Reed Smith Client Alerts

The proposals are finally here (available at Nearly 18 months after the Department of Health and Human Services (HHS) announced its “Regulatory Sprint to Coordinated Care” to remove regulatory barriers to effective care coordination and management, the Centers for Medicare & Medicaid Services (CMS) and the HHS Office of Inspector General (OIG) published the highly anticipated proposed changes to modernize the regulations under the Physician Self-Referral Law (the Stark Law), the federal Anti-Kickback Statute (AKS), and the Civil Monetary Penalties Law (CMP Law). These proposals represent HHS’ most significant effort to date to align the AKS safe harbors, CMP Law, and Stark Law exceptions with a value-based health care delivery system that relies less on volume-based payment models in favor of health care delivery and payment systems focused on paying for quality, outcomes, and efficiencies.

The proposed changes are expansive, encompassing (i) four new AKS safe harbors and three new Stark Law exceptions for value-based arrangements, (ii) a new AKS safe harbor related to patient engagement tools, (iii) a new AKS safe harbor to streamline and standardize protection for CMS payment models tested by the Innovation Center or related to the Medicare Shared Savings Program, (iv) a new AKS safe harbor and Stark Law exception for the donation of cybersecurity technology and services, and (v) a number of changes meant to ease compliance with existing safe harbors and exceptions. And HHS’ work is far from done. Throughout the proposed rulemakings, CMS and OIG solicit comments from stakeholders on alternative frameworks and safeguards that vastly differ from the language of the proposed regulations, while hinting at potential additional rulemaking in this area. As a result, industry participation in this rulemaking is critical to help shape the scope and application of the final rules.

Reed Smith is providing a series of client alerts and teleseminars that focus on analyzing key aspects of the proposals and significant areas for comment. Part One, presented here, focuses on the new value-based arrangement framework proposed by OIG and CMS and the new safe harbors and exceptions that would be available to persons and entities participating in those arrangements. We will discuss these proposed changes further in a teleseminar on October 31, 2019. Part Two will dive into additional CMS proposed changes to the Stark Law regulations, including clarifications to fundamental terminology, with a teleseminar following on November 12, 2019. Finally, given the emphasis on technology to facilitate and establish new value-based arrangements and drive policy initiatives, Part Three will focus on what these proposals mean for digital health arrangements and companies, with a teleseminar following on November 21, 2019. We hope this series will give clients the context needed to consider and submit comments well before the due date, which HHS kindly set for New Year’s Eve (December 31, 2019).

New value-based protections

The proposed rulemakings establish, for the first time, specific regulations aimed at shielding from enforcement beneficial arrangements that facilitate and reward value-based care under the AKS, CMP Law, and Stark Law. This is a significant step toward recognizing how changes to the health care payment and delivery systems have fundamentally altered the fraud and abuse risks that gave rise to the existing safe harbors and exceptions. At the same time, the proposed regulations focus narrowly on arrangements that qualify as precisely defined value-based arrangements, leaving unaddressed many beneficial arrangements for the purchase of products and services.

In general, OIG and CMS coordinated proposals for three new tiered safe harbors and exceptions that offer increasing flexibility with increasing financial risk, and OIG proposed an additional new safe harbor related to patient engagement tools, in the context of value-based arrangements. The proposals incorporate new terminology and definitions. As a threshold matter, to be protected, the value-based arrangements covered by these proposals must be for the provision of at least one value-based activity1 for a target patient population2 that is reasonably designed to achieve a value-based purpose3 and must be between a “value-based enterprise”4 and one of its participants, or between participants in the same value-based enterprise. CMS and OIG propose coordinated definitions for each of these terms, but in short:

 Two or more persons or entities must collaborate, and be accountable, to achieve improved care coordination, quality, or efficiency for a defined patient population by taking, or refraining from taking, an action tailored to that improvement.