Locke Lord QuickStudy: HHS Proposes Rules to Modernize Stark Law and the Anti-Kickback Regulations and Promote Value-Based Care

Locke Lord LLP
October 10, 2019

On October 9, 2019, the U.S. Department of Health and Human Services (“HHS”) proposed rules that would substantially reform the Physician Self-Referral Regulations (“Stark Regulations”) and the Federal Anti-Kickback Safe Harbor Regulations. The proposed changes to the Stark Regulations, issued by the Centers for Medicare & Medicaid Services (“CMS”), and the proposed changes to the Anti-Kickback Safe Harbor Regulations issued by the Office of Inspector General (“OIG”), seek to encourage value-based care arrangements among payors, providers, and newly-defined “value-based enterprises”.

  • New and Amended Safe Harbors Under Anti-Kickback Statute.
    The proposed OIG rule, if adopted in its current form, amends the personal services safe harbor and creates three new, permanent safe harbors to the Anti-Kickback Statute that allow health plans, payors, physicians, hospitals, and other providers to develop and implement innovative payment arrangements without fear that their efforts to coordinate care and reduce the growth in health care expenditures may violate Anti-Kickback Statute. The proposed new safe harbors address the following: (1) the use of outcomes-based payments to improve quality, health outcomes, and efficiency; (2) the use of value-based arrangements to advance population-based care coordination and care management; (3) the use of value-based arrangements which include substantial downside financial risk; and (4) the use of value-based arrangements with full financial risk.1 The proposed regulations define, in some detail, the meanings of permissible outcomes-based payments and “value-based” purposes, enterprises, arrangements, and payments. In addition, the OIG is proposing to revise the safe harbors for warranties and local transportation, and is proposing to codify in regulations the statutory exception to the definition of “remuneration” related to ACO Beneficiary Incentive Programs for the Medicare Shared Savings Program.  The OIG further is proposing a new safe harbor for remuneration provided in connection with a CMS-sponsored innovation center model, thus reducing the need for separate fraud and abuse waivers.

  • New Exceptions Under the Stark Law.
    The proposed revisions to the Stark Regulations would add exceptions for value based arrangements which are closely aligned with the new Anti-Kickback Safe Harbor Regulations.  In the proposed rule,CMS proposes modification to key definitions -- including the ‎definitions of “commercially reasonable” and exceptions within the definition of “designated health ‎services” --  designed to facilitate value-based arrangements and care coordination and to modernize the regulations as the health industry tries to move away from a largely fee-for-service environment. ‎CMS also proposes changes to numerous existing Stark exceptions, including the academic medical center, isolated transactions, indirect compensation, fair market value, lease of space, and lease of equipment exceptions.CMS notes that these changes are necessary to permit compliant value-based arrangements to be developed and implemented as well as to provide guidance and clarity on a wide range of other technical compliance requirements intended to reduce administrative burden that drives up costs.For example, the proposed rule provides more nuanced guidance on how to determine if compensation is fair market value.  The proposed revisions to the Stark Regulations will have impact well beyond value based arrangements, and require careful study.

  • Technology Donations.

    In the effort to facilitate more coordinated patient care, both of the CMS and OIG proposed rules would allow hospitals to provide free cybersecurity software to local providers they work with frequently. For example, HHS explains that, in order to improve cybersecurity of nearby providers, a local hospital “could donate, for free, cybersecurity software to each physician that refers patients to its hospital.”2  Similarly, the proposed rules provide that facilities may equip “physicians with data analytics software to help them monitor patients’ health outcomes.” Ultimately, HHS believes “[t]he proposed rules provide greater certainty for healthcare providers participating in value-based arrangements and providing coordinated care for patients.” The proposed rules also update the existing Anti-Kickback safe harbor Regulation and Stark Regulation exception for electronic health record donations.

  • Scope of Protection Afforded by Proposed Rules?
    The long-awaited reformation of the Stark exceptions and Anti-Kickback Statute safe harbors would apply regardless of whether the arrangement relates to care furnished to Medicare patients and other federal health care program beneficiaries or to commercial health plan members.

The CMS and OIG will accept comments on the proposed rules for 75 days after their publication in the Federal Register. The Locke Lord Health Care Practice Group will publish further guidance on these proposed rules, and the resulting final rules, in the weeks ahead.


1. For further information about the Safe-Harbor Exceptions please refer to the HHS Office of Inspector General Fact Sheet found here.  See also, the CMS fact sheet
2. See HHS Proposes Stark law and Anti-Kickback Statute Reforms to Support-Value-Based and Coordinated Care here.