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Volume XII, Number 227


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Health Care Landscape May Be Changing: Proposed Rules Modifying Federal Anti-Kickback and Physician Self-Referral (Stark) Regulations

Whenever two massive proposed regulations are released on similar, but distinct health care laws, it is the right time to evaluate the changes occurring in the relationships and referrals of health care services. On Oct. 9, 2019, the Office of Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS) released two rules with a similar message: providers and plans should focus on innovating and moving more rapidly to value-based models.

With over 100 questions already raised for comment, all impacted stakeholders should evaluate what relationships may change as a result of this movement toward greater risk-sharing and utilization of new models of care. Comments on both rules are due 75 days from the date of publication in the Federal Register (to be determined, but a few days after Dec. 23, 2019).

In outlining these proposed changes, there are nuggets of information where comments may highlight other relevant issues raised.

Changes to the Federal Anti-Kickback Regulations


The proposed rule was issued by the OIG with the Department of Health and Human Services’ (HHS) Regulatory Sprint to Coordinated Care. The rule proposes to prospectively add (after completion of the final rule) certain safe harbor protections for value-based and care coordination arrangements among providers and suppliers. In addition, the rule looks to add a new safe harbor for donations of cybersecurity technology, and amends certain existing safe harbors for electronic health records items and services and personal services and management contracts. Protections are added under the Anti-Kickback statute (AKS) and civil monetary penalty (CMP) laws for programs that promote consumer engagement.

The OIG adhered to the following guiding principles in developing the proposed rule: (1) to allow for beneficial innovations in health care delivery; (2) for the promulgated safe harbors and exceptions to reflect up-to-date understandings in medicine, science, and technology; and (3) to be useful for a range of individuals and entities engaged in the coordination and management of patient care. Thus, the draft regulations seek to strike the right balance between flexibility for innovation and safeguards to protect patients and the integrity of federal health care programs.

Overview of Proposed Changes

Notable changes in the proposed rule include:


Three new safe harbors for certain remuneration (in-kind and monetary) exchanged for participants in value-based arrangements (VBA) that foster care coordination:



Care coordination arrangements to improve quality, health outcomes, and efficiency;


VBAs with substantial downside financial risk; and


VBAs with full financial risk.



A new safe harbor for certain tools and supports furnished under patient engagement, and support arrangements to improve outcomes and efficiencies;


A new safe harbor for certain remuneration provided about a CMS-sponsored model (thereby reducing OIG’s need to issue waivers);


A new safe harbor for donations of cybersecurity technology and services;


Proposed modifications to the existing safe harbor for electronic health records (EHR); adding protection for certain cybersecurity technology as part of EHR;


Proposed modifications to the existing safe harbor for personal services and management contracts for flexibility with outcome-based payments and part-time arrangements;


Proposed modifications to the existing safe harbor for warranties (definition and for one or more related services);


Proposed modifications to the existing safe harbor for local transportation to expand and modify mileage limits for rural areas and transportation for discharged patients; and


Codify the statutory exception to the definition of “remuneration” relating to accountable care organization (ACO) Beneficiary Incentive Programs for the Medicare Shared Savings Program.

The changes to the Civil Monetary Penalty statute include:


Amending the definition of “remuneration” to add a new statutory exception to the prohibition on beneficiary inducements for “telehealth technologies” furnished to certain in-home dialysis patients; and


Clarifying that the new safe harbors would also become exceptions to the beneficiary inducements definition of remuneration.

OIG and HHS are seeking comments and specifically raise certain questions for the health care industry to consider and provide feedback. For example, they specifically want to know if the VBA safe harbors adequately address the identified undesired effects of such arrangements and other unintended consequences to the health care system, if “value” should be defined, if accountable bodies should be required to have more oversight of the VBA (e.g., related to utilization, quality, patient experience, and the privacy, integrity, and security of data), if VBEs should exclude pharmacy benefit managers (PBMs) and pharmacies, the definition for care coordination, and if VBEs should be imposed on to require independence or a duty of loyalty.

Changes to the Physician Self-Referral Regulations (Stark)


Also on Oct. 9, 2019, CMS released the long-awaited proposed amendments to the regulations governing the Ethics in Patient Referrals Act (Stark), 42 U.S.C. 1395nn.

The proposed regulations are designed to address any undue regulatory impact of the physician self-referral law and adopt new exceptions to bolster the ability of physicians to engage in VBAs. The primary focus of the proposed regulations is the concern that because the consequences of noncompliance with the physician self-referral law are so dire, providers, suppliers, and physicians may be discouraged from entering into innovative arrangements that would improve quality outcomes, produce health system efficiencies, and lower costs (or slow the rate of growth). In drafting the proposed changes, CMS notes that Stark was initially designed to combat potential overutilization caused by the referral of patients for services where the physician has a financial interest. A value-based model, however, greatly reduces these concerns by focusing on the value of the care provided while working to disincentive overutilization.

Overview of Proposed Changes

The central focus of the proposed regulations is the exception, to be codified as new section 411.357(aa), for value-based contracting. The proposal sets forth different requirements depending on the level of risk taken by the physician (from a full-risk model to no risk). The exceptions apply only to compensation interests, and apply regardless of whether the arrangement relates to care furnished to Medicare beneficiaries, non-Medicare patients, or a combination of both.

Notable changes in the proposed rule include:


Proposed new definitions that would be included in exceptions for compensation arrangements that satisfy specified requirements based on the arrangement characteristics and level of financial risk. The new exceptions include the following:



Detailed definitions of value-based activity; VBA; value-based enterprise (VBE); value-based purpose; VBE participant; and target patient population are proposed with an application of such definitions to certain exceptions;


Concern is expressed about potentially abusive arrangements between certain types of entities that furnish designated health services; specifically, there is a concern about compensation arrangements between physicians and laboratories or suppliers of durable medical equipment, prosthetics, orthotics, and supplies that may improperly influence or capture referrals without improving the coordination of care. CMS is considering excluding from the definition of VBE laboratories, durable medical equipment (DMEs), pharmaceutical manufacturers, PBMs, wholesalers, and distributors.



Clarification of commercial reasonableness, Fair Market Value, and “volume or value” requirement;


Clarification on group practice requirements, including organizational changes to the group practice bonus and profit share provisions;


An exception for certain arrangements where a physician receives limited remuneration for items or services actually provided by the physician;


An exception for the donation of cybersecurity technology and related services;


An amendment to the existing exceptions relating to EHR items and services, as well as new requirements for interoperability.

As previously noted, the proposed regulations include a significant number of requests for comments from impacted stakeholders. For example, CMS specifically asks for feedback on whether additional interpretation in defining “value-based purpose” is necessary, which persons and entities should qualify as VBE participants, how CMS can best pursue price transparency objectives in the context of the self-referral law (in terms of a value-based care system and otherwise), and whether CMS should limit what it considers to be “remuneration related to the provision of designated health services” to remuneration paid explicitly for a physician’s provision of designated health services to a hospital’s patients.

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume IX, Number 290

About this Author

Mark L. Mattioli Shareholder Health Care & FDA Practice Commercial Litigation Data, Privacy & Cybersecurity Antitrust Litigation & Competition Regulation

Mark L. Mattioli utilizes his twenty plus years of experience in the health care industry to assist wide variety of health care entities including hospitals, physicians, Long Term Care Providers, Home Health, Dialysis, DME, Clinical Labs and insurers in navigating and solving complex issues. He provides regulatory, transactional and compliance guidance in areas such as antitrust, health care reform, managed care contracting, reimbursement, fraud and abuse (Stark and anti-kickback), health information privacy and security medical staff credentialing, licensing, change of ownership, and...

Francis Serbaroli, Greenberg Traurig Law Firm, New York, Healthcare and Litigation Attorney

Francis J. Serbaroli is a shareholder in the Health Care & FDA Practice of Greenberg Traurig's New York office. Frank has three decades of experience in the health care industry. His clients include health insurers and managed care plans; hospitals, nursing homes, clinics, ambulatory surgery centers and home health agencies, clinical laboratories, renal dialysis providers, faculty practice plans, pharmaceutical companies, and medical device and equipment manufacturers. He handles a wide range of corporate, regulatory, compliance, reimbursement, corporate governance,...

Nancy Taylor, Greenberg Traurig Law Firm, Washington DC, Health Care Law Attorney

Nancy Taylor is Co-Chair of the Health Care & FDA Practice and has advised clients on health and FDA related matters for more than two decades. She has broad experience in areas relating to the Affordable Care Act provisions, CMS reimbursement and policy issues relating to providers and plans, and she has done a significant amount of FDA regulatory work. Prior to joining Greenberg Traurig, Nancy served 10 years as Health Policy Director for the Senate Committee on Labor and Human Resources and worked on a number of significant health and FDA laws, including NLEA,...

Somer Hayes Healthcare Lawyer GT Law Firm

Somer Hayes focuses her practice on health care law, including regulatory, transactional, administrative and litigation matters.

Somer has assisted in representing hospitals, physicians, physician groups, and other health care industry clients in a variety of transactional matters, including the formation of joint ventures, the purchase of facilities and other assets, employment agreements, coverage contracts, business associate agreements, medical office leases, and management services agreements. She has knowledge of and experience with...

Tess Meyer Healthcare Lawyer Greenberg Traurig Law Firm

Tess Meyer advises payers, providers, biotech and pharmaceutical companies, large employers, and other health care stakeholders on health care regulatory compliance issues and policy objectives. She conducts complex regulatory and compliance assessments, including matters related to Affordable Care Act compliance, Medicaid and Medicare issues, and market conduct requirements.