The Wait is Over: The Stark Law and Anti-Kickback Statute Rules are Finalized

The much anticipated regulatory updates to the Physician Self-Referral Law (or “Stark”) and the Anti-Kickback Statute were published in the Federal Register on Tuesday, December 2, 2020. These final rules come about 14 months after the U.S. Department of Health and Human Services (“HHS”) and its sub-agencies proposed sweeping updates to both fraud and abuse programs. Most provisions of the final rules are effective January 19, 2021. However, the changes to group practice profit compensation methodologies are not effective until January 1, 2022.

HHS maintained its approach from the proposed rules to add flexibility to these programs. The Stark regulations saw significant updates and clarifications to existing concepts. Additionally, both rules added entirely new concepts. In certain instances, the Stark and the Anti-Kickback Statute regulations developed similar, though not identical, changes. This is most notable in how the regulatory schemes approached the Stark Law exceptions and Anti-Kickback safe harbors for value-based care arrangements. It is obvious that the sub-regulatory agencies worked together in developing these concepts, but differed on certain approaches based on the unique aspects of each program.

As anticipated, these changes will reinvent the way providers must examine potential relationships with referral sources. Below we highlight some of the most significant changes in the rules. However, the complexities of these rules and their interplay, makes a summary of the updates too dense for a single article. For that reason, over the next several weeks, Baird Holm’s Health Care Section will be publishing a series of in-depth articles targeted at specific portions of these new rules. The articles will cover the following topics:

• The “Big Three” – Changes to the Fundamental Terminology Used in the Stark Law

In this update, the Centers for Medicare and Medicaid Services (“CMS”) finalized one of the most discussed proposed change: clarifying the definitions of “commercially reasonable,” “fair market value,” and the “volume or value of referrals” concepts. CMS re-designed the definition of fair market value with specificity around a variety of the types of financial arrangements. It also codified a definition for commercially reasonable and outlined when compensation would take into account the volume or value of referrals.

• Clarification of Other Stark Law Concepts

Among several other updates, CMS clarified concepts related to technical noncompliance with the Stark Law, including what constitutes the “set in advance” standard, and how compensation can be modified on a prospective basis during the term of an arrangement. CMS also updated the writing and signature requirements, permitting up to 90 days to obtain required writing(s) and gather signatures.  

• Revised Exceptions and Safe Harbors

In two revised Stark Law exceptions, CMS permitted significantly more flexibility to use previously limited exceptions. Both the “Payments by a Physician” exception and the “Fair Market Value Compensation” exception were expanded to provide protection for arrangements previously excluded. The Payments by a Physician exception can now be relied upon even when an arrangement falls under a regulatory exception, though it cannot be used for arrangements addressed by another statutory exception. The Fair Market Value exception can now be used for space lease arrangements.

Notably, the Anti-Kickback Statute’s “Personal Services and Management Contracts” safe harbor was updated to remove the requirement for aggregate compensation to be set in advance. Now only requiring that the methodology be established.

We also saw a revision to both the exception and safe harbor related to Electronic Health Records, among other exception and safe harbor updates.

• New Value-Based Arrangements Exceptions and Safe Harbors

HHS introduced entirely new concepts into the fraud and abuse rules with the inclusion of multiple value-based arrangement exceptions. The various new exceptions and safe harbors were developed recognizing that an individual’s or entity’s entry into value-based reimbursement arrangements will not be one-size-fits-all. HHS developed an approach that permits providers to assume a varying amount of risk to its reimbursement. Its approach acknowledged that, as a provider’s downside risk increases, an arrangement’s need for regulatory protections decrease.                          

However, these financial arrangements are not fraud-proof. HHS also acknowledged that, regardless of a provider’s financial risk, certain safeguards are necessary. As such, certain consistent safeguards are required across all exceptions and safe harbors.

• Other New Exceptions and Safe Harbors

We also saw other new exceptions and safe harbors. CMS added a new “Limited Remuneration to a Physician” exception, which would permit annual aggregate payments to a physician of up to $5,000 without a writing requirement or meeting the set in advance standard.

The Office of the Inspector General (“OIG”) added additional safe harbors related to the new approach to value-based care payment models. The “Outcomes-Based Payment Arrangements” approach is added to the previously-existing “Personal Services and Management Contracts” safe harbor, though it stands with its own requirements. It would except payments made for reaching outcome measures based on a pre-established formula. Additionally, the new “ACO Beneficiary Incentive Program” would except any payments made by an ACO to a beneficiary under the Medicare Shared Savings Program.

Both regulatory schemes also developed a new exception/safe harbor which would permit a hospital to provide certain cybersecurity technology or services to referral sources.

• Changes to the Stark Law Rules on Group Practice Compensation Methodologies (This portion of the rule is not effective until January 1, 2022)

CMS attempted to clarify the rules for profit shares and productivity bonuses paid out by physician group practices. The changes to this section are intended to provide physicians with more certainty as to whether compensation structures take into account an individual physician’s referrals.

Additionally, the Stark final rule addressed the move to value-based care and how the current group practice distribution rules could negatively affect an individual physician’s participation in a value-based enterprise. The Stark regulations now permit a physician group practice to distribute profits which are attributable to a physician’s participation in a value-based enterprise to that participating physician. Such profits will be deemed not to be based on the volume or value of the physician’s referrals. 

Again, each of these topics will be discussed further in individual articles. Look for this series to begin soon!