HHS Adopts Changes to Stark Law

Tuesday 1st December 2020


  • CMS and OIG have issued the long-awaited final rules, which are due to come into force on January 19, 2021, to modernize and clarify the Stark Act and the Anti-Kickback Statute

  • New exceptions and safe havens will encourage coordinated services between health care providers, with an emphasis on value-based pay and collaborative care

  • The final rules recognize the role of electronic health records and cybersecurity technologies that allow providers to share resources without breaking various regulations

On November 20, 2020, the U.S. Department of Health (HHS) released final rules to clarify and revise the regulatory exemptions from the Doctors Self Referral Act (also known as the Stark Act, the Anti-Kickback Act (AKS)) safe havens and the civil fine laws related to the law on incentives for beneficiaries. The new rules are intended to remove regulatory barriers, accelerate the shift in reimbursement from volume-based to value-based payments, and promote coordinated care across the healthcare system.

The Office of Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS) finalized these rules as part of their Regulatory Sprint to Coordinated Care.

These changes will take effect on January 19, 2021, with the exception of an amendment to the remuneration distribution provisions for the Stark Law Group’s practice, which will take effect on January 1, 2022.

In its press release announcing the reforms, HHS stated that it intended “to give healthcare providers more flexibility to enter into value-based agreements and provide coordinated care to patients[, and] . . . Relieve unnecessary compliance burdens[s] for healthcare providers and other stakeholders across the industry while maintaining strict safeguards to protect patients and programs from fraud and abuse. ”

Major legislative changes

The Stark Act generally governs the financial relationships between physicians and facilities making claims for certain specific health services, and sets the exemptions for financial relationships that HHS has determined not to pose a risk of program abuse. In the new definitive rule, CMS set three new exceptions and definitions for certain value-based compensation agreements between or between doctors, providers and suppliers and changed the existing electronic health record (EHR) exception.

When it comes to value-based agreements, CMS has codified its “tiered” rules and made three “new, permanent exemptions from the law on self-referral of doctors”: 1) Value-based agreements with full funding for the duration of the agreement. Risk of a payer for patient care services for a target patient population, 2) value-based arrangements with significant downside financial risk for failure to achieve the value-based company’s value-based goals throughout the life of the arrangement; and 3) any value-based agreement provided the listed requirements are met.

The specific activities of the parties involved in these compensation relationships are decisive in determining whether the proposed value-based arrangement qualifies for an exception under the Stark Act.

A separate section defines critical terms needed to analyze certain compensation agreements, including value-based companies and audiences:

  • A “value-based company” is defined as a network of participants (such as clinicians, providers and suppliers) who have agreed to work together on a target patient population to put the patient at the center of care through care coordination and delivery efficiency of nurturing and improving outcomes for patients

  • A “company” focuses on functions and can be a separate legal entity, e.g. B. a responsible care organization, or two parties with written documentation of the value-based agreement

  • A “Target Patient Population” means an identified patient population that is based on legitimate and verifiable criteria, established in writing prior to the commencement of the Value Agreement, and that promotes the Value Purposes of the Value Company

CMS also added two new exceptions – one for specific agreements where a doctor receives limited compensation for items or services actually provided by the doctor, and the other, targeted to OIG, for donations of cybersecurity technology, hardware, software, and include related services.

Each of these new exemptions include the requirement that 1) the remuneration does not provide an incentive to reduce or limit medically necessary items or services for a patient, and 2) if a patient expresses a preference for a provider, that preference supersedes any referral terms. In addition, the new exemption for limited compensation includes an annual monetary cap in addition to the general requirement that payment does not exceed the fair value of the items or services provided.

The final rule also includes comments and insights into the interpretation of numerous defined terms and various requirements that are scattered throughout Stark’s law.

Anti-Kickback Statute Safe Haven

OIG’s final rule adds seven new Safe Harbor provisions for certain coordinated care and value-based regimes, modifies four existing Safe Harbor safeguards, and codifies a new exception under the civil penalty prohibitions against incentives for beneficiaries related to telehealth technologies, which are provided for certain in-home technologies for dialysis patients.

In coordination with the exceptions under the Stark Act, OIG established three “new safe havens for remuneration that is exchanged between or between participants in a value-based agreement”. These value-based safe havens follow a similar “tiered” framework: 1) arrangements to coordinate care to improve quality, health outcomes and efficiency without the parties taking risks; 2) value-based arrangements with significant downside financial risk; and 3) value-based arrangements with full financial risk.

OIG has also completed a new safe haven for patient loyalty tools and support that a value company participant provides to a patient in a target patient population, as well as a safe haven for participants in CMS-sponsored model agreements and patient model incentives (e.g. Medicare Shared Savings Program) to ensure better predictability and consistency between models.

The other Safe Harbor provisions include cybersecurity technology, tools, and related services, and EHR items and services, similar to Stark, and arrangements for personal service, warranties, and on-site transportation.

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