Observation Deck

Modifications to Stark and the Anti-Kickback Statute

Physician self-referral law and the federal anti-kickback statute have seen modifications in the move to value-based care.

EDITOR’S NOTE: This article is a summary. Baird has generously authored a deep analysis of the full topic that we have posted online. There is much that providers need to understand on this issue, and we highly recommended they read it.

The full feature is at hme-business.com/vbclaw.

The fee-for-service payment model is transitioning to a value-based care (VBC) model, which is premised on the collaboration of providers and the achievement of certain metrics.

The challenge is that VBC has run up against the federal physician self-referral law (Stark) and the federal anti-kickback statute (AKS). Recognizing this challenge, on November 20, 2020, CMS and the OIG issued Final Rules that updated Stark and the AKS.


New Value-Based Enterprise (VBE) Exceptions:

  • The Full Financial Risk exception applies to value-based arrangements among VBE participants that have assumed full financial risk for the cost of patient care in the target patient population for a defined time period.
  • Meaningful Downside Financial Risk to the Physician exception protects remuneration paid under a value-based arrangement where the physician assumes a meaningful level of financial risk.
  • The Value-Based Arrangements exception pertains to value-based arrangements ... even if no risk is assumed by the VBE participants.

Execution of Documents. Documents can be prepared and executed within 90 days of the beginning of the arrangement.

Set in Advance. Compensation may be modified during the term of an agreement where the modified compensation is not based on the volume or value of referrals.

Disallowance. CMS deleted the rules on the period of disallowance. Parties to an arrangement can correct errors for up to 90 days after a compensation arrangement ends.

Indirect Compensation. Exceptions are available to protect a physician’s referrals to an entity when the indirect compensation includes a value-based arrangement to which the physician is a direct party.

Limited Remuneration to a Physician. Limited remuneration (not to exceed $5,000 per year) may be paid to a physician, for substantive services rendered, without a written agreement or compensation set in advance.

Patient Choice. An entity may direct a physician to refer to a specific provider.

Fair Market Value (FMV). FMV is the value in an arm’s-length transaction consistent with the general market value of the transaction.

Volume or Value of Referrals/Business Generated. The Final Rule discusses when arrangements will be construed as taking into account the volume or value of referrals or other business generated.

Commercial Reasonableness. The arrangement needs to make sense as a means to accomplish the parties’ goals.

Rental of Office Space and Equipment. These exceptions do not prohibit multiple lessees from using the space or equipment.

Group Practice. Effective January 1, 2022, if a physician group practice establishes a valid value-based model, then distribution of profits to physician members will be construed as not taking into account the volume or value of the physicians’ referrals.

Consistency of Stark and the AKS. An arrangement no longer must comply with the AKS as a precondition to meeting a Stark exception.

Anti-Kickback Statute

New VBE Safe Harbors. With limited exceptions, DME suppliers may not utilize the following new value-based safe harbors:

  • The Value-Based Arrangements with Full Financial Risk safe harbor provides the greatest flexibility, because it requires the assumption of the most risk.
  • The Value-Based Arrangements with Substantial Downside Risk safe harbor protects both in-kind and monetary remuneration if the VBE participants assume a certain amount of risk.
  • The Care Coordination Arrangements safe harbor does not require the participants to take on risk.

New Patient Engagement and Support Safe Harbor. This new safe harbor, which is inapplicable to DME suppliers, provides protection for certain patient engagement tools.

Modifications of Existing Safe Harbors:

  • Local Transportation safe harbor. Mileage limits are increased to 75 miles for residents in rural areas.
  • Warranty safe harbor. Protection is afforded to a bundle of one or more items and related services.
  • Personal Services and Management Contracts and Outcomes-Based Payments safe harbor now includes the protection for certain outcome-based payment arrangements. This new provision is not available to DME suppliers. The requirement that the aggregate payment for a management or services arrangement be set out in advance is removed; only the methodology needs to be set in advance. The requirement that a part-time arrangement have a schedule of services specifically set out in the written agreement is removed.

Anti-Kickback Statute

Electronic Health Records (EHR). CMS and the OIG relaxed the EHR Stark exception and AKS safe harbor.

Cybersecurity Technology. The goal of the new safe harbor and Stark exception is to facilitate the donation of cybersecurity technology.

This article originally appeared in the Mar/Apr 2021 issue of HME Business.

About the Author

Jeffrey S. Baird, Esq., is Chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents HME companies, pharmacies, infusion companies, manufacturers and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or jbaird@bf-law.com.

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