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Monica A. Wallace focuses her practice on complex regulatory and transactional counseling to health care organizations, including health systems, hospitals, ambulatory surgery centers, physician groups, dental providers, integrated delivery systems, academic medical centers, DMEPOS and pharmaceutical manufacturers and suppliers, home health agencies, and venture capital and private equity firms and their health-related portfolio companies. Read Monica A. Wallace's full bio.

On June 25, 2018, the Centers for Medicare and Medicaid Services (CMS) published a request for information, seeking input from the public on how to address any undue regulatory impact and burden of the physician self-referral law (Stark Law) on value-based and other coordinated care arrangements designed to improve quality and lower cost. While the overall focus of CMS’s request for information is on the Stark Law’s actual or perceived barriers to innovation, the request also gives the health care industry a unique opportunity to comment on and request revisions or clarifications for any significant Stark Law provision, including the provisions regarding fair market value, volume or value, and commercial reasonableness, as well as the Stark “group practice” definition.

As part of its focus to shift from a fee-for-service to a value-based health care delivery system, the US Department of Health and Human Services (HHS) launched a “Regulatory Sprint to Coordinated Care,” which is focused on identifying regulatory barriers to coordinated care. CMS identified aspects of the Stark Law that may create obstacles to participation in integrated delivery models, alternative payment models, and other arrangements incentivizing improvements in outcomes and reductions in costs, and is seeking input on revisions or additions to exceptions to the Stark Law.

The Stark Law is largely indifferent to the good faith intentions of health systems to integrate and enter into coordinated care arrangements with physicians, and continues to impose on health systems burdens of proof that the arrangements comply with ambiguous standards like fair market value, volume or value and commercial reasonableness. While financial transactions incident to CMS’s innovative care delivery and payment initiatives, such as accountable care organizations (ACOs), medical homes and bundled payment arrangements can be protected by certain fraud and abuse/Stark Law waivers, there are other common transactions and arrangements with physicians still operating in a fee-for-service environment (such as practice acquisitions, employment, “gainsharing,” service line co-management, pay-for-quality and non-ACO clinically integrated networks) that are not protected by the waivers. CMS’s request for information provides a welcome opportunity for the health care industry to educate CMS on the obstacles the Stark Law presents for innovative coordinated care arrangements with physicians.

In its request, CMS posed 20 specific requests for information on novel financial arrangements and alternative payment models, the applicability of current Stark Law exceptions to such arrangements, and what additional exceptions or revisions to the Stark Law are necessary to protect coordinated care arrangements from Stark Law liability. These requests, however, are so far ranging that they effectively invite comments on just about any Stark Law provision that a stakeholder believes warrants revision or clarification.

Comments are due by 5 pm EDT on August 24, 2018. If you would like assistance in preparing comments, please contact one of the authors or your regular McDermott lawyer.

On December 7, 2016, the Office of Inspector General of the US Department of Health and Human Services published a final rule containing revisions to both the federal Anti-Kickback Statute safe harbors and the beneficiary inducement prohibition in the civil monetary penalty rules. Effective January 6, 2017, the Final Rule modifies certain existing safe harbors and adds additional safe harbors to the Anti-Kickback Statute and incorporates Affordable Care Act-mandated exceptions into the definition of remuneration under the civil monetary penalty rules.

Read the full article here.

On December 7, 2016, the Office of the Inspector General (OIG) of the US Department of Health and Human Services (HHS) issued a policy statement increasing its thresholds for gifts that are considered “nominal” for purposes of the patient inducement provisions of the civil monetary penalties law (section 1128A(a)(5) of the Social Security Act) (CMP Law). HHS also announced the new thresholds in the preamble to a final rule issued on December 7, 2016, revising safe harbors under the Anti-Kickback Statute and rules under the CMP Law. 81 Fed. Reg. 88368, 88394 (Dec. 7, 2016).  The previous thresholds for gifts to Medicare and Medicaid beneficiaries were $10 per item or $50 in the aggregate annually per patient. The new thresholds are $15 per item or $75 in the aggregate annually per patient.

Under the CMP Law, a person who offers or provides any remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable for civil money penalties, subject to a limited number of exceptions. The OIG has indicated that gifts of “nominal value” are not required to meet an exception. However, the OIG has not changed its thresholds for what constitutes “nominal value” since issuing its 2002 Special Advisory Bulletin: Offering Gifts and Other Inducements to Beneficiaries, which included thresholds of no more than $10 in value individually or $50 in value in the aggregate annually per patient. To account for inflation, the OIG has now increased its interpretation of “nominal value,” permitting inexpensive gifts (other than cash or cash equivalents) of no more than $15 per item or $75 in the aggregate per patient annually, effective immediately.

The OIG’s policy statement provides that violations of the CMP Law could result in penalties of up to $10,000 per wrongful act; however, HHS increased the penalty to $15,024 per violation in an interim final rule issued earlier this year. 81 Fed. Reg. 61538, 61543 (Sept. 6, 2016). While the new thresholds are still fairly low, they are a welcome update to the longstanding $10/$50 thresholds.

The good, reassuring news about that “old dog” fraud and abuse as it enters an age of payment reform is that criminal liability for fraud still requires a specific intent to defraud the federal health care programs, anti-kickback liability still requires actual knowledge of at least the wrongfulness, if not the illegality, of the financial transaction with a referral source, and civil False Claims Act liability for Stark Law violations still requires actual knowledge, a reckless disregard for, or deliberate ignorance of the Stark Law violation. This should mean that good faith and diligent efforts to comply with law, including seeking and following legal counsel, still go a long way in managing an organization’s and individual executive’s risk under the fraud and abuse laws. The bad, unsettling news about fraud and abuse in an age of payment reform, however, is that (1) anxiety about reform and stagnating and declining physician incomes are propelling a spike in transactions between health systems and physicians at a time when qui tam plaintiffs and the law firms that represent them are aggressively challenging the legitimacy and common structures for these transactions; and (2) the Stark Law is largely indifferent to the good faith intentions of health systems to integrate and enter into coordinated care arrangements with physicians, and continues to impose on health systems heavy burdens of proof that the arrangements comply with ambiguous standards like fair market value, volume or value and commercial reasonableness. While financial transactions incident to the Centers for Medicare and Medicaid Services’ (CMS) innovative care delivery and payment initiatives, such as accountable care organizations (ACOs), medical homes and bundled payment arrangements can be protected by the fraud and abuse/Stark waivers discussed in Part B below, there are many other common transactions and arrangements with physicians still operating in a fee-for-service environment  (such as practice acquisitions, employment, “gainsharing,” service line co-management, pay-for-quality and non-ACO clinically integrated networks) that are not protected by the waivers. During this period of transition to transformation of the health delivery and payment system, the key areas of risk for health systems are their burdens of proof on the ‘big three” issues of:

  • Fair market value,
  • Volume or value, and
  • Commercial reasonableness.

Each is discussed separately below, and the industry practices for managing these risks. Please note that none of these practices are necessarily “best” or “normative” practices, but are what we have observed.

Read the full article here.