The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS) recently released two proposed rules restructuring the Physician Self-Referral Law (the Stark Law) and the Federal Anti-Kickback Statute (AKS) regulations.

Background on the Action

HHS previously recognized the “broad reach” of the Stark Law, AKS, and the beneficiary inducements civil monetary penalty law. The federal agency also acknowledged that the serious consequences of noncompliance with Stark and AKS had the potential to discourage arrangements promoting value-based care and care coordination between providers. Plus, HHS acknowledged noncompliance could have a potential chilling on innovation within the healthcare industry. HHS initiated its “Regulatory Sprint to Coordinated Care” and requested comments from health care industry stakeholders on how it could reduce the regulatory burden of Stark and AKS to encourage innovation in relationships among stakeholders and promote value-based care and care coordination.

Guided by comments received, CMS and the OIG released the following proposed rules on October 9, 2019:

CMS-Proposed Changes to Stark Regulations

The Stark Law prohibits physicians from making referrals for certain designated health services payable by Medicare to an entity where a referring physician (or the physician’s immediate family member) has a financial relationship (compensation or investment), unless an exception applies, and prohibits the entity from billing for those referred services. In its proposed rule, CMS introduces new exceptions and changes existing Stark exceptions. CMS provides additional guidance on existing exceptions in the proposed rule.   

The proposed rule provides multiple new exceptions for value-based arrangements for:

  • Programs where participants in a value-based enterprise have assumed full financial risk for patient care items and services for a target population for a specified time period.
  • Arrangements with meaningful downside financial risk to a participating physician.
  • Qualifying value-based arrangements, regardless of the level of risk undertaken by the value-based enterprise or the participants in the arrangement. 

These exceptions are applicable to care furnished to Medicare beneficiaries, non-Medicare patients, or a combination of both.

The proposed rule also includes:

  • New exceptions for arrangements where physicians receive “limited remunerations” for items or services actually provided by a participating physician (not to exceed $3,500 a year).
  • A new exception for the donation of electronic health records (EHR) items and services.
  • Changes to the existing exception for EHR items and services.

Further, CMS proposes revisions to numerous existing exceptions, including eliminating AKS compliance as a condition to meet certain exceptions, changing the signature requirement for the physician recruitment exception, and providing that the only party that must be excluded from using space or equipment under the office space and equipment rental exceptions is the lessor.

The CMS-proposed rule also proposes numerous new and revised definitions. These include new definitions for terms related to value-based care, such as “value-based activity” and “value-based purpose.”

The rule proposes a revision of the definition of “fair market value” to provide both a general definition (“generally, fair market value means the value in an arm’s-length transaction with like parties and under like circumstances, of assets or services, consistent with the general market value of the subject transaction”) and specific definitions applicable to equipment and office space rentals.

Finally, CMS provides additional guidance relating to the term “commercially reasonable” in the form of two alternative definitions. The first states that “the particular arrangement furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangements.” The second definition specifies that “the arrangement makes commercial sense and is entered into by a reasonable entity of similar type and size and a reasonable physician of similar scope and specialty.”

In addition to the above proposals, CMS requests comment on numerous areas of the proposed rule, including the definitions of “commercial reasonableness” and  “coordinating and managing care,” permissible ways to determine whether quality of care has improved or whether costs or expenditure growth have been reduced, the role of price transparency as related to Stark, and how to address value-based arrangements that are within a chain of financial relationships between a physician and an entity to which the physician refers designated health services.

OIG-Proposed Changes to AKS Regulations

AKS prohibits the offering, paying, soliciting, or receiving of remuneration (anything of value) to induce or reward referrals or generate federal healthcare program business. Transactions falling within AKS safe harbors are protected regardless of whether they tend to induce referrals. In its proposed rule, the OIG proposes new, and modifies existing, AKS safe harbors.

The OIG-proposed rule includes six new safe harbors that protect:

  • Monetary and in-kind remuneration for certain care coordination arrangements involving participants in value-based arrangements meeting particular standards.
  • Value-based arrangements involving full and substantial downside financial risk from payors for providing items and services.
  • Tools and supports furnished pursuant to patient engagement and support arrangements where such arrangements seek to promote quality, health outcomes, and efficiency.
  • Remuneration exchanged in CMS-sponsored innovation models.
  • Donations of cybersecurity technology and services. 

The proposed new AKS safe harbors covering value-based arrangements provide greater flexibility to participating parties as such parties assume more downside financial risk for care cost and quality.

The proposed rule also modifies four existing safe harbors. Specifically, the OIG proposes:

  • Modifying the EHR items and services safe harbor to extend the EHR safe harbor sunset provision, clarify certain definitions, and eliminate the prohibition on donation of equivalent items or services and replacement EHR technology.
  • Modifying the personal services and management safe harbor to increase flexibility for outcomes-based payments and part-time arrangements.
  • Modifying the warranties safe harbor to revise the definition of “warranty” and provide protection for warranties provided for one or more items and related services.
  • Expanding the transportation safe harbor by revising mileage limits for rural areas and discharged patients.

The proposed rule would also codify the statutory exception to the definition of “remuneration” in the Bipartisan Budget Act of 2018 as it relates to ACO Beneficiary Incentive Programs. It further proposes revisions to the Civil Monetary Penalties Law (CMPL) rules by incorporating a new statutory exception to the prohibition on beneficiary inducements, accomplished by amending the definition of “remuneration” to exclude telehealth technologies used in the care of certain in-home dialysis patients. The OIG was careful to note that its proposed new safe harbors for patient engagement and support arrangements and modifications to the transportation safe harbor would also serve as exceptions to the CMPL prohibition’s definition of “remuneration” by operation of law.

Like the CMS-proposed Stark rule, the OIG proposes a number of new definitions and modifies certain existing definitions relating to AKS. These include new definitions for certain value-based arrangements, “cybersecurity” and “technology,” and “outcomes-based payments,” among others. The proposed rule modifies the definition of “electronic health record” and “interoperable.”

CMS and OIG’s proposed rules were published in the Federal Register on October 17, 2019, triggering a 75-day comment period. When the proposed rules are finalized, with or without substantial change to the rules as proposed, health industry stakeholders can expect impactful changes to the Stark and AKS rules and will need to re-assess their compliance efforts.

Ballard Spahr's Health Care Group advises health care organizations on compliance with the Stark Law and AKS.


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