New Changes to Stark Law and Anti-Kickback Statutes

Written by: Jordan Johnson, Esq. and Leanne Livingston, Esq.

The Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently revised the federal self-referral Stark Law and safe harbors under the Anti-Kickback Statute (AKS). Before these changes, providers were faced with strict regulations that, if not followed, would result in severe monetary sanctions and potential criminal penalties.

The Stark Law’s goal is to avoid overutilization of medical services that incentivize physician referrals for financial gain. The Stark Law is violated when there is a direct or indirect financial relationship between a physician and another entity to whom the physician refers Medicare or Medicaid patients for the furnishing of Designated Health Services. To meet an exception to the Stark Law and avoid penalties, compensation arrangements in agreements must be set in advance, consistent with fair market value, and not consider the volume or value of referrals generated.

The Anti-Kickback Statute is a criminal and civil statute that prohibits any person from knowingly and willfully paying, offering, receiving, or soliciting any remuneration directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward a referral, purchase or recommendation of, an item or service reimbursable in whole or in part under a Federal health care program, including Medicare and Medicaid. The Anti-Kickback Statute provides “safe harbor” exceptions and grants further leeway to agreements that do not fall within an exception but have a low likelihood of encouraging or facilitating fraud and abuse.

To further facilitate our healthcare system’s shift to value-based care, the new rules remove and revise regulatory barriers that blocked beneficial patient-care arrangements due to their violation of these stringent laws. While these rules create more flexibility, they still maintain important safeguards against overutilization, fraud, and abuse of our healthcare system.

The new Stark Law final rule establishes new, permanent exceptions to the physician self-referral law for certain value-based enterprises between or among physicians, providers, and suppliers. These include, subject to further and detailed conditions explained in the rule:

  • full financial risk exceptions between value-based enterprise participants;
  • exceptions to remuneration paid under a value-based arrangement to a physician who is at “meaningful downside financial risk” for failure to achieve the value-based purpose of the enterprise;
  • value-based arrangements regardless of the level of risk undertaken; and
  • indirect compensation arrangements that include a value-based arrangement.

Additionally, certain arrangements that allow a physician to receive limited remuneration for items or services actually provided by the physician will be subject to new exceptions. Donations of cybersecurity technology and electronic health records also enjoy new and amended exceptions under the final rule as well as the highly anticipated guidance for financial relationships governed by the physician self-referral statute and regulations.

The new AKS final rule creates seven new safe harbors, while modifying four others and codifies one new exception under the Beneficiary Inducements CMP. Some of the new safe harbors that highlight value-based care include:

  • protections for in-kind remuneration exchanged between value-based enterprise participants used for value-based activities that are directly connected to care coordination for a target patient population;
  • value-based arrangements that assume substantial downside financial risk; and
  • value-based arrangements where the value-based enterprise assumes full financial risk.

Overall, the new rules attempt to address many of the regulatory burdens obstructing arrangements that are otherwise beneficial to the patient. The federal emphasis on value-based care propels the Stark Law and Anti-Kickback Statutes forward to a more provider-friendly regulatory structure while continuing to safeguard from fraud, waste, and abuse. While the initial reaction from providers is mixed, the primary objection is whether the revisions and additions to the Stark Law and AKS went far enough. Time will tell.