Speaker 2: We'll come back to Modern Healthcare's Beyond the Byline. We're here to add some context to our stories, to help you better understand the news and how it's reported. My name is Alex Kacik. I'm the hospital operations reporter for modern healthcare rules and regulations report or Michael Brady. And I will examine the latest changes to healthcare's fraud and abuse laws. Mike, I snatched away from inauguration day coverage. I appreciate you taking the time for me.
Speaker 3: Yeah. Thanks for having me, Alex. It's good to be back on the clock. Okay.
Speaker 2: Well, so Mike, after some delays, due to COVID-19 the centers for Medicare and Medicaid and the department of health and human services issued the final rule of the star claw and anti-kickback statute in December. Can you tell me a little bit more about those laws and what prompted the changes?
Speaker 3: So the Starkweather was created in 1989 to sort of root out problems of the, for service medicine. It was originally targeted toward physician referrals for clinical lab services cause by Medicare to weed out any conflicts of interests. But the law of scope is sort of expanded since then to cover other activities. And the anti-kickback statute serves as a sort of backstop for the stark law because it allows the federal government to pursue criminal charges against providers for more of Regis violations. The idea was to reviews, waste, fraud, and abuse in the fee for service system because it encourages providers to deliver more services, but providers and federal officials, and a number of experts thought those rules discovered providers from taking part in value-based arrangements pointing to the fact that only about 3% of net patient revenue came from capitation and risk based payments in 2017. And that figure has been about the same for several years. So most experts agree that these changes will encourage, or at least not actively discourage value-based arrangements that aim to improve care coordination and management.
Speaker 2: So you bring up a good point. You know, this system is based predominantly on fee for service, where you get paid for each service that you produce. And it's been a long incremental move to value based arrangements. And, and to be fair, this isn't the only impediment here in some of these laws, but that's where I hear the framing of some of these updates to the fraud and abuse laws is that, you know, we need this in, in today's healthcare system to facilitate this care coordination, this, that these elements of, of risk taking that have been impeded by our fee for service system. I'm curious how providers say that these laws inhibited value based payment models.
Speaker 3: The anti-kickback statutes were originally put in place to prevent the physicians and profiting off the referrals and Medicare providers that they are a family member had a financial stake in. And so those rules made sense under the traditional fee for service Medicare program, because there's a real risk, but providers have been sort of spooked. The government will come down on them for participating in diabase arrangement, even if they don't receive financial benefits from referrals. But as far as I know, regulators have never taken action against providers for taking part in value-based arrangements under the previous roles. So it's not clear to me whether those years were justified or more of a convenient excuse for sticking with fee for service.
Speaker 2: Well, I think there are two important designations here. The stark law, you could be found in violation of that, even if it's like a documentation error. So even if there's no intent to violate, you know, to induce some sort of referrals and, and financial gain, you know, you could be penalized, but under anti-kickback statute, you don't, you need to prove intent. So there's different thresholds here. I think that's probably why you were saying that anti-kickback statute is more of a backstop to stark.
Speaker 3: Yeah, absolutely. They, especially when it comes to criminal prosecutions, those are really for the most egregious cases that is not for you people making documentation errors and those sorts of things. And that's for people who are trying to commit crimes.
Speaker 2: So there are new safe harbors that came into play that involve value-based entities that take on downside risk. If you're a fully capitated arrangement where you get a lump sum ahead of time, you have a lot more flexibility under these new safe harbors to operate you take on substantial, which is defined as at least 20% of downside risk per episode. You have a little less flexibility, but still the intent of the law is to provide some flexibility to those that do take on risks because that's been projected as is where, you know, the healthcare system should move to, to be more equitable and affordable and efficient. But I'm curious, you know, what, from your reporting, Mike, have you gleaned from, from providers as a, as a way these trade-offs between taking on, you know, more downside risk and the, you know, the potential risks there.
Speaker 3: Most of them are generally supportive of the changes that CMS and OIG made to start and anti-kickback rules. But when I talked to employers and some experts, they're worried that the trade-off won't be worth the risk. If providers get an exception by taking on very little downside risks. So providers may skimp on care, they may treat the patients, they could engage in patient dumping thing or manipulation or falsification of data used to verify outcomes. And that's the sort of, you know, flip side of the fee for service system, which is water literally volume-based and just encourages providers to deliver more services, CMS and OIG seem to have erred on the side of giving to providers, perhaps a bit more freedom than some efforts and employers would have preferred. But I think they're going to be monitoring those things closely to make sure that they haven't sort of gone too far in the other direction, because there is a fundamental trade-off between allowing these flexibilities and maintaining sufficient oversight to make sure there aren't abuses within the program.
Speaker 2: That's a good point. And just to reiterate, taking on downside risk is where, you know, you're putting some of your payments are tied to certain outcomes. So, you know, whether it's length of stay or, you know, other metrics that are used to determine whether a patient is healthy or not, you know, if you don't hit those, then you could be losing some of those payments. And so the worry there is that, you know, even if the intent was good on the provider, they did everything they could providers have limited control to a certain extent of how well a patient does. So they're, don't seem as willing to, to take on that type of risk. The idea of cherry picking patients that you know, are healthier or will do better or on the other side, what they call lemon dropping to not treat any patients that are perceived to not, you know, recover as well, or have underlying complications. They're trying to, as much as they can to weed that out because that's one way essentially providers could game the system and, and maximize reimbursement.
Speaker 3: Yeah. And a lot of the payment models that the mind has put out attempt to do that in their methodologies. But most of the experts I've talked to don't think that those methods are sufficiently rigorous. One common trick that providers have used to try to gain the system. So to speak is to set up clinics in high or moderate income neighborhoods, as opposed to lower income neighborhoods, because the pain models and the risk scoring don't sufficiently adjust for differences in socioeconomic status and other, you know, markers that might be predictive of how healthy people are likely to be and how likely they are to recover. Yeah. So Alex, you've been working on a story about anti-kickback statute and how it comes into play in hospital and physician ambulatory surgical center, joint ventures. What are some of the safe harbors that apply to those arrangements? And what is the OIG looking for as they tried for prevent referral driven profits,
Speaker 2: The outpatient setting has become more of an emphasis, especially among hospital systems where, you know, they're trying to increase access among the community. And so they're trying to push more services into the outpatient setting, all that that's being facilitated to by this inpatient only list, which CMS is winding down. So they're saying that they said that only these procedures, because they're complex can be done in an inpatient facility, but over, I think the next three years, they're going to wind that down completely. These ambulatory surgery center, joint ventures, they have to hit certain thresholds when it comes to fair market value. And those that's where the sticking points for a lot of these rules come into play, but you can't offer let's say office space or any type of equipment to physicians at a discount payment in any way, can't be tied to referrals. They don't need to hit everyone to be a legal arrangement, but they need to show like in good faith that they're trying to satisfy, you know, these exceptions and that they aren't saying, you know, they aren't basing pay on referrals. What it comes down to, I think essentially is the risk threshold of each hospital. And whether they're willing to how, you know, how much they're willing to expose themselves to in these joint ventures. And if they're willing to put up the documentation and do the other leg work required to satisfy some of these safety,
Speaker 3: What have you heard about the new definition of commercially reasonable and fair market value when you've been talking to providers?
Speaker 2: So when it comes to fair market value, there is this discrepancy between fair market value and general market value, which is essentially, you know, what the average pay for a certain specialist is, you know, depending on where they are or their years of service, or what have you. So there is discrepancy there which they've cleared up and they basically said that, you know, general market value equates the fair market value. So it's supposed to be a little bit more clear cut and providers are happy with that when it comes to commercially reasonable, there is one lawyer put it, there was widespread misconception between the nexus of commercial reasonableness and profitability. So prior to the most recent updates compensation, wasn't reasonable. If hospitals paid more for a doctor than the revenue they brought in, but this could hurt, let's say a rural provider where they would have to pay a premium for doctors in order for them to work there because a they're in short supply and, and you know, they, it's not often, you know, they, they most often prefer to go to urban settings. So they might not be bringing in as much revenue to offset that compensation, but that's okay now, so they can still be unprofitable and still be commercially reasonable. But what have you heard in terms of the next steps as providers test out these new, this new regulatory framework?
Speaker 3: You're going to keep an eye on whether providers take up value-based arrangements in the coming years to see if more changes than necessary since that's the principle purpose of the changes I'm personally skeptical. These changes are going to make a huge impact because the fact of the matter is that it's still easier for providers to keep making money the old way under the fee for service system. So, you know, I suspect providers will probably more likely to take up allocation and other value based arrangements to guard against the huge drop off in service volume and fee for service revenue that we've seen during the pandemic. You know, I think if we're really going to move the needle on value, there's going to have to be significant changes to the way the innovation center does models. This is something that the Medicare payment advisory commission is looking at.
Speaker 3: Now there's some changes that could make a significant difference. One of the changes that most providers seem to push back against and a number of expert would be an increase in the number of mandatory models. So long as fee for service is viable and profitable, especially if it's more profitable than value-based payment. Most providers are not going to have a strong incentive to voluntarily enter these models, especially on a large scale. This is something that could help, but I don't think it's going to usher in a sea change and, you know, transform the healthcare system in any fundamental way, but it will at least be one less roadblock to value-based care.
Speaker 2: Great. Okay. Thanks so much. This is, this is really helpful. Appreciate you sharing your time and insight with us, Alex. Thank you all for listening. We'll have links in the show notes that feature mikes and in my reporting, as well as links to the subscribe, to all of Modern Healthcare's content, and we appreciate your support.