October 20, 2019

October 18, 2019

Subscribe to Latest Legal News and Analysis

HHS Proposes Substantial Changes to Stark Law and Anti-Kickback Statute Regulations

The Department of Health & Human Services’ (HHS) proposed changes to the Stark Law, the Anti-Kickback Statute, and the Civil Monetary Penalty Law, released today as part of the Regulatory Sprint to Coordinated Care, would represent some of the most significant changes to these laws in the last decade. This high-level overview addresses noteworthy changes and next steps as the healthcare industry continues to navigate the transition towards a value-based healthcare delivery system. 

In Depth


On October 9, 2019, the US Department of Health and Human Services (HHS) published proposed changes to the physician self-referral law (Stark Law) (Stark Proposed Rule) and the Anti-Kickback Statute (AKS) and the Beneficiary Inducement Civil Monetary Penalty Law (CMPL) (AKS Proposed Rule).

The proposed rules represent some of the most significant potential changes to these laws in the last decade. HHS Deputy Secretary Eric Hargan said that they “would be a historic reform of how healthcare is regulated in America.” This On the Subject provides a high-level overview of key provisions in the proposed rules. 

The “Sprint”

The Stark Law and AKS Proposed Rules have been promulgated as part of HHS’s “Regulatory Sprint to Coordinated Care,” which was launched in 2018 with the goal of reducing regulatory burden and incentivizing coordinated care. As part of this initiative, the Centers for Medicare and Medicaid Services (CMS) and the HHS Office of Inspector General (OIG) began scrutinizing a variety of long-standing regulatory requirements and prohibitions to determine whether they unnecessarily hinder the innovative arrangements that policymakers are otherwise hoping to see develop. The agencies took the step of formally seeking public input on this topic by issuing requests for information (RFIs) in June and August 2018. 

The Proposals

The Proposed Rules reflect a coordinated effort between CMS and OIG to address various challenges to the transition to value-based care. Both agencies clearly recognize that the two laws often operate in tandem, but they also emphasize that they are distinct and separate enforcement vehicles. Thus, in some instances OIG’s proposals may be more restrictive that CMS’s, and both agencies state that the AKS may act as a “backstop” to protect against arrangements that meet a Stark Law exception but are nonetheless considered abusive. CMS also proposes to remove compliance with the AKS as a requirement from several Stark Law exceptions, further underscoring the laws’ separateness.

The Stark Law Proposed Rule includes new exceptions designed to enable value-based care arrangements and proposes a long list of additional changes to the Stark Law regulations intended to address many of the most challenging aspects of Stark Law compliance. Among the most noteworthy proposals are the following:

  • New Compensation Exceptions
    • Value-Based Care Exceptions. CMS proposes new exceptions for value-based care arrangements that satisfy a series of requirements, depending on the level of financial risk undertaken by the parties to the arrangement.
    • New Exception for Limited Remuneration to a Physician. CMS proposes a new exception to protect compensation not exceeding an aggregate of $3,500 per calendar year if certain conditions are met.
    • New Exception for Cybersecurity Technology and Related Services. CMS proposes a new exception to protect arrangements involving the donation of certain cybersecurity technology and related services.
  • New Defined Terms and Regulatory Modifications
    • New or Modified Definitions for Key Stark Law Terms. CMS proposes new definitions of key concepts, including commercial reasonableness, the volume/value standard and fair market value, in an effort to establish clear bright-line rules. CMS also proposes to modify the definition of designated health service (DHS) to make clear that an inpatient hospital service is only DHS if the furnishing of the service affects the amount of Medicare’s payment to the hospital under the Inpatient Prospective Payment System. This change has the potential to dramatically reduce the number of hospital claims that may be tainted by a prohibited financial relationship between a hospital and a physician where the physician is not the admitting physician.
    • Clarifications to “Group Practice” Requirements. CMS proposes clarifications to the regulations defining a “group practice” for purposes of the Stark Law, including revisions that make clear that group practices may not use DHS-specific pods for purposes of distributing DHS profits.
    • Modifications to Various Compensation Exceptions. CMS proposes a series of modifications to various compensation exceptions, including the space lease exception, recruitment exception, fair market value exception and others. Most, though not all, of these modifications appear intended to liberalize their requirements.
    • Temporary Non-Compliance. CMS proposes to expand the 90-day grace period for certain writing requirements.
    • Period of Disallowance. CMS proposes to delete the goal posts for when an entity would know the period of disallowance has ended.
    • Clarification for Electronic Health Records Items and Services. CMS proposes changes to the exception, including modifying the physician contribution requirement and permitting certain donations of replacement technology.

The AKS Proposed Rule also includes many important proposals that would modify existing AKS safe harbors, create new AKS safe harbors and create new CMPL exceptions. We have identified those proposals below along with brief descriptions of some of the changes they would involve:

  • New AKS Safe Harbors
    • Value-Based Arrangements. OIG proposes to create three new safe harbors to protect certain remuneration exchanges among certain individuals and entities in a value-based arrangement. The three new safe harbors would vary in terms of the type of remuneration that could be provided, the level of financial risk the parties assume and the types of “safeguards” OIG proposes to include.
    • Patient Engagement. OIG proposes to protect furnishing certain tools and support to patients by certain individuals and entities to improve quality, health outcomes and efficiency.
    • CMS-Sponsored Models. OIG proposes to protect certain remuneration provided in connection with certain models sponsored by CMS, thereby reducing the need for HHS to issue individualized fraud and abuse waivers for each model.
    • Cybersecurity Technology and Services. OIG proposes to create standalone protection for donations of cybersecurity technology and services.
  • Modifications to Existing AKS Safe Harbors
    • Personal Services and Management Contracts Safe Harbor. OIG proposes to add greater flexibility for part-time and outcomes-based arrangements by, among other things, removing the part-time schedule requirement and the aggregate compensation set-in-advance requirement, which resulted in this safe harbor having limited practical use.
    • Local Transportation. OIG proposes to expand and modify mileage limits applicable to rural areas and for transportation related to patients discharged from inpatient facilities.
    • Electronic Health Records Items and Services Safe Harbor. OIG proposes to extend protection for certain related cybersecurity technology, update the interoperability provisions and make the safe harbor permanent by removing the “sunset” date.
    • Warranties. OIG proposes to protect bundled warranties for one or more items and related services.
  • New CMPL Exceptions
    • Accountable Care Organization (ACO) Beneficiary Incentive Programs. OIG would codify the Bipartisan Budget Act of 2018 statutory exception for ACO Beneficiary Incentive programs for the Medicare Shared Savings Program.
    • Telehealth for In-Home Dialysis. OIG proposes to interpret and incorporate the Bipartisan Budget Act of 2018 statutory exception for furnishing telehealth technologies to certain in-home dialysis patients.

Next Steps

If finalized, the changes proposed in these rules could present significant opportunities for new arrangements, but may also necessitate revisions to current arrangements involving healthcare providers, others involved in the healthcare industry, and patients.

The public now has the opportunity to provide feedback to HHS on the proposed changes to help inform any future final rules. The proposed rules state that comments for each will be due 75 days from the date of publication in the Federal Register (which is currently scheduled for October 17, 2019). All stakeholders should consider commenting, as these proposed rules have the potential to fundamentally alter the health care landscape by allowing new and different types of arrangements. 

© 2019 McDermott Will & Emery

TRENDING LEGAL ANALYSIS


About this Author

James A. Cannatti III* practices at the intersection of today's most pertinent health care issues, including digital health, health IT policy, and fraud and abuse, including Anti-Kickback Statute/Stark Law matters. With more than 10 years of experience in the US Department of Health & Human Services’ (HHS) Office of Inspector General (OIG), most recently as Senior Counselor for Health Information Technology, James is well-attuned to the regulatory issues impacting the rapidly evolving digital health landscape, including:

  • Information...

202-756-8866
Tony Maida Health Care Attorney McDermott WIll Law Firm
Partner

Tony Maida is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s New York office.  Tony has extensive experience in health care fraud and abuse and compliance issues, including the federal Anti-Kickback and Physician Self-Referral/Stark laws, false claims and overpayments, and government investigations.    He works closely with our health and white collar teams on criminal, civil, and administrative investigations and counseling clients on corporate transactions and compliance programs.

Tony previously served as a senior official in the Office of Counsel to the Inspector General at the United States Department of Health and Human Services, where he worked for nine years.  As Deputy Chief of the Administrative and Civil Remedies Branch, Tony led a team of attorneys representing the agency on False Claims Act and Civil Monetary Penalty Law cases, including conducting investigations and negotiating settlements and Corporate Integrity Agreements in some of the largest settlements obtained by the United States.  He participated in defending the OIG in numerous exclusion appeals, including appeals pursued by high-level corporate executives.  

1 212 547 5492
Partner

Daniel H. Melvin is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Chicago office.  Daniel focuses his practice on counseling clients on Federal health care program fraud and abuse, Stark law, and Medicare reimbursement issues. 

312-984-6935
Joan Polacheck, Health Care industry Lawyer, McDermott Will Emery, Chicago Law Firm
Partner

Joan Polacheck is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. She represents a broad range of health care industry clients, including hospitals, suppliers, and drug and device companies.

312-984-7556
Monica Wallace, regulatory counseling lawyer, administrative attorney, McDermott Will Emery, law firm
Associate

Monica A. Wallace is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office.  She focuses her practice on complex regulatory and transactional counseling to health care organizations such as health systems, hospitals, physician groups, integrated delivery systems, durable medical equipment prosthetics and orthotics suppliers, home health agencies, and other health care providers. Monica’s regulatory practice focuses on the Anti-Kickback and Stark laws; Medicare and Medicaid reimbursement and billing; legal assessments and compliance...

312-984-7757