Proposed Federal Rule Changes Could Increase Flexibility for Health Care Providers

October 15, 2019

By: Willard L. Boyd III, Eric N. Fischer

On October 9, 2019, the Department of Health and Human Services (HHS) released proposed changes to the Stark Law and the Anti-Kickback Statute. These changes represent some of the most significant alterations to these regulatory regimes in nearly 10 years.


The changes are part of HHS’s “Regulatory Sprint to Coordinated Care” initiated in 2018 for the purpose of reducing regulatory burdens and incentivizing coordinated care. The Proposed Rules for the Stark Law and the Anti- Kickback Statute are open for public comment for 75 days from publication in the Federal Register.


The Proposed Rules are the result of coordination between the Centers for Medicare and Medicaid Services (CMS) and the HHS Office of Inspector General (OIG) to address challenges and uncertainties in providing coordinated and value-based care. The Proposed Rules reiterate that the Stark Law and the Anti-Kickback Statute are distinct but related statutory regimes.


Both CMS and OIG make clear that the Anti-Kickback Statute is intended to act as a backup to protect against situations falling within a Stark Law exception but are nonetheless abusive. CMS and OIG also indicate that the Proposed Rules are provided in response to comments on the high burden of compliance with the Stark Law and the Anti-Kickback Statute. Below are some highlights of the Proposed Rules.


Proposed Anti-Kickback Statute Rules:

  • Modifications to Existing Safe Harbors
    • Personal Services and Management Contracts. OIG proposes rules to add flexibility to engage in part-time and outcomes-based arrangements by removing the aggregate compensation set in advance requirements and part-time schedule requirements, which are intended to afford parties additional flexibility in designing bona fide business arrangements, including care coordination and quality-based arrangements, where parties provide legitimate services as needed. The Proposed Rules set forth a requirement that only the compensation methodology be set out in advance.
    • Local Transportation. OIG proposes to expand the distance that residents of rural areas may be transported and remove all mileage limitations on transportation of a patient from a healthcare facility to the patient’s residence.


  • New Safe Harbors
    • Care Coordination and Value-Based Arrangements. OIG proposes three new safe harbors to address:
      1. care coordination arrangements to improve quality, health outcomes, and efficiency;
      2. value-based arrangements with substantial downside financial risk; and
      3. value-based arrangements with full downside financial risk.
    • CMS Sponsored Models. OIG proposes a safe harbor for remuneration received in connection with models sponsored by CMS. This will reduce the need for separate and distinct fraud and abuse waivers.
    • Patient Engagement. OIG proposes to protect support provided to patients to improve health outcomes and efficiency. This new safe harbor specifically excludes gift cards, cash, and cash equivalents and applies only to value-based enterprise participants as defined in the Proposed Rules.
    • Cybersecurity Technology and Related Services. OIG proposes a safe harbor to protect donations of certain cybersecurity and related services with appropriate safeguards.


Proposed Stark Rules:

  • New Compensation Exceptions
    • Value-Based Care Exceptions: CMS proposes an exception for value-based arrangements with differing requirements depending on the level of financial risk assumed by the parties.
    • Exception for Cybersecurity Technology. Consistent with the OIG’s Anti-Kickback Statute safe harbor proposal, CMS proposes an exception for arrangements involving the donation of certain cybersecurity technologies by hospitals to providers that they work with frequently. The Proposed Rules also indicate that hospitals may equip physicians with software to help them monitor patient health outcomes.
    • Exception for Limited Remuneration to Physicians. CMS proposed an exception for certain compensation arrangements not exceeding $3,500 per calendar year in the aggregate. This exception is for remuneration from an entity to a physician for items or services provided by the physician at fair market value under a commercially reasonable arrangement that meets certain other requirements, even if the arrangement is not in writing and the amount of remuneration is not set in advance as is otherwise required. This new exception is intended to cover items and services provided on an infrequent or short-term basis.


  • Other Modifications
    • Definitions to Key Stark Terms. CMS proposes new definitions for the volume/value standard, “fair market value” and “commercial reasonableness.” The new definition of commercially reasonable is especially important as the standard is essential for Stark compliance. The Proposed Rules define “commercially reasonable” to mean that “the particular arrangement furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangements. An arrangement may be commercially reasonable even if it does not result in profit for one or more of the parties.”
    • Group Practice Requirements. CMS proposes revisions to clarify uncertainties around compensation and allocation of income among members of a Group Practice. The proposals for value-based arrangements provide flexibility for Group Practices compensating physicians for participating in those programs. Under the Proposed Rules, income from participation in a value-based enterprise can be split among the physicians participating in the value-based enterprise, because that income is deemed not to directly take into account the volume or value of physician referrals. These changes make it easier to provide financial incentives for members of Group Practices to participate in care coordination and value-based enterprises.
    • Various Compensation Exceptions. CMS proposes to loosen the requirements needed to comply with the recruitment exception, fair market value exception, indirect compensation exception, isolated transaction exception, equipment lease exception, and space lease exception. These proposed revisions could have significant impacts beyond value-based arrangements and require careful consideration.


In its Fact Sheet about the Proposed Rules, CMS indicates that it is soliciting comments about the role of price transparency in the Stark Law and whether to require cost of care information at the time of a referral. CMS indicates that “such information could empower patients to have conversations about costs with their physicians at the point of care and serve as an additional safeguard at the point of referral.”


If finalized substantially in their current form, these rules could present significant opportunities for flexibility and care coordination for healthcare providers; however, they may also necessitate revisions to current policies and procedures in the health care industry.