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Healthcare Lawyers Weigh In on Proposed Stark Law, Anti-Kickback Revisions

Analysis  |  By John Commins  
   October 15, 2019

Experts on healthcare law say the proposed revisions to the Stark Law and Anti-Kickback Statute will create more opportunities for providers, and challenges.

What can we anticipate with the Stark Law and Anti-kickback Statute proposed revisions put forward this month by the Trump administration?

We asked four healthcare attorneys for their initial assessments of the proposed revisions and how it may change the landscape for healthcare delivery.

Here's what they said. Their responses have been slightly edited for length.

HLM: Will these proposed revisions deliver the promise of reducing regulatory burdens on providers?

Danielle Sloane: Bass, Berry & Sims.

The proposed changes add flexibility and some important clarifications. For example, the newly proposed value-based exceptions and safe harbors are generally broad and flexible, which will stimulate innovation with respect to value-based payment models.  Moreover, several of the changes will help facilitate greater patient engagement in value-based programs.

There are also a number of valuable Stark regulatory clarifications and changes that will alleviate some of the regulatory burdens.  For example, CMS clarified its aim to interpret the Stark statutory prohibitions narrowly and the exceptions broadly; and in doing so, broadened the applicability of several exceptions.  Also, the industry likely breathed a collective sigh of relief upon seeing CMS's proposed definition of "commercial reasonability," which clearly states that profitability is not determinative of commercial reasonability. 

At first blush the proposals do not lessen the complexity overall; nor, could the agencies really have achieved that absent statutory changes. The length of the proposals alone is evidence of the continuing complexity. At the end of the day, these laws contain a maze of definitions, exceptions or safe harbors, special rules and thousands of pages of preamble guidance; and, the risk of any missteps remains high.

Karl Thallner and Nicole Aiken-Shaban: Reed Smith Life Sciences Health Industry Group

For healthcare systems and physician providers, these changes provide welcome clarification to key concepts of the Stark Law, and provide some clarity on the types of features that the government expects to see in permissible value-based arrangements. Other providers, including certain manufacturers and suppliers, may want to provide comments in response to the proposed rules in order to carve out a place for themselves at the value-based table.

William Maruca, a partner at Fox Rothschild LLC
Most of these changes don't address regulatory burdens as much as uncertainty about whether different kinds of relationships among providers, payors and Medicare are legal. Given that the Stark Law is a strict-liability law, anything that didn't fit squarely within an exception before was considered too risky. These changes will have minimal impact on most current arrangements but may encourage the growth of new minimally-integrated networks of providers sharing risk and coordinating care in ways we haven't seen. The goal is to break the stranglehold of fee-for-service on the economics of healthcare so that delivering quality outcomes is more important and more lucrative than churning visits, procedures and RVUs.  

HLM: What real-world impact will we see if these proposals are approved?

Sloane: The proposals, if finalized, are likely to spur expansion of value-based models used by healthcare organizations.  Given, however, the sophisticated data analysis necessary to implement these programs and the continuing regulatory complexities, consolidation across the industry is likely to continue, if not accelerate.  We are likely to see new start-ups emerge that aim to help start, facilitate and manage value-based payment models. Hopefully, the proposals will result in fewer frivolous whistleblower lawsuits or, at least, make them easier to defend. Also, the revised EMR and new cybersecurity safe harbors and exceptions should help effectuate cybersecurity improvements across the industry that will better protect all of our personal data.

Thallner and Aiken-Shaban: For healthcare systems and providers, like hospitals and physicians, if finalized, these proposals will bring greater certainty to the compliance of the value-based enterprises such providers engage in currently, or seek to develop. Furthermore, the Stark Law clarifications will allow providers greater certainty on how to structure arrangements within existing exceptions that rely on key concepts of fair market value, commercial reasonableness, and that the remuneration not vary with the volume or value of referrals between the parties. This and other changes should reduce the need for self-disclosures of non-compliant arrangements to CMS, and enhance defenses in related False Claims Act litigation based on alleged non-compliance with those exceptions.

Maruca: The Medicare ACO program is only one form of value-based reimbursement, but its results suggest many other approaches to care coordination and risk-bearing will be developed in the coming years. It is likely to take some time for the results to appear. The value-based models promoted under these new rules will primarily benefit larger organizations and health systems who have the infrastructure to monitor costs and outcomes. Independent medical practices have survived many premature obituaries but this is another pressure point that may encourage some of the survivors to sell or at a minimum to contract with the organizations who are better positioned to participate in these models.

HLM: Are there any unforeseen consequences of these actions?

Sloane: There is some risk people will take the relaxation of certain regulations too far. Healthcare companies should not use these proposals (assuming finalized) as a reason to reduce their compliance efforts. Many of the changes, particularly with respect to Stark, seem like defensive safeguards against a violation of Stark in the event existing policies and procedures (e.g., contracting procedures) unintentionally break down. For example, we would not recommend any hospital stop or carve back its physician contracting procedures because certain inpatient hospital services are no longer DHS.

It is clear that the OIG is on the lookout for any unintended consequences of the new value-based payment safe harbors. The OIG notes that value-based arrangements come with their own risks of things like inappropriately reducing care, cherry picking lucrative or adherent patients, lemon dropping expensive or noncompliant patients, and manipulating performance data. In part for these reasons, the OIG's value-based safe harbors are more restrictive than the Stark exceptions.

Thallner and Aiken-Shaban: For those categories of healthcare manufacturers and suppliers proposed to be excluded from the value-based exceptions, it draws into question their continued ability to rely on existing exceptions and safe harbors that they have historically used to protect or assess the risk posed by value-based and shared savings arrangements.

Maruca: People and organizations can be expected to react to financial incentives, so there may be issues where unscrupulous players try to game the new system by fudging outcomes, screening out the sickest patients, or just undertreating patients to generate savings they can then share in. Both CMS and OIG are anticipating these concerns in their preambles and both acknowledge that there may be more risks that cannot be foreseen. This is one reason proposed rulemaking is published for comment. Watching the comments come in will be one way to identify potential consequences unanticipated by the regulators. Another challenge will be measuring quality of outcomes, adjusting for severity of illnesses across populations to minimize any ill effects of financial rewards that are designed to discourage unnecessary care and end up reducing necessary care.

HLM: Are there any icebergs looming for this proposal that may jeopardize implementation?

Sloane: These laws impact every healthcare provider, supplier and practitioner. A lot of discussion and many viewpoints will emerge in the coming months. CMS and OIG will get a lot of comments, which will likely slow the release of the final rule. But in the end, a lot of these proposals will be finalized.  

Thallner and Aiken-Shaban: The manufacturer and supplier community may not have seen the types of changes it had hoped to see with regard to value-based pricing, and therefore may oppose the proposals strongly. Additionally, in their proposals, OIG and CMS offered a large number of alternative structures, elements, and definitions on which they solicited comments, which leaves stakeholders uncertain as to the likely contours of the final regulations, and which might give OIG and CMS more challenges in finalizing the proposed value-based rules in a timely fashion.

Maruca: Fortunately for the agencies, no vote is needed in Congress, since there is little chance for any consensus there. There will be a 75-day comment period where stakeholders can provide input, then CMS and OIG will need to react to those comments. One area of controversy is that the OIG has decided to exclude certain players from participating in Safe Harbor-approved "Value Based Enterprises", specifically pharmaceutical manufacturers; manufacturers, distributors, or suppliers of durable medical equipment, prosthetics, orthotics or supplies; and laboratories. They are also considering excluding pharmacies, specifically compounding pharmacies, and pharmacy benefit managers and have requested input.

“At the end of the day, these laws contain a maze of definitions, exceptions or safe harbors, special rules and thousands of pages of preamble guidance; and, the risk of any missteps remains high.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Photo credit: Mark Van Scyoc /


For providers, these changes provide clarity on the types of features that the government expects to see in permissible value-based arrangements.

The value-based models promoted under these new rules will primarily benefit larger organizations that have the infrastructure to monitor costs and outcomes.

One area of controversy is that the OIG has excluded certain manufacturers from participating in Safe Harbor-approved Value Based Enterprises.

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