exclusive forum for the nation’s healthcare leaders to ...€¦ ·

1

October 26, 2018

By electronic submission via www.regulations.gov

The Honorable Daniel R. Levinson

Office of the Inspector General

Department of Health and Human Services

Washington, DC 20201

Attn: OIG–0803–N

Re: OIG–0803–N Request for Information Regarding the Anti-Kickback Statute and

Beneficiary Inducements CMP

Dear Mr. Levinson:

The Healthcare Leadership Council (HLC) thanks the Office of the Inspector General (OIG) for

the opportunity to provide comments in response to the August 27, 2018 Request for Information

(RFI) regarding the anti-kickback statute and beneficiary inducements civil monetary penalty

(CMP). HLC applauds OIG for soliciting input from healthcare industry stakeholders as it

evaluates the impact the anti-kickback statute and beneficiary inducements CMP have on care

coordination and works to “transform the health care system into one that better pays for value.”1

HLC is a coalition of chief executives from all disciplines within American healthcare and the

exclusive forum for the nation’s healthcare leaders to jointly develop policies, plans, and programs

to achieve their vision of a 21st century system that makes affordable, high-quality care accessible

to all Americans. With the move toward a healthcare system based on providing better value, HLC

has convened a broad group of organizations that recognizes the transformational effect of this

shift on the existing legal framework governing U.S. healthcare. In order to better coordinate and

deliver patient care, the legal framework must allow appropriate patient-serving care delivery and

payment models involving broader collaboration among stakeholders in order to accelerate

ongoing improvements in care quality and patient safety while reducing the rate of cost growth.

The Physician Self-Referral (Stark) Law and Federal Anti-Kickback Statute workgroup of HLC

(the “Workgroup”) includes a wide array of hospital, physician, health insurance, medical device,

pharmaceutical, information technology vendor, and supplier organizations.

As the August 2018 RFI notes, the anti-kickback statute was designed to protect patients and the

Federal health care system from “the corrupting influence of remuneration on health care

decisions.”2 This concern arose when fee-for-service was the primary payment model in federal

healthcare programs - a model that rewarded volume and provided little financial incentive for

providers or patients to improve the coordination of care delivery or focus on patient outcomes.

However, as noted in the RFI, the broad reach of the anti-kickback statute may “act as a potential

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October 26, 2018

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impediment to beneficial arrangements that would advance coordinated care”3 in an environment

that is increasingly focused on care coordination and the delivery of value-based care. The need to

modify the fraud and abuse framework in the face of delivery and payment system reform and

changing relationships among healthcare stakeholders was anticipated long before the current and

ongoing transition toward value-based care. As discussed in the RFI, in 1987, Congress responded

to concerns that the broadly-written Federal anti-kickback statute 4 could technically prohibit

innocuous and beneficial arrangements by requiring the OIG to establish “safe harbors” protecting

certain arrangements and payment practices.5 These safe harbors were intended to evolve over

time; Congress gave the Department of Health and Human Services (HHS) authority to create and

modify them to reflect changing business practices and technologies in the health care industry.6

With this mandate, the OIG has enacted numerous safe harbors and modified them to allow for the

“new and changing business relationships among health care providers” that are required to

facilitate the shift from volume to value-based and patient-centered care.7 Emerging arrangements

and ongoing changes in the industry and technology warrant further expansion of the safe harbor

framework in order to “foster high-quality, efficient, patient-centered care.”8 Aligning the fraud

and abuse framework with the current healthcare system is critical to ensure that the system

functions as efficiently and effectively as possible and supports stakeholder innovation and

investment in system-wide improvement. HLC appreciates OIG’s shared commitment to these

goals and willingness to consider modifying the anti-kickback statute safe harbors as necessary in

the changing healthcare payment and delivery environment.

HLC appreciates HHS’ commitment to eliminate obstacles to care coordination and accelerate the

transition to a value-based system through its Regulatory Sprint to Coordinated Care;9 this effort

represents a continued commitment to aligning the fraud and abuse legal framework with new care

delivery and payment models. The OIG continues to proactively engage with stakeholders in order

to identify modifications and additions to the safe harbor regulations that would best support and

promote care coordination and care focused on delivering value. Soliciting meaningful input on

ways to eliminate barriers to achieving an effective value-based system presented in the current

anti-kickback statute safe harbors and the beneficiary inducements CMP is not only in line with

Congress’ mandate to establish safe harbor regulations that reflect the existing payment and

delivery system, but demonstrates a welcome effort by the OIG to consider practical implications

of the current fraud and abuse framework from the perspective of multiple stakeholders across the

healthcare system.

In light of the ongoing shift to value-based care and taking into consideration the demonstrated

interest in revising the anti-kickback statute safe harbors to facilitate this shift, below is a summary

of proposed changes to existing safe harbors, general proposals for new safe harbors, and

recommendations for additional clarification and guidance that are responsive to specific requests

for input raised in the RFI. This summary is organized by RFI-topic proposed change, with

reference to the RFI questions contained therein. We also have included several attachments to

this letter that provide more detail and/or support for our proposals:

• Appendix A: Anti-kickback statute table – lays out major barriers to value-based care and

general proposals to overcome these barriers, as well as existing protections that would

remain to prevent fraud

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• Appendix B: Examples list – provides high-level examples of alternative payment models

and other financial arrangements that promote coordinated and integrated care but may,

for various reasons, implicate the existing fraud and abuse framework.

• Appendix C: White paper – provides detailed discussion of all proposed changes as well

as corollary changes to the Stark Law and background on the fraud and abuse framework.

• Appendix D: HLC’s submitted response to the Centers for Medicare & Medicaid

Services June RFI seeking public input on potential modifications to the Stark Law.

REGULATORY PROPOSALS

Despite the healthcare delivery and payment system’s continued evolution, changes to the fraud

and abuse legal framework lag behind. The anti-kickback statute’s existing safe harbors do not

address many types of possible arrangements among providers, payers, and pharmaceutical and

medical device companies that encourage greater care coordination and improve healthcare quality

and patient outcomes without involving fraudulent or abusive activity. While some safe harbors

could protect certain value-based care models, applying their narrow requirements to new models

of healthcare delivery and payment requires the expenditure of resources (e.g., legal and financial

resources) that may be unavailable to some stakeholders. Furthermore, proceeding with these

arrangements in good faith and with expert legal guidance does not foreclose or mitigate potential

enforcement activities, thus requiring a degree of risk tolerance that many stakeholders do not

possess. The failure to modernize the fraud and abuse legal framework threatens to impede

meaningful progress. Uncertainty surrounding application of the anti-kickback statute provisions

and safe harbors to new care models for which they were not designed may discourage

stakeholders from entering into arrangements that could help achieve better outcomes for patients

and support public policy goals regarding healthcare system transformation. The following

proposals would modernize the anti-kickback statute and safe harbor regulations and eliminate

uncertainty about their potential application to beneficial organizational arrangements.

In reviewing the recommendations below, we wish to emphasize the protections against fraud and

abuse that would remain as part of the fraud and abuse legal framework. While we advocate for

modifications that simplify the regulatory burden imposed by the anti-kickback statute and

regulatory safe harbors and facilitate the transition to a value-based delivery and payment system,

we similarly advocate for a robust defense against potential fraud and abuse that protects patients

and the entire healthcare system. In support of these priorities, Appendix A categorizes all of our

anti-kickback related proposals (including those not referenced in this letter) and specifies the

protections against fraud and abuse in the existing framework that would or should remain in the

event that the proposal is adopted.

PROMOTING CARE COORDINATION AND VALUE-BASED CARE

In Question 1A, the RFI asked for detailed information about potential arrangements the industry

is interested in pursuing that may implicate the anti-kickback statute or beneficiary inducements

CMP.

• We have attached to this letter an Appendix B, which provides examples of some of the

arrangements into which stakeholders may wish to enter, but which may produce

challenges in implementation due to a perceived or real risk of liability under the current

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October 26, 2018

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fraud and abuse framework, specifically the physician-self referral law and the Federal

anti-kickback statute. These examples are organized by stakeholder type and include

sourcing information where available.

• In addition to the examples provided in Appendix B, we generally propose the creation of

a safe harbor(s) for clinically and financially integrated programs that allow all types of

stakeholders to participate, give stakeholders flexibility in meeting those requirements as

applicable, and allow financial savings distribution to support clinical and payment

integration.10 New safe harbors could be created to protect:

o Value-based arrangements, including those involving bundling services, data

collection and analytics, and arrangements with manufacturers to better determine

whether clinical outcomes and cost-savings metrics are met; and

o Risk-sharing arrangements between manufacturers (e.g., pharmaceutical, medical

device) and providers and/or payors that incentivize and reward improvements in

clinical outcomes, care management, and/or reductions in cost.11

Should any of these safe harbors be implemented, the anti-kickback statute would still

prohibit inappropriate inducement of healthcare business. By specifying the approved

activities/initiatives and the necessary value-based criteria and defining appropriate clinical

and/or payment integration, these safe harbors would necessarily exclude any payment

model that inappropriately takes into account volume or value of referrals.

Question 1B asks whether additional safe harbors or modifications to existing safe harbors may be

necessary to protect novel financial arrangements and are of particular relevance to coordinated

care.

• Question 1B specifically identifies electronic health record (EHR) arrangements as a

relevant safe harbor for coordinated care. We propose revising and making permanent the

existing [temporary] safe harbor for donation and financial support of EHR software,

related technologies, and training, as follows:

o Expand the scope of covered technology to encompass a broader range of health

information technology, including:

▪ Technology related to information sharing;

▪ Technology related to cybersecurity;

▪ Cloud-based items and services, practice management and revenue cycle

systems and services, EHR storage, and subscription fees related to the use

and exchange of health information; and

▪ Industry-supported data collection, analytics, and other technology

services as part of the exceptions.

o Remove the requirement that donated technology cannot replace something similar.

This requirement limits the exception to those providers who have not implemented

an EHR system, which by 2021, will likely be an increasingly low percentage of

providers; and

o Make the exception permanent (currently, the exception expires in 2021).

In Question 1E, the RFI asks for examples of possible opportunities where OIG could clarify its

position through guidance as opposed to regulation. We submit the following recommendations

for clarifying guidance that would not require regulatory modifications:

• Issue guidance on how to apply the “volume or value of referrals” standard within the

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changing healthcare payment environment. For example, we seek clarification on the use

of incentive payments to improve quality even if they partially reflect the volume or value

of a provider’s referrals.

• Issue guidance clarifying how to establish and document fair market value (FMV) in value-

based payment settings and integrated care models (e.g., identify the type of data to use

to determine FMV for a physician’s participation in a pay-for-performance program or

consulting arrangement between a physician and a medical device or pharmaceutical

manufacturer), or whether a standard other than FMV is more appropriate. In crafting this

guidance, we urge the OIG to consider the resource expenditures that are currently

necessary to establish and document FMV and support an approach that is aligned with

the shared goal of reducing unnecessary expenditures in the health care system. Issuing

such guidance would not impact the underlying protections against inducement, which

would otherwise remain the same. New or clarified standards for appropriate value

exchanges can include safeguards relating to quality, payment caps, or similar criteria to

ensure accurate assessment in a value-based environment without compromising program

integrity.

• Issue guidance expanding and revising the definition of FMV, or adopting a new standard

other than FMV, to account for new payment models that incentivize performance and

provide additional flexibility for collaboration among the various stakeholders to optimize

the delivery of patient care to include improved outcomes and reduced costs (e.g.: industry

providing service line optimization support to a provider and obtaining compensation for

that support from the provider through various risk-sharing arrangements; or a shared-risk

endeavor among multiple stakeholders where service providers may not be compensated if

objective is not achieved).12

OTHER RELATED TOPICS OF INTEREST

In Question 3A, the RFI requests feedback on the current waivers developed for purposes of testing

models by the Centers for Medicare and Medicaid Innovation and for carrying out the Medicare

Shared Savings Program (MSSP). Specifically, Question 3A(e) seeks input on the pros and cons

of fraud and abuse protections that are uniform across different types of CMS-sponsored models,

initiatives, and programs.

• While not an evaluation of the costs and benefits of safe harbors applicable to all CMS-

sponsored models, we propose the issuance of safe harbors or guidance that mirrors Federal

anti-kickback statute waivers for MSSP Accountable Care Organizations (ACOs) and

extends this protection to all ACOs and to organizations implementing other alternative

payment models that meet certain conditions, regardless of whether or not they are

participating in the MSSP or other Medicare-specific programs.

• To achieve the uniformity alluded to in Question 3A(e), we further propose the issuance of

a safe harbor or guidance that protects activities or initiatives that involve the integration

of care, items, services, and payment across stakeholders (i.e., industry, providers, and

payers), which meet certain established value-based health care criteria and that are

designed to improve healthcare quality, as measured by patient outcomes, and/or to reduce

the overall cost of providing care. These protections would be available to stakeholders

regardless of whether they are participating in a Medicare-approved value-based

payment program (e.g., ACO, APM, bundled payment initiative).

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INTERSECTION OF PHYSICIAN SELF-REFERRAL LAW AND ANTI-KICKBACK

STATUTE

Question 4 asks for feedback regarding specific circumstances in which exceptions to the physician

self-referral law and safe harbors to the anti-kickback statute should align for purposes of the goals

of the RFI.

• While changes to the physician-self referral law are beyond the scope of this RFI (and

OIG’s sole purview), HLC supports modifying the safe harbors of the anti-kickback statute

in alignment with corresponding changes to the physician self-referral laws to ensure

consistency across the entire fraud and abuse framework. In furtherance of this interest, we

are attaching to this letter an Appendix A, which provides details about proposals that

require corresponding and contemporaneous changes to the physician self-referral law.

Without contemporaneous and aligned changes to both the physician self-referral law and

the anti-kickback statute, the recommended changes will not have the desired effect of

encouraging and supporting value-based payment and care delivery.

Thank you in advance for your consideration of the above proposals. Please contact Tina Grande

at [email protected] or 202-449-3433 with any questions.

Sincerely,

Mary R. Grealy

President

1 U.S. Department of Health and Human Services Office of Inspector General. Medicare and State Health Care

Programs: Fraud and Abuse; Request for Information Regarding the Anti-Kickback Statute and Beneficiary

Inducements CMP (“RFI”), 83 Fed. Reg. 43607, 43608 (August 27, 2018). 2 RFI at 43608 (2018). 3 RFI at 43608 (2018). 4 Social Security Act § 1128B(b). 5 RFI at 43608 (2018). 6 RFI at 43608 (2018). 7 OIG. Final Rule: “Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Safe Harbors

Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements,” 81 Fed.

Reg. 88368 at 88370 (December 7, 2016). 8 81 Fed. Reg. 88368 at 88370. 9 See, e.g., RFI at 43608 (2018). 10 42 U.S.C. § 1320a-7b(b)(3) (2016). 11 For additional examples, see http://phrma-docs.phrma.org/files/dmfile/PhRMA-Value-of-Value-Based-

Contracts1.pdf 12 For additional examples, see Appendix B.

1

UPDATING THE FRAUD AND ABUSE LEGAL FRAMEWORK:1 FEDERAL ANTI-KICKBACK STATUTE2

Innovation System Transformation

Impact

Proposed Changes Remaining Protections

Shared payments; incentive payments

Value-based payments encourage outcomes-based care as opposed to fee-for-service (FFS) payments that solely incentivize volume (physicians) or diagnosis-related group (DRG) payments that incentivize discharge with little to no accountability for care post-discharge (hospitals); incentives to control cost are built into value-based arrangements and mitigate the possibility of incentives to increase volume or use higher-level care settings.

Create safe harbor to protect accountable care organizations (ACOs) and other organizations implementing alternative payment models (APMs) that meet certain conditions – regardless of whether or not they are participating in a Medicare-sponsored demonstration project.3

Anti-Kickback Statute (AKS) still prohibits inappropriate inducement of health care business. Any payment model that inappropriately takes into account volume or value will fall outside the scope of the new safe harbor.

Shared payments; incentive payments; team-based care

Value-based payments encourage outcomes-based care as opposed to FFS payments that solely incentivize volume (physicians) or DRG payments that incentivize discharge with little to no

Create safe harbor that effectively extends waivers to any activities or initiatives that involve integration of care, items, services, and payment across stakeholders that meet certain

AKS still prohibits inappropriate inducement of health care business. Waivers issued only for approved activities or initiatives. Any arrangement that does not meet specified criteria will

Appendix A

2

accountability for care post-discharge (hospitals); incentives to control cost are built into value-based arrangements and mitigate the possibility of incentives to increase volume or use higher-level care settings.

established value-based health care criteria and that are designed to improve patient outcomes and reduce the overall cost of providing care, regardless of whether those stakeholders are participating in a Medicare-sponsored demonstration project.4

not be approved and will fall outside the scope of a waiver.

Shared payments; team-based care

Value-based payments encourage outcomes-based care as opposed to FFS payments that solely incentivize volume (physicians) or DRG payments that incentivize discharge with little to no accountability for care post-discharge (hospitals); incentives to control cost are built into value-based arrangements and mitigate the possibility of incentives to increase volume or use higher-level care settings.

Create safe harbor for clinically and financially integrated programs that allow all types of stakeholders to participate, give stakeholders flexibility in meeting those requirements as applicable, and allow financial savings distribution to support clinical and payment integration.5

AKS still prohibits inappropriate inducement of health care business.

Shared infrastructure; team-based care

Provider timetables and resource availability for electronic health record (EHR) technology acquisition differ widely; extending exception is warranted to ensure robust and widespread EHR implementation. Technological advancements not

Create safe harbor expanding and making permanent the existing (temporary) regulatory safe harbor for donation and support of EHR software, related technologies, and training.6 Expand the safe harbor to specifically include technology related to information sharing

Existing provisions of EHR safe harbor that protect against inappropriate financial relationships still exist.

Appendix A

3

contemplated when exception was originally created necessitate additional flexibility in defining covered technology.

and cyber-security as well as industry-supported data collection, analytics, and other technology services.

Shared infrastructure, shared payments, incentive payments, team-based care

Value-based payments encourage outcomes-based care as opposed to FFS payments that solely incentivize volume (physicians) or DRG payments that incentivize discharge with little to no accountability for care post-discharge (hospitals); incentives to control cost are built into value-based arrangements and mitigate the possibility of incentives to increase volume or use higher-level care settings or more complex services.

Define “volume or value of referrals” to allow for an outcomes-based healthcare payment environment. Coordinate with CMS to ensure alignment with Stark Law provisions.7,8

Definition of volume or value can include quality of care requirements to ensure that variable payment rates based on volume or value vary solely or primarily on outcomes.

Shared infrastructure, shared payments, incentive payments, team-based care

Value-based payments encourage outcomes-based care as opposed to FFS payments that solely incentivize volume (physicians) or DRG payments that incentivize discharge with little to no accountability for care post-discharge (hospitals); incentives to control cost are built into value-based arrangements and mitigate the possibility of incentives to increase volume or use higher-level care settings or more

Issue regulations or guidance on applying “volume or value of referrals” standard within the changing healthcare payment environment. Coordinate with CMS to ensure that regulations or guidance are aligned with similar provisions applicable to Stark Law.9

Alignment with similar Stark Law guidance will ensure consistency across governing agency interpretations.

Appendix A

4

complex services. Uncertainty in applying AKS provisions stifles innovation.

Shared infrastructure, shared payments, incentive payments, team-based care

Value-based payments encourage outcomes-based care as opposed to FFS payments that solely incentivize hours worked and resources used (physicians) or DRG payments that incentivize discharge with little to no accountability for care post-discharge (hospitals); incentives to control cost are built into value-based arrangements and mitigate the possibility of incentives to increase volume or use higher-level care settings.

Issue regulatory definition or clarifying guidance of “fair market value” (FMV) to account for value-based payment models and provide flexibility to allow collaboration among various stakeholders. Coordinate with CMS to ensure definitions are aligned with similar provisions applicable to the Stark Law.10

Definition of FMV can include safeguards relating to quality, payment caps, and similar criteria to ensure accurate assessment in a value-based environment without compromising program integrity. Underlying protections against inducement remain the same.

Shared infrastructure, shared payments, incentive payments, team-based care

Value-based payments encourage outcomes-based care as opposed to FFS payments that solely incentivize hours worked and resources used (physicians) or DRG payments that incentivize discharge with little to no accountability for care post-discharge (hospitals); incentives to control cost are built into value-based arrangements and mitigate the possibility of incentives to increase volume or use

Issue regulations or guidance on establishing and documenting FMV in value-based payment settings and integrated care models. Coordinate with CMS to ensure that provisions and/or guidance are aligned with similar provisions applicable to the Stark Law.11

Standards for documenting FMV can include safeguards relating to quality, payment caps, and similar criteria to ensure accurate assessment in a value-based environment without compromising program integrity. Can create standard valuation protocol, require the use of multiple appraisers, and/or require the use of an approved appraisal firm. Underlying protections against

Appendix A

5

higher-level care settings. Uncertainty and/or lack of guidance in applying AKS provisions stifles innovation.

inducement remain the same.

1 Note that changes to the Federal Anti-Kickback Statute should be made in consideration of the Physician Self-

Referral (Stark) Law. This may include: (1) making conforming changes to the Stark Law and/or its implementing regulations; (2) ensuring that modified Anti-Kickback language aligns with existing Stark Law provisions; and/or (3) issuing joint agency guidance discussing how to approach and manage changes to either or both laws. 2 The Anti-Kickback Statute prohibits any individual from knowingly and willfully offering, paying, soliciting, or receiving anything of value in return for referring a patient for items or services or to induce the generation of business reimbursable by a federal healthcare program. This prohibition applies to all healthcare industry participants, including institutional and individual providers and medical device and pharmaceutical manufacturers and suppliers. See complete HLC White Paper here: https://www.hlc.org/app/uploads/2017/02/HLC_StarkAntiKickback-White-Paper.pdf. 3 42 U.S.C. § 1320a-7b(b)(3) (2016). 4 42 U.S.C. § 1320a-7b(b)(3) (2016). Note that the language granting current waiver authority is in 42 U.S.C. § 1395jjj(f) and (i) (2016). 5 42 U.S.C. § 1320a-7b(b)(3) (2016). 6 42 U.S.C. § 1320a-7b(b)(3) (2016). Note that the current regulatory safe harbor for EHR donation is located at 42 C.F.R. § 1001(y) (2017). 7 The need to make contemporaneous changes is underscored by the U.S. Department of Health and Human Services’ Requests for Information (RFI) issued in the summer of 2018. CMS’s June 25th RFI sought input on how the Physician Self-Referral Law (“Stark Law”) impacts care coordination (83 Fed. Reg. 29524) and the OIG’s August 27th RFI seeking input on the Anti-Kickback Statute, the beneficiary inducements Civil Monetary Penalty, and their impact on value-based care and health system transformation (83 Fed. Reg. 43607). Stakeholder comments to both RFIs have been drafted in the same time frame and thus are likely to raise similar and overlapping concerns. There is a unique and significant opportunity for CMS and the OIG to coordinate the federal response to these concerns and ensure that changes made to both laws are in alignment. 8 See generally Physician Self-Referral Law (“Stark Law”) in Social Security Act § 1877, codified as amended at 42 U.S.C. § 1395nn (2016); implementing regulations at 42 C.F.R. Part 411, §§ 350-389 (2017). 9 Supra n. 7. 10 Id. 11 Id.

Appendix A

1

Value Based Examples in Relation to Modernizing Federal Physician Self-Referral (Stark) Law and Anti-Kickback Statute

New healthcare delivery and payment models align financial interests among stakeholders to

incentivize care coordination and improved quality. While these models aim to move the U.S. healthcare

system toward patient-centric, value-based care, the current federal fraud and abuse legal framework

limits permissible remunerative arrangements between stakeholders and may not be compatible with

this goal.1 In particular, the Federal Physician Self-Referral (Stark) Law and Anti-Kickback Statute

(AKS) were adopted in a siloed, fee-for-service healthcare environment. They were intended to

address arrangements by and among providers and other industry stakeholders that have the potential

to encourage overutilization of healthcare resources and/or inappropriately influence provider decision-

making. To improve quality of care and reduce cost growth, new care delivery and payment models are

designed to encourage greater integration, coordination of care, and payment for healthcare services

and products that is linked to outcomes (rather than volume). However, as healthcare stakeholders

attempt to implement these new integrated care and payment models, they are confronted with potential

liability under the existing fraud and abuse framework and ambiguity surrounding how to apply this

outdated framework to a changing system. The potential liability concerns and challenges associated

with implementing these models may stifle stakeholder innovation and impede progress toward value-

based health care delivery and payment.

This paper provides examples of some of the challenges stakeholders may encounter to providing

value-based care within the healthcare system due to a perceived or real risk of liability under the

current fraud and abuse framework, particularly the Stark Law and the AKS. These examples are for

illustrative purposes only. Analyzing the fraud and abuse implications of any arrangement is a highly

fact-specific exercise that depends not just on a given situation’s facts but also on the relevant

stakeholders’ resources and tolerance for risk and ambiguity. Further, because the AKS is an intent-

based statute, liability is predicated on an analysis of the relevant parties’ motives and the purpose of

the specific financial arrangement at issue. It is important to keep these and other factors in mind when

considering the potential limits of and exceptions to the examples provided below. For convenience,

examples are organized by stakeholder type and source information is cited where possible.

1 For more information about the intersection between the fraud and abuse legal framework and value-based care, see, e.g., Health System Transformation: Revisiting the Federal Anti-Kickback Statute and Physician Self-Referral (Stark) Law to Foster Integrated Care Delivery and Payment Models (February 2017), produced by the Healthcare Leadership Council. Available at: https://www.hlc.org/app/uploads/2017/02/HLC_StarkAntiKickback-White-Paper.pdf.

Appendix B

2

HEALTH SYSTEM

Incentivizing Physician Efforts to Support Reduction of Hospital Acquired Infections

• The Stark Law and AKS restrict the ability of a hospital to reward or penalize non-employed

physicians for their efforts to improve patient outcomes, such as efforts to reduce hospital

acquired infections (HAIs)

• Hospitals cannot uniformly reward non-employed physicians who follow established care

pathways and meet quality metrics or penalize those physicians who fall below thresholds for

acceptable outcomes; Payment of such incentives may implicate the Stark Law and/or AKS.

• Penalties for violating the Stark Law and/or AKS are substantial and the risk of incurring such

penalties can be too great to justify; as a result, growth of value-based payment models are

stifled.

Source: US Senate Finance Committee Hearing – Examining the Stark Law: Current Issues and Opportunities,

7/12/2016, Statement from Ronald Paulus (CEO/President, Mission Health System, Asheville, NC): pp. 4-5

Provision of Hospital-Based Patient-Centered Services in Physician Office

• Geneticists with health system meet with expectant parents who have just learned that their child

will die shortly after birth in order to help the parents understand their child’s fatal condition and

process what to expect during delivery.

• Health System-based geneticists wish to have this conversation with patients at their

obstetrician’s office (separate from the Health System) at no charge in order to ensure a familiar,

supportive environment

• The service rendered by health system-based geneticists could be construed as “something of

value” offered to the obstetrician’s practice without “fair market” compensation in return for

patient referrals, potentially running afoul of the fraud and abuse framework.

• Penalties for violating AKS and/or the Stark Law are substantial and the risk of incurring such

penalties may be too great; as a result, this and other patient-centered services not offered.

Source: US Senate Finance Committee Hearing – Examining the Stark Law: Current Issues and Opportunities,

7/12/2016, Statement from Ronald Paulus (CEO/President, Mission Health System, Asheville, NC): pp. 5-6

PAYER

• Insurer offers prescription drug coverage through a Medicare Part D plan and seeks to enter into

a value-based contract with the pharmaceutical manufacturer.

• Under the value-based contract, payment would be directly linked to proof that use of the

prescribed medication contributed to avoided illness, such as through reductions in emergency

room visits or inpatient hospitalizations. Manufacturer will pay for a part of the cost of the data

collection necessary to provide the proof required under the contract.

• This negotiated discount could be construed as an unlawful inducement to use the

manufacturer’s drug potentially triggering AKS scrutiny.

Appendix B

3

• The data collection provision could be construed as an unlawful inducement to use the

manufacturer’s drug potentially triggering AKS scrutiny.

• As a result of both of the above possibilities, insurer does not enter into a contractual

arrangement with manufacturer out of fear of potential AKS liability.2

Source: Network for Excellence in Health Innovation, Rewarding Results: Moving Forward on Value-Based Contracting

for Biopharmaceuticals, 03/2017, pp. 14-15

PHARMACEUTICAL MANUFACTURERS

• Pharmaceutical Manufacturer develops an online tool that collects prescription claims data from

pharmacies to track whether patients are filling prescriptions and calculate whether patients are

adhering to prescribed therapies. Longitudinal adherence information is available to physicians

at the point of care for all drugs prescribed to patient.

• Manufacturer wants to make this tool available to providers at no charge, but decides not to due

to concerns that it may be construed as an unlawful inducement to prescribe Manufacturer’s

drugs potentially triggering AKS scrutiny.

• The potential value of medication adherence data to improve care, lower costs, and reduce

spending is not realized within the current fraud and abuse framework.3

Source: Prescriptions for a Healthy America, A Treatable Problem: Addressing Medication Nonadherence by Reforming

Government Barriers to Care Coordination, 10/2017: p. 11. For additional examples, see http://phrma-

docs.phrma.org/files/dmfile/PhRMA-Value-of-Value-Based-Contracts1.pdf

DEVICE MANUFACTURERS

Incentivizing the Use of Support Services to Improve Patient Outcomes

• Device Manufacturer develops a blood pressure monitoring device that transmits readings at

regular intervals to the patient’s physician employed by Health System. The physician uses this

information to establish a treatment plan that manages patient’s activities connected with blood

pressure fluctuations.

• Device Manufacturer offers health and nutrition support services to assist patients with

implementing their physician-developed care plans and achieve set outcome thresholds.

Manufacturer proposes that Health System incur the cost of such services at a potentially

discounted rate: if patients do not achieve the outcome threshold, Manufacturer will charge

Health System a discounted rate for the support services provided. If patients achieve the

outcome thresholds, Health System will pay the full cost of the support services.

• Offering a discounted rate for services is considered “something of value” under the AKS; this

discount may be considered an improper inducement for referrals between Manufacturer and

2 While value-based contracts are not inherently problematic, the risk of exceeding the bounds of the fraud and abuse framework may be too great for some stakeholders. This issue is compounded by the absence of guidelines clarifying fraud and abuse terminology in the context of a value-based payment system. 3 This data has potential value for multiple stakeholders: individual-level medication adherence information has clinical value for providers while population-level adherence data can serve as a performance-based outcome indicator. New England Healthcare Institute, Thinking Outside the Pillbox: A System-wide Approach to Improving Patient Medication Adherence for Chronic Disease, 8/2009

Appendix B

4

Health System because it is unlikely to be “fair market value” for the services provided

(potentially triggering AKS scrutiny).

• Device Manufacturer does not offer discounting arrangement and Health System declines to pay

for support services that may or may not be effective in improving patient outcomes.

Similar examples arise in the context of value-based contracts between payers and device

manufacturers that involve manufacturer-provided services to support appropriate product use.

Examples include the provision of supportive tools and resources, the use of field-based

reimbursement personnel to assist customers with helpline support, the provision of adherence tools

and resources, and the provision of data analytics to identify high-risk patients. These arrangements

would benefit from clarifications around the determination of fair market value (FMV) for these

services.

PHYSICIANS

• Physician has privileges to see patients at Hospital (non-employee). Physician treats a patient

at Hospital; patient has multiple chronic conditions and is struggling to navigate the healthcare

system. Physician establishes a care plan for the patient that involves a social worker, a dietician,

an advanced practice nurse, and a physical therapist, all employed by Hospital. Each member

of this care team has specific roles to fulfill, including medication monitoring, dietary counseling,

and ensuring that the patient attends appointments for non-clinical services. When the patient

has a question, every member of the care team is knowledgeable about the patient’s medical

history and ongoing care plan, which helps reduce unnecessary trips to the emergency

department as well as a domino effect of health problems that can increase the risk of

preventable readmissions. Physician remains accountable for the patient’s overall health, but all

members of the care team play an important role in helping the patient maintain good health.

• Physician is adept at coordinating the patient’s care and managing the care team. As a result,

the patient maintains his health status and avoids unnecessary admissions and office visits,

saving Hospital money and improving quality and performance metrics.

• If Hospital compensates Physician for her success in coordinating the care team, this could

potentially violate the Stark Law prohibition against compensation based on volume or value of

services rendered. In addition, compensation linked to patient outcomes could be considered

“something of value” that could be construed as improper inducement of referrals between

Physician and Hospital, violating the AKS.

• Hospital does not provide performance-based compensation to Physician for care coordination

out of concern of liability under the fraud and abuse framework. This creates a potential future

disincentive for Physician to spend the time and effort required to successfully coordinate care

for a patient with complex needs.

• Additional Note: AKS prohibits physicians and other stakeholders from providing anything of

value to anyone that might induce the purchase or order of any services paid for by Medicare.

This includes assistance provided to patients by physicians such as cab vouchers, scales, and

Appendix B

5

blood pressure cuffs. There is no AKS exception that protects these types of patient benefits,

even those that encourage a patient to follow post-discharge treatment plans.4

Sources: American Hospital Association, Legal (Fraud and Abuse) Barriers to Care Transformation and How to Address

Them, 02/28/2017: p. 6

LONG-TERM CARE PROVIDERS

• Hospital provides 85% of the cost of adopting certified electronic health record technology

(CEHRT) to Nursing Home with the goal of facilitating care coordination and management for

patients who frequently transition between care settings. Nursing Home paid remaining 15%

cost and implemented CEHRT (in accordance with current Stark and AKS exception and safe

harbor for EHRs).

• In support of its ongoing goal to improve population health, Hospital seeks to collect and analyze

de-identified health data about patient outcomes in acute inpatient and long-term care settings.

Nursing Home CEHRT does not currently have the functionality to provide this data to Hospital;

Hospital wishes to subsidize the purchase of data analytics software for Nursing Home to enable

this and other activities that will support Hospital and other stakeholders’ population health

management efforts.

• This and other tools (such as cyber-security protections) are “something of value” that, if

provided at no or reduced cost, may be construed as an improper inducement for referrals to

Hospital under the AKS. Provision of the financial support to acquire such software may create

an impermissible financial relationship under the Stark Law as well.

• Hospital does not subsidize the purchase of software or other technology for fear of violating the

fraud and abuse framework and is unable to pursue this and related population health

management activities.

ACCOUNTABLE CARE ORGANIZATIONS (ACO)

• Hospital and Physician Group form an ACO through participation in the Medicare Shared

Savings Program (MSSP). Their fee-for-service Medicare patients are experiencing improved

outcomes and per-beneficiary costs have declined.

• Hospital wishes to extend its collaborative efforts with Physician Group and proposes to create

an ACO for patients under age 65 with two or more chronic diseases, the highest-cost patients

outside of the Medicare population. This ACO would function identically to the existing

arrangement under the MSSP, where any savings realized through care coordination and

management of the specified population would be shared between Hospital and Physician

Group.

4 Note that provision of some patient assistance is protected under AKS safe harbors (and in the Civil Monetary Penalty [CMP] rule as it relates to beneficiary inducements). For example, in its December 2016 Final Rule (81 Fed Reg 88368), the OIG created a safe harbor protecting some types of free or discounted local transportation services, to the extent that the transportation provided is for purposes of obtaining medically necessary [clinical] services. However, this safe harbor is not sufficiently expansive to meet all patient needs. For example, providing transportation to a food bank would not be permitted under the safe harbor, even if a patient had food security issues that directly and negatively impacted her health and, as a result, her overall outcomes following a hospital stay and ability to comply with a post-discharge treatment plan.

Appendix B

6

• Such an arrangement constitutes a financial relationship between hospitals and physicians for

purposes of Stark potentially triggering Stark Law liability. Distribution of savings constitutes

“something of value” that could be construed as inducing referrals between Hospital and

Physician Group in violation of the Stark Law and AKS. No waivers are available for non-

Medicare MSSP initiatives.

• Physician Group is unwilling to form an ACO with Hospital outside of the MSSP out of concern

for Stark and/or AKS liability. Hospital’s proposal is declined and its plan abandoned.

Source: Centers for Medicare & Medicaid Services. Proposed Rule: Medicare Program; Revisions to Payment Policies

Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016 (80 Fed. Reg. 41685), 07/15/2015: pp.

41928-41930.

Appendix B

1

Health System Transformation:

Revisiting the Federal Anti-Kickback Statute and Physician Self-

Referral (Stark) Law to Foster Integrated Care Delivery and Payment

Models

February 2017

EXECUTIVE SUMMARY AND PRIORITY OPTIONS

The U.S. healthcare system continues to move toward quality-driven, value-based care

delivery and payment models. These models could be interpreted to implicate the current

federal fraud and abuse legal framework, creating policy and implementation challenges

that impede delivery and payment reform. These new models align financial interests

among providers to incentivize care coordination and improved quality, which may invite

scrutiny under the outdated legal framework. The framework must allow appropriate

patient-serving care delivery and payment models that encourage broader collaboration

among stakeholders to accelerate ongoing improvements in care quality and patient

safety while reducing the rate of cost growth. The federal government has issued waivers

that protect certain arrangements from further scrutiny under the fraud and abuse legal

framework, but the waivers are limited and only benefit a small group of stakeholders

participating in Medicare initiatives. As such, stakeholders across the entire healthcare

system are considering and advocating for changes to the current legal framework to

make it more compatible with healthcare delivery system transformation while still

retaining appropriate protections against fraud and abuse.

To facilitate the development of meaningful options to reform the Federal Anti-Kickback

Statute and the Physician Self-Referral (Stark) Law, the Healthcare Leadership Council

(HLC) through its National Dialogue for Healthcare Innovation initiative convened

stakeholders and prepared a report released in January 2016 addressing these and other

issues related to health system transformation. i Given the appetite for addressing

challenges and concerns with applying the current fraud and abuse framework to new

Appendix C

2

care delivery and payment models, HLC subsequently convened a broader workgroup of

stakeholders representing both HLC members and other interested parties. This

Workgroup, the Stark and Anti-Kickback Reform Workgroup, has continued the work of

developing options to reform the Federal Anti-Kickback Statute and Physician Self-

Referral (Stark) Law.

This white paper reflects the ongoing discussions of this Workgroup. It focuses on the

Federal Anti-Kickback Statute and the Physician Self-Referral (Stark) Law, as primarily

and respectively enforced by the U.S. Department of Health and Human Services (HHS)

Office of Inspector General (OIG) and the Centers for Medicare & Medicaid Services

(CMS), as well as the Department of Justice (DOJ).

The Physician Self-Referral (Stark) Law prohibits a physician from referring patients for

services reimbursed by a federal healthcare program (i.e., Medicare) to a healthcare

organization with which the physician has a financial relationship and prohibits the

organization from billing for those services, unless an exception applies. The Anti-

Kickback Statute prohibits the offer or receipt of anything of value in return for referring a

patient for items or services reimbursed by a federal healthcare program (e.g., Medicare,

Medicaid), unless an exception or safe harbor addresses the arrangement. The Anti-

Kickback Statute applies to all healthcare industry stakeholders, including institutional and

individual providers, medical device and pharmaceutical manufacturers, vendors,

suppliers, and health plans. This white paper also addresses the relationship between the

Federal Anti-Kickback Statute and the Civil Monetary Penalties (CMP) Law prohibitions

related to beneficiary inducement (i.e., providing anything of value to a patient in order to

encourage the patient to utilize a particular provider) and gainsharing (i.e., sharing

savings among providers generated by limiting or reducing the provision of medically

necessary services).

The options addressed in this white paper represent a working draft of potential regulatory

and legislative modifications to the Anti-Kickback Statute and Physician Self-Referral

(Stark) Law to better support innovative and integrated care delivery and payment

models. A brief overview of priority options is identified here in the Executive Summary

and discussed further alongside additional options in subsequent sections of this white

paper. None of these options is, nor is intended to be, an exhaustive analysis of the

universe of potential modifications to these laws. Rather, the priority and additional

options addressed in this white paper are based on discussions with HLC, participants in

the National Dialogue for Healthcare Innovation initiative, and members of the HLC Stark

and Anti-Kickback Reform Workgroup.

Appendix C

3

Priority Options

The Workgroup considers the following, categorized as either Regulatory or Legislative

alternatives and discussed more fully in the white paper, to be priority options. They have

been selected based on the following criteria:

• Feasibility: Willingness of Congress, CMS and/or OIG to address

• Impact: Potential to alleviate or eliminate perceived and/or real barriers to

developing and implementing new models of care delivery and payment based

on fraud and abuse framework

• Timeliness: Whether meaningful action may/can be taken in the next 6-12

months

While this white paper categorizes the options as either regulatory or legislative, it is

important to note that these options may be pursued independently or concurrently and

some may lend themselves to both regulatory and legislative action.

Regulatory Options

• Issue safe harbors, exceptions, or guidance that effectively extend existing Anti-

Kickback Statute and Physician Self-Referral (Stark) Law waivers for Medicare

Shared Savings Program (MSSP) Accountable Care Organizations (ACOs) to all

ACOs and to other organizations implementing alternative payment models that

meet certain conditions, regardless of whether or not they are participating in the

MSSP or other Medicare-specific program.

• Revise and make permanent existing Anti-Kickback Statute and Physician Self-

Referral (Stark) Law exceptions for donation and financial support of Electronic

Health Record (EHR) software, related technologies, and training. Revisions

should ensure a range of relevant and appropriate technologies (particularly

information-sharing and cyber security technology) are included based on the

evolving technological environment.

• Clarify how to establish, document, and apply the Anti-Kickback Statute and

Physician Self-Referral (Stark) Law’s prohibition on the use of “volume or value of

referrals” to set payment within a changing healthcare payment environment

oriented towards outcomes rather than volume of services delivered.

• Expand and revise application of fair market value standards to account for new

payment models that are based on outcomes rather than productivityii (e.g., by

Appendix C

4

allowing incentives for efficiency and improved outcomes rather than basing fair

market value on the number of hours worked).iii

• Eliminate or redefine the “one purpose” test for Anti-Kickback Statute liability and

replace it with a balancing test that would require the OIG to prove either increased

cost or actual harm to a patient. iv This would potentially allow, for example,

arrangements where providers and/or medical device or pharmaceutical

manufacturers provide items or services of value to patients to assist with

prescription medication adherence, perioperative regimen adherence, or access

to healthcare services. The OIG could assess the arrangement’s overall impact on

quality of care and weigh these benefits against the potential risk of fraud and

abuse to determine whether the transaction is permissible, regardless of whether

one purpose of the arrangement is potentially problematic. Legislative action also

may be appropriate to address this issue.

Legislative Options

• Expand the parameters of the Medicare Access and CHIP Reauthorization Act of

2015 (MACRA)-mandated alternative payment model report (due by April 16,

2017)v and require the HHS Secretary to review and assess the Anti-Kickback

Statute, the Physician Self-Referral (Stark) Law, and the CMP Law in the context

of the transformation of the healthcare system. This assessment should

specifically address: (1) whether these laws create unnecessary barriers to

integrated care delivery and payment models; (2) whether these laws are effective

in limiting fraudulent behavior; and (3) whether these laws should be modified to

more effectively limit fraud and abuse without limiting new care and payment

models aimed at providing better care at lower costs. The review process for this

report should include subject matter experts from CMS and the OIG; the Secretary

also should consult with the Department of Justice (DOJ), Internal Revenue

Service (IRS), and the Federal Trade Commission (FTC). The Secretary should

also allow for opportunities for stakeholder input that would include medical

practitioners and administrators, pharmaceutical and medical device

manufacturers and suppliers, consumers, and legal and policy experts to review

the Secretary’s findings and assessment. The report could include findings from

the assessment along with stakeholders’ feedback, and should include plans of

action to address any suggested changes to the legal frameworks that arise from

the assessment, as well as a description of the actions needed to achieve those

changes.

• Changes identified through the assessment and report noted above may yield

opportunities for either legislative or regulatory action to amend the Anti-Kickback

Appendix C

5

Statute, Physician Self-Referral (Stark) Law, and CMP Law to protect

arrangements that promote increased quality and lower costs.

• Congress also may consider granting OIG and CMS enhanced regulatory

flexibility/rulemaking discretion to develop exceptions/safe harbors that are

consistent with broad policy objectives (e.g., increase efficiency and quality,

decrease costs, and improve rate of information-sharing) and adapt the Anti-

Kickback Statute, the Physician Self-Referral (Stark) Law, and the CMP Law to the

current healthcare environment.vi Note that OIG and CMS already have statutory

authority to create safe harbors and exceptions, but Congress could either: 1)

direct OIG to regulate in certain broad policy areas; or 2) establish new statutory

safe harbors and exceptions to these laws that are consistent with policy

objectives.

Appendix C

6

Appendix C

7

Health System Transformation:

Revisiting the Federal Anti-Kickback Statute and Physician Self-

Referral (Stark) Law to Foster Integrated Care Delivery and Payment

Models

February 2017

INTRODUCTION

The U.S. healthcare system continues to move toward quality-driven, value-based care

delivery and payment models. These models encourage integration and care and

payment coordination between and among providers and other industry stakeholders

using financial incentives, such as shared savings, bonus payments, or risk-sharing

arrangements. While these models are designed to improve outcomes, reduce waste,

and increase efficiency, they may align financial interests in ways that trigger fraud and

abuse concerns. In general, the federal fraud and abuse legal framework penalizes

arrangements between and among providers and other industry stakeholders that have

the potential to encourage overutilization of healthcare resources, inappropriately

influence provider decision-making, decrease competition among competitors, and/or

harm patients. This framework was designed for a fee-for-service healthcare

environment where volume was the leading payment incentive in a siloed payment

structure (e.g., physician reimbursement separate from inpatient hospital

reimbursement).

Congress, based on reports of Medicare program abuse, created the Anti-Kickback

Statute and the Physician Self-Referral (Stark) Law to protect a volume-based payment

system from overutilization and revenue-generating financial relationships that pose a risk

of fraud and abuse. For example, the Physician Self-Referral (Stark) Law was originally

passed to prohibit perceived overuse of lab services by physicians holding ownership

interests in labs to which they were referring Medicare patients.

New delivery and payment models represent a shift to fee-for-value, designed to reward

improved outcomes and efficiency and encourage cross-provider coordinated care

Appendix C

8

across the care continuum. However, implementing these models within the confines of

the current federal fraud and abuse framework is challenging. New delivery and payment

models may trigger liability and require government protection (e.g., in the form of a

waiver such as those offered to Accountable Care Organizations (ACOs) participating in

the Medicare Shared Savings Program (MSSP)). Furthermore, the fear of potential

liability due to the complexity of the legal framework potentially stifles innovation and

impedes progress toward a value-based system.vii

As such, stakeholders across the healthcare system as well as policymakers and

legislators are considering and advocating for changes to the current framework to make

it more compatible with healthcare delivery system transformation while retaining

appropriate protections against fraud and abuse.

It is important to note that alignment of the fraud and abuse legal framework with new

care delivery and payment models is being discussed at multiple levels across the

healthcare system. The Medicare Access and CHIP Reauthorization Act of 2015

(MACRA) called for the HHS Secretary, in coordination with the OIG, to consider possible

modifications to the legal frameworks to better align with integrated care delivery and

payment models. As mandated by MACRA, CMS issued a report to Congress on the

relationship between fraud and abuse laws and gainsharing or similar arrangements

between physicians and hospitals (i.e., the gainsharing report). viii In addition, CMS

solicited feedback on possible changes to the Physician Self-Referral (Stark) Law in the

2016 Physician Fee Schedule Proposed Rule, indicating that the agency is thinking about

these issues and open to dialogue regarding modifications. In the 2016 Final Rule, CMS

stated that it would consider the comments received when preparing MACRA-mandated

reports to Congress.

Purpose of White Paper

This white paper represents the product of a working draft of potential regulatory and

legislative options to modify two of the primary fraud and abuse laws (the Federal Anti-

Kickback Statute and Physician Self-Referral (Stark) Law) to better support innovative

and integrated care delivery and payment models. It is not intended to be, nor should it

be construed as, an exhaustive analysis of the universe of potential modifications to these

laws. Rather, the potential options are based on discussions with the Healthcare

Leadership Council (HLC), its National Dialogue for Healthcare Innovation initiative,

representatives from member companies, and the HLC Stark and Anti-Kickback Reform

Workgroup.

These new models potentially implicate many other federal statutes and regulations,

including the Civil Monetary Penalties (CMP) Law’s beneficiary inducement and

Appendix C

9

gainsharing provisions; the Civil and Criminal False Claims Acts (FCA); the Health

Insurance Portability and Accountability Act of 1996 (HIPAA) and its implementing

regulations; the off-label promotion regulations as enforced by the Food and Drug

Administration (FDA) and Department of Justice (DOJ); the Veteran’s Administration (VA)

and Medicaid program’s best price requirements for pharmaceutical companies; antitrust

and tax laws; and state laws that overlap with, mirror, or relate to these federal laws.

However, the purpose of this white paper is to address the Federal Anti-Kickback Statute

and Physician Self-Referral (Stark) Law as primarily and respectively enforced by the

U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG)

and Centers for Medicare & Medicaid Services (CMS), and the Department of Justice.

While this paper does not address the other federal and state laws noted above, it is

important to note the relationship between the Federal Anti-Kickback Statute and the

CMP Law as they relate to both beneficiary inducement (i.e., providing anything of value

to a patient in order to encourage the patient to utilize a particular provider) and

gainsharing (i.e., sharing savings among providers based on limited or reduced medically

necessary services). For example, routinely waiving patient co-payments potentially

implicates both the CMP Law’s beneficiary inducement provisions as well as the Anti-

Kickback Statute, which prohibits a copayment waiver because it constitutes something

of value provided to a patient. As such, when considering potential changes to the Anti-

Kickback Statute, stakeholders also should consider related changes to the CMP Law to

ensure consistency in interpretation and application across both laws.

For reference, this white paper provides some background information on the Federal

Anti-Kickback Statute and Physician Self-Referral (Stark) Law as well as an overview of

recent regulatory and legislative changes that provide additional context for the

discussion of possible options to modify these legal frameworks.

The options are organized into two main categories: Regulatory and Legislative. Within

each category, the options are arranged into three subcategories: Organization-based

(e.g., ACOs), Financial Arrangements, and Penalties. There are also two additional

subcategories to the Legislative options category addressing a Report to Congress and

expanding CMS/OIG authority to modify the existing regulatory framework. These

changes may be pursued independently or concurrently and some of the options may

lend themselves to both regulatory and legislative action. Options identified in the

Executive Summary as priority options are in bold below.

THE CURRENT LEGAL FRAMEWORK

Appendix C

10

Federal Anti-Kickback Statute and Physician Self-Referral (Stark) Law

The Federal Anti-Kickback Statute and Physician Self-Referral (Stark) Law regulate

arrangements between and among healthcare industry participants. The Anti-Kickback

Statute prohibits any individual from knowingly and willfully offering, paying, soliciting, or

receiving anything of value in return for referring a patient for items or services or to induce

the generation of business reimbursable by a federal healthcare program. ix This

prohibition applies to all healthcare industry participants, including institutional and

individual providers, medical device and pharmaceutical manufacturers, suppliers,

vendors, and health plans. The Physician Self-Referral (Stark) Law prohibits physicians

from referring Medicare patients for certain services to an entity with which the physician

(or an immediate family member) has a financial relationship. x The Physician Self-

Referral (Stark) Law also prohibits healthcare organizations from billing Medicare for

services provided pursuant to an improper referral. The Federal Anti-Kickback Statute

and the Physician Self-Referral (Stark) Law would both prohibit, for example, an

arrangement in which a physician and a hospital shared in savings achieved through

coordinating care delivered to Medicare beneficiaries unless a waiver applies.xi

The Anti-Kickback Statute is a criminal law, and intent is required for liability to attach;

penalties for violating the statute include imprisonment and substantial fines. In contrast,

the Physician Self-Referral (Stark) Law is a civil statute imposing “strict liability,” meaning

that no intent to violate the law is required. Civil monetary penalties may be levied for

violations of the Anti-Kickback Statute and the Physician Self-Referral (Stark) Law, and

entities that violate either may be excluded from participation in federal healthcare

programs.

There are exceptions to each law as well as “safe harbors” that protect certain

arrangements under the Federal Anti-Kickback Statute. These exceptions and safe

harbors protect certain types of business arrangements and transactions that are

considered to present a minimal risk of fraud or abuse when appropriately structured (i.e.,

in accordance with the requirements of an exception or safe harbor). The exceptions and

safe harbors and associated requirements are not the same across both laws, though

there is overlap. Generally, exceptions and safe harbors address payments made in the

course of everyday business dealings (e.g., salaries paid to bona fide employees) and

payments made for services integral to healthcare delivery (e.g., personal services

contracts).

When the Anti-Kickback Statute (1972) and the Physician Self-Referral (Stark) Law

(1988) were enacted, the healthcare system provided little or no financial incentive to

providers or patients to improve health or care delivery. Reimbursement models rewarded

Appendix C

11

volume based on the number of services provided, rather than rewarding health

promotion and maintenance. Volume-based reimbursement models risk incentivizing

overutilization, which in turn increases costs. Congress sought to restrict financial

arrangements that could lead to overutilization, inappropriately influence provider

decisionmaking, and compromise patient care through the Federal Anti-Kickback Statute

and the Physician Self-Referral (Stark) Law. By prohibiting providers from benefiting from

referring patients for services, Congress sought to formally discourage unethical

behavior. Both laws are quite broad, prohibiting financial relationships and arrangements

that are permitted in other industries, and the safe harbors and exceptions, though

numerous, are extremely narrow in scope.

As reimbursement models have changed over time, the Anti-Kickback Statute, Physician

Self-Referral (Stark) Law, and their implementing regulations have been modified in an

attempt to keep pace with these changes. These piecemeal modifications have resulted

in incredibly complex requirements and uncertainty regarding how to apply these

requirements to arrangements not contemplated when these laws were enacted.

Recent Legislative and Regulatory Changes

Significant changes in the healthcare marketplace have occurred since the Anti-Kickback

Statute and the Physician Self-Referral (Stark) Law were enacted. As noted above, these

changes are moving healthcare from a fee-for-service reimbursement model to a fee-for-

value payment and care delivery model. Most recently, these changes include passage

of the Patient Protection and Affordable Care Act of 2010 (ACA) and the creation of ACOs

as well as the passage of MACRA, which will transform how Medicare compensates

physicians and significantly expand the use of alternative payment models such as ACOs

and bundled payments across providers.

1) General Changes to Fraud and Abuse Laws: MACRA contained several provisions

relevant to the fraud and abuse laws in general, including requiring the Secretary of

HHS, in consultation with the OIG, to:

a. Study the applicability of fraud prevention laws under alternative payment

models (APMs), identify aspects of APMs vulnerable to fraud, and examine

implications of waivers to APMs. The Secretary must report to Congress on its

findings and provide recommendations on how to reduce APMs’ vulnerability

to fraud by April 16, 2017;xii and

b. Submit a report to Congress by April 16, 2016, with options for amending

existing Medicare and Medicaid fraud and abuse laws and regulations through

exceptions or safe harbors to permit gainsharing or similar arrangements

between physicians and hospitals that would improve care while reducing

waste and inefficiency.xiii CMS, in consultation with the OIG, submitted the

report to Congress in 2016.xiv In the report, CMS noted that the Secretary of

HHS had no legislative or regulatory options to consider, but made several

Appendix C

12

observations about the application of the current fraud and abuse legal

framework to gainsharing and similar relationships, including:xv

i. The fraud and abuse laws “may serve as an impediment to robust,

innovative programs that align providers by using financial incentives to

achieve quality standards, generate cost savings, and reduce waste;”

and

ii. The Stark law is a “particularly difficult obstacle to structuring effective

programs that do not run afoul of the fraud and abuse laws.”

MACRA also narrowed the CMP Law’s gainsharing provisionxvi to prohibit hospitals from

paying physicians to induce reductions or limitations of medically necessary services

(compared to the previous language, which prohibited payments made to induce

physicians to reduce or limit any service).xvii

2) Physician Self-Referral Law Changes in Physician Fee Schedule: CMS routinely uses

payment rules to amend the Physician Self-Referral (Stark) Law regulations. In July

2015, CMS issued a proposed 2016 Medicare Physician Fee Schedulexviii in which it

referenced its history of using such rulemakings to make changes to the Stark law,

detailed proposed changes to the law, and requested public feedback about these

changes, which included:xix

a. Two new Stark law exceptions (covering payments to physicians to employ

non-physician practitioners and timeshare arrangements for the use of office

space, equipment, personnel, supplies, and other services that benefit rural or

underserved areas);

b. Guidance and clarification related to financial relationship documentation and

requirements specific to certain financial relationships; and

c. Clarifying ACA-mandated limitations on the whole hospital exception.

CMS finalized the proposed changes with minor modifications on October 30, 2015 in

a final rule with comment period.xx In the proposed rule, CMS sought public comment

regarding the impact of the self-referral law on healthcare delivery and payment reform

and specifically asked for feedback on perceived Stark-related barriers to clinical and

financial integration. xxi CMS also posed specific questions for stakeholder input

regarding the need for guidance on the application of aspects of the Stark regulations

to physician compensation unrelated to participation in APMs. In the final rule, CMS

stated that it would carefully consider comments received in response to these

questions when preparing reports to Congress as mandated by MACRAxxii and in

determining the necessity of additional rulemaking on these issues.xxiii

In July 2016, CMS issued a proposed 2017 Medicare Physician Fee Schedule rulexxiv

in which it noted that the Stark law “responds to the context of the time in which it was

Appendix C

13

enacted” and includes flexibility to adapt to changing circumstances and healthcare

industry developments.xxv The Final Rule issued in November 2016 reiterated these

statements, and emphasized the Secretary’s authority (as granted by Congress) to

protect via regulatory exceptions beneficial healthcare industry arrangements not

contemplated when the Stark law was enacted.xxvi

3) Medicare Shared Savings Program: The ACA made several changes that impact the

fraud and abuse laws. One significant change was the creation of the Medicare

“Shared Savings Program” (MSSP), which allows groups of providers to create ACOs

and share in the savings generated by reducing the overall cost of providing care to

an assigned population of Medicare beneficiaries. CMS and the OIG published interim

final rules on November 2, 2011, waiving certain provisions of the Stark and the Anti-

Kickback statutes that would limit ACO arrangements within the MSSP. xxvii A

continuation notice published in 2014 extended these provisions, which were finalized

in a joint rule issued by CMS and OIG in October of 2015.xxviii CMS has authority to

issue waivers of the federal fraud and abuse laws as may be necessary to test models

for improving care delivery or reducing expenditures.

Note that in CMS’ gainsharing report, it uses the OIG and CMS determination that

these waivers were necessary as support for its assertion that the fraud and abuse

laws may serve as an impediment to “robust, innovative programs” that use financial

incentives to align providers and achieve quality standards.xxix

4) The ACA made other changes to the fraud and abuse laws, including that it:

a. Lowered the Anti-Kickback Statute’s intent threshold, xxx specifying that an

individual or entity need not intend to violate the statute or even know the

statute exists to have the requisite level of intent; the individual or entity must

just intend to induce the prohibited referral;

b. Established the Medicare Coverage Gap Discount Program, under which

prescription drug manufacturers provide drug discounts to certain beneficiaries,

and amended the Anti-Kickback Statute to exclude these discounts from its

definition of remuneration.xxxi The OIG issued a final rule implementing this

change to the Anti-Kickback Statute on December 6, 2017;xxxii

c. Added disclosure requirements to the Physician Self-Referral Law’s in-office

ancillary services exception applicable to certain imaging services (e.g.,

physicians must disclose financial interests to patients); and

d. Removed the “whole hospital exception” (commonly referred to as the specialty

hospital exception) to the Stark law, with limited grandfathering for existing

arrangements.

Appendix C

14

5) On December 6, 2016, the OIG finalized modifications to the Anti-Kickback Statute

proposed in 2014. xxxiii The final changes expanded the Anti-Kickback Statute’s

regulatory safe harbor protecting waivers or reductions of beneficiary cost-sharing

amounts and established two new safe harbors protecting: (1) free or discounted local

transportation services and (2) remuneration between a Federally Qualified Health

Center (FQHC) and a Medicare Advantage organization in certain circumstances.

6) E-prescribing and Electronic Health Records: The Medicare Prescription Drug

Improvement and Modernization Act (MMA) of 2003 mandated the development of an

Anti-Kickback Statute safe harbor and a Stark law exception to promote e-prescribing

technology adoption. In 2006, CMS and the OIG issued final rules furthering this

mandate via two exceptions: (1) certain providers and health plans may subsidize 100

percent of e-prescribing system hardware, software, training, and support for certain

related entities; and (2) through 2013, any provider or health plan may subsidize up

to 85 percent of electronic health record (EHR) software and/or related technology

and training services for any provider.xxxiv The preambles of both final rules provide an

illustrative but nonexhaustive list of EHR software and related technologies that would

be considered covered technology within the donation exception.xxxv These examples

include connectivity services, clinical and information support services related to

patient care, maintenance services, and secure messaging. The final rules specifically

exclude certain items and services, including storage devices and software with core

functionality other than electronic health records, such as payroll software. On

December 27, 2013, the OIG and CMS issued joint final regulations extending the

EHR exception through 2021 and modifying some of its requirements.xxxvi In response

to stakeholder concerns about the scope of covered technology, the final rules note

the importance of maintaining flexibility in the definition, particularly as health

information technology evolves.xxxvii The rules declined to expand on the illustrative

list provided in the 2006 final rule or to memorialize that list within the regulatory text

and noted that revising the definition could inadvertently narrow the exception. The

final rules emphasize that whether specific items and services are considered covered

technology under the exception is dependent on the particular items or services.

Specifically, donated items or services must be necessary and used predominantly to

create, maintain, transmit, or receive electronic health records to qualify for the

exception. The final rules suggest the possibility of expanding the scope of covered

technology in the future.xxxviii

Recent Congressional Activity and Guidance

1) Senate Finance Committee and Stark: In response to increasing support for Physician

Self-Referral Law reform, particularly following the passage of MACRA, the Senate

Finance Committee held a roundtable with subject matter experts to discuss Stark law

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15

concerns in December 2015. The committee subsequently gave participants and

other stakeholders the opportunity to submit comments on these issues, which were

summarized in a white paper published on June 29, 2016. xxxix Several of the

recommendations and concerns highlighted in the white paper are mirrored here. The

committee held a hearing on July 12, 2016, to examine current issues and

opportunities related to the Physician Self-Referral Law, where experts in the field

testified about the barriers to healthcare transformation the Stark law imposes and

answered questions posed by committee members.xl

2) Information Blocking: The OIG issued an alert on October 6, 2015 addressing

information blocking and the EHR safe harbor exception to the Anti-Kickback Statute.xli

The alert notes that donation of EHR items or services that have limited or restricted

interoperability due to action taken by the donor or anyone on the donor’s behalf would

not fall within the EHR donation safe harbor. OIG believes that charging fees to deter

nonrecipient providers and suppliers and the donor’s competitors from interfacing with

the donated items or services would pose “legitimate concerns” that parties were

improperly locking-in data and referrals and thus that the arrangement in question

would not qualify for safe harbor protection.

3) Medicare and Medicaid Discharge Planning Requirements: CMS released a proposed

rule on October 29, 2015 revising Medicare and Medicaid discharge planning

requirements for acute care, long-term care, and critical access hospitals, inpatient

rehabilitation facilities, and home health agencies.xlii The rule would implement the

Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014’s

discharge planning provisions, which modify conditions of participation (COPs) to

require postacute care providers, hospitals, and critical access hospitals to account

for quality, resource use, and similar measures in the discharge planning process.

The rule would require these entities to use and share data on quality and resource

use measures to assist patients in selecting postacute care providers.

POTENTIAL REGULATORY OPTIONS (with priority options in bold)

Despite the healthcare payment and delivery system’s continued evolution, changes to

the fraud and abuse legal framework lag behind. The Stark law continues to restrict

physicians’ (and certain family members’) financial relationships with entities to which the

physician may make referrals. The Anti-Kickback Statute safe harbors do not address

many types of possible arrangements among providers, payers, and pharmaceutical and

medical device companies that would encourage greater care coordination and improve

care quality and patient outcomes without involving fraudulent or abusive activity. While

some safe harbors and exceptions could protect certain value-based care models,

Appendix C

16

applying their narrow requirements to new models requires the expenditure of resources

and a degree of risk tolerance that many stakeholders do not possess. Safe harbors and

exceptions for personal services arrangements, fair market value compensation,

warranties, and/or discounts, for example, may be “cobbled together” to protect some

arrangements that reward value and outcomes. xliii However, these exceptions were

designed for siloed care and payment settings and generally cannot sufficiently enable

robust collaborative care model innovation.xliv The failure to modernize the fraud and

abuse framework threatens to impede meaningful progress. Unwilling to risk penalty

under the Anti-Kickback Statute or Physician Self-Referral (Stark) Law, stakeholders may

be discouraged from entering into arrangements that could help achieve better outcomes

for patients and support public policy goals regarding healthcare system transformation.

The following proposals would modernize these laws and eliminate uncertainty about their

potential application to beneficial arrangements.

Note: The U.S. Department of Health and Human Services (HHS) Office of the Inspector

General (OIG) and the Centers for Medicare & Medicaid Services (CMS) have regulatory

authority to create new and modify existing safe harbors/exceptions to protect

arrangements that pose little threat of fraud and abuse.

Organization-Based Waivers or Exemptions

• Issue safe harbors, exceptions, or guidance that effectively extend Federal

Anti-Kickback Statute and Physician Self-Referral law waivers for Medicare

Shared Savings Program (MSSP) Accountable Care Organizations (ACOs) to

all ACOs and to organizations implementing other alternative payment

models that meet certain conditions, regardless of whether or not they are

participating in the MSSP or other Medicare-specific programs.

• Issue safe harbors, exceptions, or guidance that effectively extend Anti-Kickback

Statute and Stark law waivers to activities or initiatives that involve the integration

of care, items, services, and payment across stakeholders (i.e., industry, providers,

and payers), that meet certain established value-based health care criteria and

that are designed to improve patient outcomes and reduce the overall cost of

providing care. These waivers would be available to stakeholders regardless of

whether they are participating in a Medicare-approved program (e.g., ACO, APM,

bundled payment initiative).

Financial Arrangements

• Revise and extend the Anti-Kickback Statute and Physician Self-Referral

exceptions for donation and financial support of EHR software, related

technologies, and training, as follows:

Appendix C

17

o Expand the scope of covered technology to encompass a broader range of

health information technology:

▪ Specifically include technology related to information sharing

(e.g., application program interfaces, health information exchange

networks, care coordination services, care management tools,

population health management and quality management tools, and

patient engagement and communication tools);

▪ Specifically include technology related to cybersecurity.

Because cyber security programs that protect patient records in EHR

systems are often expensive and difficult to manage, recipients of

donated EHR technology may not have adequate security systems

in place.xlv This makes recipients vulnerable to security breaches as

well as the providers with whom they exchange information;

▪ Consider including technology such as cloud-based items and

services, practice management and revenue cycle systems and

services, EHR storage, as well as subscription fees related to the

use and exchange of health information; and

▪ Include industry-supported data collection, analytics, and other

technology services as part of the exceptions.

o Remove the requirement that donated technology cannot replace

something similar. This requirement limits the exception to those providers

who have not implemented an EHR system, which by 2021, will likely be a

vanishingly low percentage of providers.

o Make the exception permanent (currently, the exception expires in 2021).

• Create an Anti-Kickback Statute safe harbor and Stark exception for clinically and

financially integrated programs that: (1) allow all the various types of stakeholders

(i.e., industry, providers, payers) to participate as applicable; (2) give stakeholders

flexibility in meeting those requirements to enable the program to achieve its goals,

and (3) allow distribution of financial savings to support clinical and payment

integration. xlvi Ensure that safe harbors and exceptions include the same

provisions so that meeting one set of requirements achieves compliance under the

federal Anti-Kickback Law, Stark, and the CMP Laws.

Penalties

• Eliminate False Claims Act (FCA) bootstrapping to Stark law violations. The

bootstrapping theory used by federal enforcement authorities makes a violation of

the Physician Self-Referral law an automatic violation of the FCA (i.e., a claim for

Appendix C

18

services provided by a physician who has an impermissible financial relationship

with the billing healthcare organization is tainted by the improper referral).xlvii

Technical Changes/Guidance

• OIG and CMS could issue regulatory guidance on how to apply the “volume

or value of referrals” standard within the changing healthcare payment

environment. For example, this could clarify whether incentive payments to

improve quality, even if they partially reflect the volume or value of a provider’s

referrals, are permissible.

• OIG and CMS could clarify how to establish and document fair market value

(FMV) through guidance (e.g., identify the type of data to use to determine FMV

for a physician’s participation in a pay-for-performance program or consulting

arrangement between a physician and a medical device or pharmaceutical

manufacturer).xlviii Alternatively, legislation could require the HHS Secretary

to produce this guidance.

• OIG and CMS could expand and revise definition of FMV to account for new

payment models that incentivize performance and provide additional

flexibility for collaboration among the various stakeholders to optimize the

delivery of patient care to include improved outcomes and reduced costs

(e.g., industry providing service line optimization support to a provider and

obtaining compensation for that support from the provider through various risk-

sharing arrangements). Alternatively, this also could be a legislative option;

the Anti-Kickback Statute does not statutorily define FMV (but the Stark law does)

and both the OIG and CMS have released guidance expanding on the concept of

FMV, but as care delivery and payment continue to evolve, additional clarification

and flexibility is necessary.

• OIG could eliminate or redefine the “one purpose” test for Anti-Kickback

Statute liability and replace it with a balancing test that would require the

OIG to prove that the transaction is likely to produce actual harm (either

increased program costs resulting from overutilization or harm to a patient)

and that this harm, if realized, would likely outweigh the actual or expected

benefits to a patient (i.e., a harm standard).xlix Transactions not meeting this

harm standard would not give rise to liability. Replacing the “one purpose rule”

with this harm standard would potentially allow, for example, arrangements where

providers and/or medical device or pharmaceutical manufacturers and suppliers

provide items or services of value to patients to assist with prescription medication

adherence, perioperative regimen adherence, or access to healthcare services

Appendix C

19

(e.g., waiver of co-pays). The OIG could assess the overall impact on quality of

care and weigh these benefits against the potential risk of fraud and abuse to

determine whether the transaction is permissible, regardless of whether one

purpose of the arrangement is to increase referrals for an item or service

reimbursable by a federal healthcare program. The “one purpose” test is a

product of case law, so a legislative solution may also be appropriate.

• OIG and CMS could, through rulemaking, simplify exceptions and safe harbors,

including:l

o Eliminate and/or broaden the signature requirements in relevant

exceptions/safe harbors;li

o Modify the written agreement requirements in relevant exceptions/safe

harbors such that failure to put an agreement in writing would result in a

lesser civil penalty and would not trigger Stark law or Anti-Kickback Statute

liability;

o Eliminate the commercial reasonableness requirement from relevant Stark

exceptions;lii

o Create a broad de minimis exception and adopt a technical violation

exception to the Physician Self-Referral law that would protect innocuous

issues, including:

▪ Standard expense reimbursements;

▪ Minor courtesies; and

▪ Modest medical director or consultant fees.

• OIG and CMS could simplify the Stark exceptions and Anti-Kickback Statute safe

harbors by eliminating cumbersome or unnecessary elements, streamlining

definitions, and re-working some specific concepts that have grown unwieldy (e.g.,

the definition of “remuneration”).liii

POSSIBLE LEGISLATIVE OPTIONS (with priority options in bold)

Reports to Congress/Stakeholder Input

• Expand the parameters of the MACRA-mandated alternative payment model

report (due by April 16, 2017)liv and mandate a new report that broadens the

MACRA-mandated gainsharing report (issued by CMS in 2016)lv:

o These reports could be expanded to require the HHS Secretary to review

and assess the Anti-Kickback Statute, Stark, and the CMP law in the context

of the transformation of the healthcare system. The Secretary could

specifically address: (1) whether these laws create unnecessary barriers to

integrated care delivery and payment models; (2) whether these laws are

Appendix C

20

effective in limiting fraudulent behavior; and (3) whether these laws should

be modified to more effectively limit fraud and abuse without limiting new

care and payment models aimed at providing better care at lower costs.

Both reports could include findings from the assessment.

o The review process for both reports should include subject matter experts

from CMS and the OIG and the Secretary also should consult with the

Department of Justice (DOJ), Internal Revenue Service (IRS), and the

Federal Trade Commission (FTC).

o The Secretary should allow for opportunities for stakeholder input that would

include medical practitioners and administrators, pharmaceutical and

medical device manufacturers and suppliers, consumers, and legal and

policy experts to review the Secretary’s findings and assessment. Both

reports could include stakeholders’ feedback.

o The reports should include plans of action to address any suggested

changes to the legal frameworks that arise from the assessment, as well as

a description of the actions needed to achieve those changes.

Potential changes to the fraud and abuse framework identified during the

assessment and detailed in the Secretary’s reports may yield opportunities

for either legislative or regulatory action to amend the Anti-Kickback Statute,

Stark law, and CMP law to protect arrangements that promote increased

quality and lower costs. Any such opportunities must be reviewed with care to

ensure that existing exceptions that enable bona fide arrangements designed to

improve patient care and reduce costs, such as the original exceptions to the Anti-

Kickback Statute (i.e., discounts, employer/employee and group purchasing

organization arrangements), are not compromised.

• Congress also may consider granting OIG and CMS increased regulatory

flexibility/rulemaking discretion to develop exceptions/safe harbors that are

consistent with broad policy objectives (e.g., increase efficiency and quality

and decrease costs) and adapt the Anti-Kickback Statute, Stark law, and the

CMP law to the current healthcare environment. lvi For example, new

exceptions and safe harbors could be created to protect: 1) bona fide value-based

arrangements, including those involving bundling services, data collection and

analytics, and medtech arrangements, to better determine whether clinical

outcomes and cost-savings metrics are met; and 2) risk-sharing arrangements

between manufacturers and providers and/or payers that incentivize and reward

improvements in clinical outcomes and/or reductions in cost. Note that OIG and

CMS already have statutory authority to create safe harbors and exceptions, but

Congress could direct them to do so regarding specific areas or in specific ways

based on findings from the assessment and/or reports. Note also that CMS’s

Appendix C

21

authority to issue exceptions is limited to those situations where doing so would

create “no possible risk of program or patient abuse.”lvii This high bar limits the

flexibility an exception can offer for innovative, effective alternative payment

models (such as gainsharing and incentive compensation programs).lviii

• Congress could authorize a “fast track” guidance process, less formal than the

current advisory opinion process, that would apply to all exceptions and safe

harbors for value-based models.

Financial Arrangements

• Amend the Physician Self-Referral law to permit ALL financial relationships

EXCEPT those specifically prohibited based on their risk of fraud and abuse. lix

Examples of continued PROHIBITED activities may include: 1) physician

ownership of clinical and physiological laboratories, outpatient diagnostic imaging

facilities, medical leasing equipment companies, and certain ancillary services

(e.g., durable medical equipment); 2) physician financial relationships including

under arrangements and per-click lease arrangements; and 3) physician

compensation arrangements where payments vary with the volume or value of

referrals.lx

Penalties

• Remove strict liability from the Stark law. Replace with either an intent-based

frameworklxi or develop a sliding scale of penalties for violations to more closely

align penalties with the severity of activity.

Appendix C

22

Document Prepared for the Healthcare Leadership Council’s Anti-Kickback and Stark

Reform Working Group by Jane Hyatt Thorpe, JD, and Elizabeth Gray, JD, MHA,

Department of Health Policy and Management, Milken Institute School of Public Health,

George Washington University.

i Healthcare Leadership Council (HLC). VIable Solutions: Six Steps to Transform Healthcare Now (February 17, 2016). Available at: http://www.ndhi.org/files/6414/5565/8017/VIable_Solutions_Final_Report.pdf.

ii Public Interest Committee, American Health Lawyers Association (AHLA). White Paper: “A Public Policy Discussion: Taking the Measure of the Stark Law” (“AHLA White Paper”) at pp. 14-16, 21 (2009). Available at: https://www.healthlawyers.org/hlresources/PI/ConvenerSessions/Documents/Stark%20White%20Paper.pdf.

iii American Hospital Association (AHA). “Legal (Fraud and Abuse) Barriers to Care Transformation and How to Address Them” (“AHA Barriers to Care”) at p. 4 (July 5, 2016). Available from: http://www.aha.org/content/16/barrierstocare-full.pdf.

iv M.E. Paulhus. The Medicare Anti-Kickback Statute: In Need of Reconstructive Surgery for the Digital Age. 59 Wash. Lee L. Rev. 677, 706-07 (2002).

v Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), Pub. Law 114-10, 129 Stat. 87, § 101(e)(7) (Apr 16, 2015).

vi Public Interest Committee, American Health Lawyers Association (AHLA). White Paper: “A Public Policy Discussion: Taking the Measure of the Stark Law” (“AHLA White Paper”) pp. 13, 21 (2009). Available at: https://www.healthlawyers.org/hlresources/PI/ConvenerSessions/Documents/Stark%20White%20Paper.pdf.

vii For example, stakeholders may consider entering into value-based arrangements that support improvements in care and better outcomes for patients (i.e., between and among private payers, providers, and biopharmaceutical companies related to the value of new medicines). In determining whether or not to enter into these arrangements, the parties must consider the application of fraud and abuse and other laws. Perceived or real ambiguity as to the application of the legal framework as it relates to value-based care delivery and payment models may create uncertainty and ultimately stifle willingness to pursue these arrangements.

viii CMS, Report to Congress: Fraud and Abuse Laws Regarding Gainsharing or Similar Arrangements between Physicians and Hospitals (“CMS Gainsharing Report”) (2016); MACRA § 512(b). Available from: https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/Report-to-Congress-2015.pdf.

ix 42 U.S.C. § 1320a-7b(b) (2015).

x 42 U.S.C. § 1395nn(a) (2015).

xi Note that if stakeholders were part of an ACO participating in the MSSP, this financial arrangement could be permissible if those entities obtained a waiver.

Appendix C

23

xii MACRA, § 101(e)(7).

xiii MACRA, § 512(b) (i.e., “Gainsharing Report”).

xiv CMS Gainsharing Report.

xv CMS Gainsharing Report, pp. 7-8.

xvi Social Security Act § 1128A(b)(1).

xvii MACRA, § 512(a).

xviii CMS, “Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016,” 80 Fed. Reg. 41686 (July 15, 2015).

xix 80 Fed. Reg. at 41909-30.

xx CMS, “Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2016” 80 Fed. Reg. 70886 (November 16, 2015).

xxi 80 Fed. Reg. at 41929.

xxii APM report (MACRA §101(e)(7)) and Gainsharing report (MACRA § 512(b)).

xxiii 80 Fed. Reg. at 71341.

xxiv CMS, “Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2017,” 81 Fed. Reg. 46162 (July 15, 2016).

xxv 81 Fed. Reg. 46162 at 46452 (2016).

xxvi CMS, “Revisions to Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2017” 81 Fed. Reg. 80170 at 80527 (November 15, 2016).

xxvii OIG “Final Waivers in Connection With the Shared Savings Program” 76 Fed. Reg. 67992; CMS “Medicare Shared Savings Program: Accountable Care Organizations” 76 Fed. Reg. 67802.

xxviii CMS and OIG “Final Waivers in Connection With the Shared Savings Program” 80 Fed. Reg. 66725 (October 29, 2015).

xxix CMS Gainsharing Report, p. 7 (2016).

xxx Following these changes, the Anti-Kickback Statute continues to include a ‘knowing and willful’ standard to determine a party’s intent. For an offer or payment of remuneration to violate the AKS, the offeror or payer must intend to induce a referral. See, e.g., United States ex rel. Ruscher v. Omnicare, 2015 WL 5178074 at *13 (S.D. Tex. Sept. 3, 2015).

xxxi ACA § 3301, adding § 1860D-14A to the Social Security Act (codified at 42 U.S.C. 1395w-114A) (2010).

xxxii OIG “Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements” 81 Fed. Reg. 88368.

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24

xxxiii OIG “Revisions to the Safe Harbors Under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements” 81 Fed. Reg. 88368 (finalizing 79 Fed Reg 59717 (October 3, 2014)).

xxxiv OIG “Safe Harbors for Certain Electronic Prescribing and Electronic Health Records Arrangements Under the Anti-Kickback Statute” 71 Fed. Reg. 45110 (August 8, 2006); CMS “Physician Referrals to Health Care Entities With Which They Have Financial Relationships; Exceptions for Certain Electronic Prescribing and Electronic Health Records Arrangement” 71 Fed. Reg. 45140 (August 8, 2006).

xxxv OIG, 71 Fed. Reg. at 45151-2; CMS, 71 Fed. Reg. at 45151.

xxxvi OIG “Electronic Health Records Safe Harbor Under the Anti-Kickback Statute” 78 Fed. Reg. 79202 (2013); CMS “Physicians’ Referrals to Health Care Entities With Which They Have Financial Relationships: Exceptions for Certain Electronic Health Records Arrangements” 78 Fed. Reg. 78751 (2013).

xxxvii OIG, 78 Fed. Reg. at 79216; CMS, 78 Fed. Reg. at 78765.

xxxviii OIG, 78 Fed. Reg. at 79216; CMS, 78 Fed. Reg. at 78766.

xxxix U.S. Senate Finance Committee Majority Staff. “Why Stark, Why Now? Suggestions to Improve Stark Law to Encourage Innovative Payment Models” (June 29, 2016). Available at: http://www.finance.senate.gov/imo/media/doc/Stark%20White%20Paper,%20SFC%20Majority%20Staff.pdf.

xl U.S. Senate Finance Committee. “Examining the Stark Law: Current Issues and Opportunities” (July 12, 2016). Video, Member Statements, and Witness Statements available at: http://www.finance.senate.gov/hearings/examining-the-stark-law-current-issues-and-opportunities

xli OIG. “OIG Policy Reminder: Information Blocking and the Federal Anti-Kickback Statute” (Oct 6, 2015). Available at: http://oig.hhs.gov/compliance/alerts/guidance/policy-reminder-100615.pdf.

xlii 80 Fed. Reg. 68126 (Nov 3, 2015).

xliii See, e.g., AHA Barriers to Care (2016).

xliv See, e.g., AHA Barriers to Care (2016).

xlv HITRUST. “Letter to Senator Lamar Alexander” (August 15, 2016). Available at: https://hitrustalliance.net/content/uploads/2016/08/HITRUST-Stark-Exception-Congressional-Letter-Senator-Lamar-Alexander.pdf.

xlvi AHA. “Trendwatch - Clinical Integration: The Key to Real Reform” (Feb 2010) (note: clinical integration defined as a spectrum from “bundled payments for single episodes of care” to “Medical Staff includes [almost] only fully-employed physicians,” Chart 4: Clinical Integration Spectrum, p. 7); AHA Trendwatch – The Value of Provider Integration (March 2014).

xlvii AHLA White Paper, pp. 17, 22 .

xlviii AHLA White Paper, p. 13.

xlix Paulhus, 59 Wash. Lee L. Rev. at 706-07.

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25

l AHLA White Paper, pp. 14-16, 21.

li For example, the Physician Self-Referral (Stark) Law exceptions for office space rental, equipment rental, and personal services arrangements each require the written agreement to be signed by all parties. Failure to sign an agreement, even inadvertently, means that the agreement does not fit within an exception (and thus is a Physician Self-Referral (Stark) Law violation). CMS created a special rule allowing “temporary noncompliance” with the signature requirement for 90 days, but this grace period may be used by an entity only once every three years.

lii The commercial reasonableness requirement appears in the exceptions for office space rental, equipment rental, bona fide employment relationships, fair market value compensation, and inpatient hospital services. In general, the financial terms of the arrangement at issue (e.g., the lease or compensation amount) must be considered “commercially reasonable” even if the parties made no referrals to each other. CMS has not clarified the meaning of “commercially reasonable.” The Anti-Kickback Statute would prohibit sham arrangements even if the commercial reasonableness requirement is eliminated from the Physician Self-Referral (Stark) Law – as such, this requirement is unnecessary.

liii AHLA White Paper, pp. 14-15, 21.

liv MACRA § 101(e)(7).

lv MACRA, § 512(b).

lvi AHLA White Paper, pp. 13, 21.

lvii 42 U.S.C. § 1395nn(b)(4).

lviii See, e.g., CMS Gainsharing Report, pp. 5-6 (2016).

lix AHLA White Paper, pp. 11-13, 21.

lx AHLA White Paper, p. 22.

lxi AHLA White Paper, pp. 12, 22.

Appendix C

Appendix D

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Appendix D