Stephanie Raborn

In October 2019, the Centers for Medicare and Medicaid (CMS) and the Department of Health and Human Services (HHS) announced several proposed changes to “modernize and clarify” existing complex regulations prohibiting physician self-referral.[1] These proposed changes to the Physician Self-Referral Law (“Stark”) and the Anti-Kickback Statute (“AKS”) could signal a welcomed relaxation of providers’ compliance burdens with regard to the HHS and the CMS. They further illustrate, however, the complexity and challenge healthcare providers of all sizes face in maintaining a compliant practice. HHS and CMS should continue to be responsive to providers’ feedback regarding the challenges of compliance and relieve some of the burden on the industry by providing a greater number of sample arrangements meeting the laws’ requirements. Although the comment period for these proposed changes closed on December 31, 2019,[2] providers should continue to engage with agencies during notice and comment periods and lobby regulatory bodies for simplification and clarification of an increasingly complex compliance burden.

There are two primary federal laws affecting health providers’ agreements: Stark and AKS. These fraud and abuse laws, enforced by the Department of Justice (DOJ), the Department of Health and Human Services Office of Inspector General (HHS OIG) and CMS, can present dangerous pitfalls for unwary providers. Stark prohibits physicians from referring patients seeking certain “designated health services,”[3] which are payable by Medicare and Medicaid to entities in which the physician has a financial relationship, unless an exception applies. The Anti-Kickback Statute is a criminal law that prohibits knowing and willful remuneration—payment of anything of value including not only money, but excessive compensation, expensive hotel stays, meals and more—to induce or reward patient referrals or business generation.[4] Penalties for violation of these laws can include monetary penalties of up to $15,000 and $50,000 per violation (for Stark and AKS respectively) plus the cost of the remuneration multiplied and in the case of the criminal statute potential imprisonment of up to five years per violation.[5] The AKS contains safe harbors that protect certain payment or business arrangements from implication, and Stark’s exceptions and AKS’s safe harbors have been the source of much inquiry and confusion.

Goals of Stark include “protecting patients from unnecessary services and being steered to less convenient, lower quality, or more expensive services because of a physician’s financial self-interest.”[6] Similarly, the goal of the AKS is to avoid overutilization, increased program costs, the adulteration of medical decisions and unfair competition.[7] Laudable and necessary as these goals are, ensuring compliance with these statutes contributes to the labyrinth of regulations that healthcare providers must navigate while simultaneously addressing patients’ healthcare needs. The Stark Law is a strict liability statute, meaning that enforcement officials need not even prove that the provider knowingly or willfully violated the statute in order to obtain a conviction.

HHS’s proposed changes to the AKS include new safe harbors and existing safe harbor modifications, specifically the introduction of new “Value-Based Enterprise” safe harbors, a Personal Services and Management Safe Harbor, and a Cybersecurity and Electronic Health Record Donation Safe Harbor.[8] CMS’s proposed Stark Law changes include the creation of new exceptions for value-based arrangements, including a Full Financial Risk exception, Value-Based Arrangements with Meaningful Downside Financial Risk to the Physician, and a Value-Based Arrangements exception.[9] The scope of these proposed changes is broad, and their publication by HHS and CMS precipitated a flurry of questions and conjecture from the healthcare industry. Potentially affected providers should respond by reviewing the CMS[10] and HHS[11] fact sheets and by consulting healthcare compliance attorneys about implications to their arrangements. Providers should also engage with both agencies by submitting inquiries when the finalized changes are announced, and HHS and CMS should create Q&As and dedicate additional staff to anticipate and respond to inquiries.

[1] HHS Proposes Stark Law and Anti-Kickback Statute Reforms to Support Value-Based and Coordinated Care, U.S. Dep’t of Health and Human Servs. (Oct. 9, 2019), https://www.hhs.gov/about/news/2019/10/09/hhs-proposes-stark-law-anti-kickback-statute-reforms.html.

[2] Modernizing and Clarifying the Physician Self-Referral Regulations Proposed Rules, Ctrs. for Medicare & Medicaid Servs. (Oct. 9, 2019), https://www.cms.gov/newsroom/fact-sheets/modernizing-and-clarifying-physician-self-referral-regulations-proposed-rule.

[3] A Roadmap for New Physicians: Fraud & Abuse Laws, U.S. Dep’t of Health and Human Servs. (last visited Mar. 27, 2020), https://oig.hhs.gov/compliance/physician-education/01laws.asp.

[4] Id.

[5] Comparison of the Anti-Kickback Statute and Stark Law, Health Care Fraud Prevention and Enf’t Action Team, Office of Inspector Gen. (last visited Mar. 27, 2020), https://oig.hhs.gov/compliance/provider-compliance-training/files/StarkandAKSChartHandout508.pdf.

[6] Ctrs. for Medicare & Medicaid Servs., supra note 2.

[7] U.S. Dep’t of Health and Human Servs., supra note 3.

[8] Billy Wynne et al., Proposed Stark Law, Anti-Kickback Reforms Aid to Facilitate Value-Based Care, HealthAffairs (Oct. 15, 2019), https://www.healthaffairs.org/do/10.1377/hblog20191014.13154/full/.

[9] Id.

[10] Ctrs. for Medicare & Medicaid Servs., supra note 2.

[11] HHS Office of Inspector General Fact Sheet, U.S. Dep’t of Health and Human Servs. (Oct. 2019), https://oig.hhs.gov/authorities/docs/2019/CoordinatedCare_FactSheet_October2019.pdf.