Local Transportation: OIG modified the AKS safe harbor for local transportation to expand and modify mileage limits for rural areas (to 75 miles) and for transportation for patients discharged from an inpatient facility or released from a hospital after being placed in observation status for at least 24 hours. Ridesharing arrangements are also permissible under this safe harbor.
  9. Accountable Care Organization (ACO) Beneficiary Incentive Programs: The final rule codifies the statutory exception to the definition of remuneration under the AKS related to ACO Beneficiary Incentive Programs for the Medicare Shared Savings Program to allow incentive payments made by an ACO to a beneficiary.
  10. Telehealth for In-Home Dialysis: OIG amended the definition of remuneration in the Beneficiary Inducements Civil Money Penalties statute to incorporate a new statutory exception to the prohibition on beneficiary inducements for “telehealth technologies” furnished to certain in-home dialysis patients.

We will provide more detailed descriptions of some of these new Stark exceptions and AKS safe harbors in future blog posts. If you have any questions concerning these final regulations or any related health care matters, please contact me at