October 20, 2019

October 18, 2019

Subscribe to Latest Legal News and Analysis

CMS and OIG Propose Regulatory Changes Impacting the Scope of the Stark Law and the Federal Health Care Program Anti-Kickback Statute

On October 9, 2019, the Department of Health and Human Services (“HHS”) Centers for Medicare and Medicaid Services (“CMS”) and Office of Inspector General (“OIG”) released proposed rules in conjunction with HHS’ “Regulatory Sprint to Coordinated Care.” The Regulatory Sprint to Coordinated Care “aims to remove potential regulatory barriers to care coordination and value-based care created by four key Federal health care laws and associated regulations: (1) the physician self-referral law [(“Stark Law”)]; (2) the anti-kickback statute [(“AKS”)]; the Health Insurance Portability and Accountability Act of 1996 [(“HIPAA”)]; and (4) the rules… related to opioid and substance use disorder treatment.”

CMS’ release (“CMS Proposed Rule”) proposes changes to the Stark Law regulations. The CMS Proposed Rule aims “to alleviate the undue impact of the physician self-referral statute and regulations on parties that participate in alternative payment models and other novel financial arrangements and to facilitate care coordination among such parties” with new exceptions for value-based compensation arrangements between or among physicians, providers, and suppliers that “satisfy specified requirements based on the characteristics of the arrangement and the level of financial risk undertaken by the parties to the arrangement or the value-based enterprise of which they are participants.”

The CMS Proposed Rule also contains more general proposals that “seek to balance genuine program integrity concerns against the considerable burden of the physician self-referral law’s billing and claims submission prohibitions by reassessing the appropriate scope of the statute’s reach.” For instance, CMS proposes to revise the definition of “fair market value” to “eliminate the connection to the volume or value standard” and add a definition of “commercially reasonable” to mean “that the particular arrangement furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangements.” In connection with the latter proposal, CMS proposes that “[a]n arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.”

In addition, the CMS Proposed Rule would create new exceptions for “nonabusive business practices,” including arrangements under which a physician receives limited remuneration and donations of cybersecurity technology and related services. It would also amend the existing exception for the donation of electronic health record (“EHR”) items and services, including by removing the sunset provision. CMS also specifically requested comments about price transparency in the context of the Stark Law, including whether to require cost-of-care information at the point of referrals.

The proposed rule from the OIG (“OIG Proposed Rule”) proposes regulatory changes impacting the scope of the AKS and the Civil Monetary Penalties law. The OIG Proposed Rule would add a number of safe harbor protections, including for coordinated care and associated value-based arrangements between or among clinicians, providers, and suppliers. These would include safe harbors for: (1) care coordination arrangements aimed at improving quality and outcomes; (2) value-based arrangements with substantial downside financial risk; and (3) value-based arrangements with full financial risk. The OIG Proposed Rule would also add a safe harbor for beneficiary incentives under the Medicare Shared Savings Program and, like the CMS Proposed Rule, for donations of cybersecurity technology.

In addition to new safe harbors, the OIG Proposed Rule would also amend the existing safe harbors for EHR arrangements, warranties, local transportation, and personal services and management contracts. The OIG’s focus in the rulemaking is on ensuring protected arrangements “promote coordinated patient care and foster improved quality, better health outcomes, and improved efficiency,” and “would not be misused to perpetrate fraud and abuse.”

The proposed changes to these regulations could signal broad reform in not only the application but also the enforcement of federal fraud and abuse laws, with wide-ranging implications for the types of arrangements that may be permissible for health care industry participants.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

TRENDING LEGAL ANALYSIS


About this Author

Partner

Mr. Paddock's practice primarily involves healthcare fraud and abuse matters, particularly those relating to civil False Claims Act, physician self-referral (Stark Law), and anti-kickback issues. He often advises clients on compliance and transactional matters, the conduct of internal investigations related to potential fraud and abuse issues, and responding to and defending against government anti-fraud and abuse enforcement efforts and regulatory inquiries, including qui tam and government allegations of False Claims Act violations. He is an active member of...

202-747-1954
Kathleen Stratton, Sheppard Mullin Law Firm, Washington DC, Corporate Law Attorney
Senior Counsel

Kathleen M. Stratton is Special Counsel in the Corporate Practice Group in the firm’s Washington D.C. office.

Areas of Practice

Kathleen Stratton represents health care industry clients in a range of matters focusing predominantly on regulatory compliance, licensure, certification, and operational issues facing a vast array of provider types. Over the past 30 years, her provider clients have included hospitals, specialty pharmacies, ambulatory surgery centers, durable medical equipment suppliers, skilled nursing facilities, primary care clinics, individual physicians and physician group practices. Representing such a wide variety of health care providers, Ms. Stratton has had the opportunity to counsel her clients in numerous matters providers face every day. She assists providers in defending against False Claims Act and other government investigations, advises them on issues involving health care fraud and abuse laws, and is often integrally involved in the implementation and monitoring of corporate compliance programs. Ms. Stratton has had the unique experience of serving as an IRO for a pharmaceutical company subject to a corporate integrity agreement. Finally, Ms. Stratton has significant experience in the specialty area of certificate of need law.

202-747-1956
Associate

Ms. Kraus focuses her practice on representing healthcare entities in regulatory compliance matters.  Ms. Kraus advises clients on compliance with federal and state fraud and abuse laws, assists clients in responding to government investigations, and represents clients in False Claims Act litigation.  Ms. Kraus also assists clients with regulatory due diligence in transactional matters, and through advocacy with federal and state regulators, and leverages her background in health policy to help clients maximize opportunities in the changing healthcare landscape...

202-747-2645
Theresa E. Thompson, Sheppard Mullin Law Firm, Washington DC, Corporate Law Attorney
Associate

Theresa E. Thompson is an associate in the Corporate and Securities Practice Group in the firm's Washington, D.C. office.

Areas of Practice

Ms. Thompson's practice focuses on such areas as health care fraud and abuse, particularly in matters relating to the civil False Claims Act, physician self-referral (Stark law), and anti-kickback issues, as well as telehealth and telemedicine. She has experience in government investigations, litigation, and regulatory compliance, including in response to government...

202-747-3217