On November 20, 2020, the Department of Health and Human Services (HHS), Office of Inspector General (OIG), and the Centers for Medicare and Medicaid Services (CMS) finalized three rules making historic changes to three of the most significant federal health care fraud and abuse laws – the Anti-Kickback Statute, Beneficiary Inducement Civil Monetary Penalty, and Physician Self-Referral Law (or “Stark Law”). The final rules, most of which are effective on January 19, 2021 (with certain exceptions), create important new flexibilities, including several new safe harbors and exceptions for financial arrangements related to value-based care arrangements. However, CMS’s revisions may create new challenges for healthcare providers as well, due to the complex requirements of the new exceptions, modifications to longstanding interpretations of law, and voluminous new commentary addressing the legal risk of many common arrangements.

Polsinelli attorneys provide their initial reaction to the new rules here, but will address several aspects of the final rules in more detail in the near future. 

The sweeping rulemaking covers a variety of topics, including the highlights listed below. Because of the breadth of this rulemaking, Polsinelli will be producing additional materials exploring key implications of the three final rules more closely in the coming days. At a high level, the rulemaking has the following implications:

• Three new Anti-Kickback Statute safe harbors and a new Stark Law exception covering value-based care arrangements. The safe harbors cover in-kind remuneration under care coordination arrangements (including those without downside risk) and value-based arrangements with substantial downside risk, and both in-kind and monetary remuneration under models involving full financial risk. Certain kinds of entities (including PBMs, labs, and DMEPOS suppliers) are expressly ineligible for the new Anti-Kickback Statute safe harbors. The Stark Law exception offers three options for full financial risk arrangements, meaningful downside risk for physicians, and value-based arrangements (including without risk). In general, the new exceptions and safe harbors protect a “value-based arrangement” between “value-based parties” to a “value-based enterprise.” The specific requirements of the applicable safe harbors and exceptions vary based on the degree of risk undertaken by the parties. While the final rule will provide protection for certain “upside only” arrangements, the requirements to protect such models are complex.

• Landmark commentary on the Stark Law “group practice” definition, imposing new limits on profit distribution methodologies based on ancillary service category. These changes may require multispecialty physician groups to review and update their compensation plans.

• Ending the use of the Anti-Kickback Statute safe harbor for rebates from pharmaceutical manufacturers to Medicare Part D plans, but adding new safe harbors for certain point of sale reductions in drug prices and certain fixed fees paid by manufacturers to pharmacy benefit managers (PBMs).

• Technical changes to many of the core concepts under the Stark Law. These include new provisions to address temporary or inadvertent noncompliance with the Stark Law, including a new exception for limited remuneration up to $5,000 per year, a 90-day grace period to put arrangements in writing, increased flexibility to demonstrate that compensation is “set in advance,” and approval of the use of electronic signatures if permitted under federal or state law   CMS also revised interpretations of many Stark Law concepts, including new definitions of “commercially reasonable,” “fair market value,” “volume or value of referrals,” “designated health services,” and the “period of disallowance.”

• New Anti-Kickback Statute safe harbors for outcomes-based payments, patient engagement and support tools for participants in a value-based enterprise, arrangements under CMS-sponsored alternative payment models, and patient incentives under the Medicare Shared Savings Program. The final rule also changes the existing Anti-Kickback Statute safe harbors for local transportation, personal service arrangements and warranties.

• The new “patient engagement” safe harbor also creates broad new flexibility under the beneficiary inducement CMP because arrangements that fit an Anti-Kickback Statute safe harbor are also excepted under this CMP. The rule also creates a new beneficiary inducement CMP exception for telehealth technologies provided to in-home dialysis patients.

• A new Anti-Kickback Statute safe harbor and Stark Law exception for donations of cybersecurity technology and modifications to the safe harbor and exception for donations of electronic health record technology (including provisions to align “interoperability” provisions with the Cures Act and elimination of the “sunset” rules).

• Modifications to Stark Law rules around contract administration, including an explicit statement that the “isolated transactions” exception may be used to protect legitimate settlements of bona fide disputes involving otherwise-compliant arrangements, and a 90-day grace period to correct administrative or clerical noncompliance following the termination or expiration of an arrangement.

• Revisions designed to expand the scope of many Stark Law exceptions, including by broadening the scope of the exception for “payments by a physician” and allowing use of the short-term “fair market value” exception to cover rentals of office space.

The new rules are complex and will have important implications for any entity regulated under these laws. While the rules largely track the proposals issued by HHS and CMS in 2019, they differ in certain important ways. For example, HHS did not finalize some of its proposed administrative requirements to use the Anti-Kickback Statute safe harbors and CMS did not finalize proposals that would have treated certain fixed-rate compensation as “taking into account the volume or value of referrals.”  Polsinelli will produce additional summaries reviewing implications of these rules for particular providers in the near future.