Health Law Daily New exceptions proposed in revision of Stark law rules
Tuesday, October 15, 2019

New exceptions proposed in revision of Stark law rules

By Cathleen Calhoun, J.D.

Value-based arrangements are allowed under proposed new rules, but how are they defined?

An advance release of proposed changes to physician self-referral regulations include exceptions to the physician self-referral law (often called the Stark Law) for certain value-based compensation arrangements between or among physicians, providers, and suppliers. New exceptions are proposed for (1) certain arrangements where a physician receives limited remuneration for items or services actually provided by the physician; and (2) for donations of cybersecurity technology and related services. According to CMS, the proposed rule also provides guidance for physicians and health care providers and suppliers whose financial relationships are governed by the physician self-referral statute and regulations.

Background. The Stark Law, (Soc. Sec. Act §1877), (1) prohibits a physician from making referrals for certain designated health services payable by Medicare to an entity with which he or she (or an immediate family member) has a financial relationship, unless an exception applies; and (2) prohibits the entity from filing claims with Medicare (or billing another individual, entity, or third party payer) for those referred services. A financial relationship means an ownership or investment interest in the entity or a compensation arrangement with the entity. A number of specific exceptions exist, and the statute establishes a number of specific exceptions and grants the HHS the authority to create regulatory exceptions for financial relationships that do not pose a risk of program or patient abuse. Aspects of the physician self-referral prohibitions are also extended to Medicaid under §1903(s).

New proposed exceptions. Under the proposed rule, new exceptions to the Stark Law are created for value-based arrangements. The proposed rule permits physicians and other healthcare providers to design and enter into value-based arrangements without concern that activities to coordinate and improve the quality of care for patients and lower costs would violate the Stark Law. The exceptions would apply regardless of whether the arrangement relates to care furnished to people with Medicare or other patients.

The proposed exceptions apply only to compensation arrangements that qualify as value-based arrangements. New definitions are proposed at 42 C.F.R. §411.351:

  • Value-based activity would mean any of the following activities, provided that the activity is reasonably designed to achieve at least one value-based purpose of the value-based enterprise: (1) the provision of an item or service; (2) the taking of an action; or (3) the refraining from taking an action. The making of a referral is not a value-based activity.
  • Value-based arrangement would mean an arrangement for the provision of at least one value-based activity for a target patient population between or among: (1) the value-based enterprise and one or more of its value-based enterprise (VBE) participants; or (2) VBE participants in the same value-based enterprise.
  • Value-based enterprise would mean two or more VBE participants: (1) collaborating to achieve at least one value-based purpose; (2) each of which is a party to a value-based arrangement with the other or at least one other VBE participant in the value-based enterprise; (3) that have an accountable body or person responsible for financial and operational oversight of the value-based enterprise; and (4) that have a governing document that describes the value-based enterprise and how the VBE participants intend to achieve its value-based purpose(s).
  • Value-based purpose would mean: (1) coordinating and managing the care of a target patient population; (2) improving the quality of care for a target patient population; (3) appropriately reducing the costs to, or growth in expenditures of, payors without reducing the quality of care for a target patient population; or (4) transitioning from health care delivery and payment mechanisms based on the volume of items and services provided to mechanisms based on the quality of care and control of costs of care for a target patient population.
  • VBE participant would mean an individual or entity that engages in at least one value-based activity as part of a value-based enterprise.
  • Target patient population would mean an identified patient population selected by a value-based enterprise or its VBE participants based on legitimate and verifiable criteria that are set out in writing in advance of the commencement of the value-based arrangement and further the value-based enterprise’s value-based purpose.

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