Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

Highlighting the US Department of Health and Human Services’ (HHS) efforts to transform the US healthcare system to a value-based model, the Office of the Inspector General (OIG) and the Centers for Medicare and Medicaid Services (CMS) have issued two proposed rules that seek to alter the landscape of healthcare program integrity and fraud and abuse regulation, as part of what HHS calls the “Regulatory Sprint to Coordinated Care Initiative.”

The HHS Regulatory Sprint identifies four lanes to better coordinate care:

  • Improving a patient’s ability to understand his/her treatment plans and be empowered to make decisions
  • Increasing providers’ alignment on end-to-end treatment
  • Providing incentives for providers to coordinate and collaborate care with their patients
  • Encouraging information sharing among providers, facilities, and other stakeholders in a manner that facilitates efficient care while preserving and protecting patient access to data

In light of the overlap between the Stark Law and the Anti-Kickback Statute (AKS), CMS and OIG coordinated the release of these proposed rules. The OIG’s proposed rule, however, creates its proposed safe harbors for value-based arrangements that are more restrictive than the CMS proposed safe harbors. The OIG explicitly recognized this difference, noting that the intent was to create a back-stop to any fraud and abuse issues that may arise. So, while these rules are intended to be read together, the differences between the two rules is likely to limit the agencies’ efforts to provide a cohesive set of regulations.

Comments to each proposed rule are due 75 days from the date of publication in the Federal Register, which we anticipate to be in the next week.

We will provide more in-depth analysis related to each rule, but several notable proposals stand out in both.

OIG Proposed Rule on Anti-Kickback Statute and Civil Monetary Penalty Changes

  • New safe harbors for participants in “value-based arrangements” including (1) care coordination arrangements, (2) value-based arrangements with substantial downside financial risk, and (3) value-based arrangements with full financial risk; these safe harbors will to varying degrees protect the exchange of money and in-kind remuneration between parties to value-based arrangements
  • A new safe harbor to protect the provision of tools and supports for patient engagement
  • A new safe harbor to protect the donation of cybersecurity technologies and services related to those technologies
  • Modifications to the existing safe harbor for electronic health records to reflect changes to requirements for interoperability
  • Expanding the “personal services” safe harbor for outcomes-based payments and part-time arrangements
  • Expanding the recently created safe harbor for local transportation to allow for the transportation of discharged patients and increase the mileage limits for rural areas
  • Expanding permitted beneficiary inducements to telehealth technologies provided to in-home dialysis patients, as required by the Bipartisan Budget Act of 2018

The OIG proposal is a step forward in promoting efficiency and innovation in the healthcare sector by protecting outcomes-based exchanges of remuneration, either as a reward or a penalty for outcomes-based care. The OIG proposal complements CMS’s efforts to link payment to outcomes through the Merit-based Incentive Payment System (MIPS) and the Quality Reporting Program (QRP). Both proposed rules are intended to structurally allow incentives not just to the care providers but to the patients to manage their care. Patients are now on the team and may be allowed incentives for participating in their own care. However, it remains to be seen how the healthcare community might structure certain arrangements once these additional protections are in place. Furthermore, OIG is clear that these proposed rules, if finalized, will only apply prospectively. Consequently, arrangements that may have met the proposed safe harbor requirements before the safe harbors are finalized may not be protected, though as a practical reality those arrangements likely would pose a low risk of AKS violations.

CMS Rule on Stark Law Changes

  • New definitions for “commercial reasonableness” and “isolated financial transactions” and a revised definition for “fair market value.”
  • A new regulatory exception, along with corresponding definitions, for compensation arrangements that have certain levels of financial risk to the parties and other certain characteristics of a value-based arrangement. This exception is further broken down into three parts. The first provides for an exception for value-based enterprises that have assumed full financial risk from a payor for patient care services for a target patient population. The second is for those value-based arrangements for which a physician has “meaningful” downside financial risk for failure to achieve the value-based purposes of the arrangement. And finally, the third provides an exception to any value-based arrangement (regardless of downside risk), if the arrangement satisfies certain requirements.
  • CMS continues to make clear its concern, even in encouraging value-based arrangements, of risks of “stinting on care” (underutilization), “cherry-picking” or “lemon-dropping” patients, or falsifying data used to verify outcomes. OIG echoed those same concerns in its proposed rule.
  • Although under the “value-based” radar, CMS also proposes an exception for limited remuneration to a physician not exceeding $3,500, which may ultimately be the most useful of all of the Stark Law rule’s proposals.

The CMS rule on value-based arrangements clearly reflects a gradient from full risk-bearing arrangements to arrangements with little or no downside risk that still include value as a basis for payment. CMS is essentially creating “mini–Medicare Advantage” programs where the agency will be hands off for fraud and abuse purposes if the enterprise is fully capitated. It will be incumbent on the healthcare community – in particular, health systems that have a strong physician arm—to organize around these rule changes to enhance not only patient care, but their own value relative to their competitors.

As noted above, Morgan Lewis is reviewing these rules more fully and will provide additional analyses on each rule in the coming days. Please join us for our upcoming Fast Break on October 30, 2019, where Al Shay and Donna Clark will discuss some of the changes coming out of the Stark Law proposed rule.