HHS on Wednesday unveiled its long-awaited proposal to change its anti-kickback and self-referral laws, a move that was largely well-received by industry observers who expect the proposals to facilitate more value-based payments and coordinated care.
Under the proposed rules, specialty physician practices could share patient information with primary care physicians to manage care or work with hospitals on discharges using data analytics. It also would allow local hospitals to work together on cybersecurity issues without running afoul of data sharing concerns.
The safe harbors include allowing hospitals to pay physicians incentives as part of CMS-sponsored care models.
Joseph Wolfe, an attorney at Hall, Render, Killian, Heath & Lyman, said he was encouraged by the rule and expects it to advance the move toward value-based care.
"It clarifies some definitions and concepts that the industry was seeking and shows that the government recognizes the complexity in the space and the fact that stakeholder input was considered," he said.
Still, stakeholders and the CMS cautioned that any exceptions or easing of restrictions could open the door for further abuse and manipulation of the system, highlighting the delicate balance regulators must strike.
Value-based arrangements may also pose risks of their own, including skimping on care, cherry-picking, patient-dumping and manipulation or falsification of data used to verify outcomes, the CMS noted.
"They are clearly moving in a direction that will facilitate more care coordination and also more care integration," Dr. Richard Gilfillan, former Trinity Health CEO who previously led the Center for Medicare and Medicaid Innovation, wrote in an email to Modern Healthcare. "Given the way acute care has become more fragmented across many different providers, it is essential that we find ways to reintegrate care and the experience for patients and their families."
The Stark law was born in a fee-for-service system, targeting physician referrals for clinical lab services covered by Medicare to weed out any conflicts of interest. The law's scope has since significantly expanded.
Officials and providers argue that the 1989 law has slowed the transition to payment models where physicians and hospitals share the financial rewards for delivering lower costs and higher quality. The movement doesn't need any more obstacles, they argue, as the current healthcare system still predominantly operates on volume-based reimbursement. Thus, "we must proceed with caution, even as we propose the significant changes outlined in this proposed rule," the agencies noted.
Less than 3% of net patient revenue came from capitation and risk-based contracting in 2017, a share that has stayed relatively consistent since 2013, a 2018 Moody's Investors Service analysis on not-for-profit hospitals found.
One of the biggest points of contention has been murky or non-existent definitions of compensation that is fair-market value and commercially reasonable. If pay exceeds the 75th percentile or the arrangements are otherwise poorly structured or improperly implemented, that can increase liability.
The definition of fair-market value, which is more hypothetical and broad in nature, should more closely align with general-market value, which takes into account cost of living, reimbursement rates and other factors, the agencies said.
The CMS and OIG offered an example. A highly sought-after orthopedic surgeon may command a higher salary than the $450,000 average, as determined by independent salary surveys. While the hypothetical fair market value is $450,000, the general market value may exceed that. Thus, "compensation substantially above $450,000 per year may be fair market value," according to the proposed rule.
Conversely, hospitals may pay more than they deem appropriate. Say a family physician's national fair-market value is $250,000. But the cost of living is low in that particular market and the hospital is enduring declining reimbursement and serves many Medicare and Medicaid beneficiaries. The physician may request $250,000 and the hospital may feel obligated to pay that under the current framework, some providers said. But in that case, the fair-market value of the physician may be less than $250,000 a year, the CMS and OIG said.
"This is the first time I can remember seeing CMS expressly say there may be some high performers who are making a lot of money right now and it is unreasonable to say that a hospital couldn't employ them unless they agreed to take massive pay cut independent of productivity," said William Horton, a partner at the law firm Jones Walker. "If that interpretation sticks, it is a helpful and realistic change to the approach that the government has traditionally taken."
Horton described the Stark law under the current framework as one with no gray area—"If you are driving 71 in a 70 mile per hour zone, you have broken the law—it doesn't matter why or what you intended to do."
The agencies also separated "taking into account the volume or value of referrals," from the definition of fair-market value. They are clarifying that the definition is solely focused on the market economics and should not include referrals, which eliminates some confusion, Wolfe said.
The proposed rule is attempting to bring the interpretation of fair-market value into alignment with general concepts used in the larger valuation committee, Victoria Sheridan, a member of the law firm Epstein Becker Green, wrote in an email.
"It appears that CMS wants to give parties a level of comfort that accepted market valuation principles have a place in the 'Stark world' and that arrangements with unique parties and compensation terms can be compliant," she said.
But there is still some ambiguity, said Joe Aguilar, a partner with HMS Valuation Partners who is also a practicing nurse practitioner. What constitutes an "exceptional" physician is unclear, he said.
As for the definition of commercial reasonableness, the CMS and OIG clarified that an arrangement may be commercially reasonable if it does not result in profit for one or more of the parties.
"There was a widespread misconception between the nexus of commercial reasonableness and profitability—this helps," Wolfe said.
The CMS and OIG also said that parties in value-based contracts have to continue to monitor the success of their arrangements. If these deals don't achieve the expected results or if the savings taper off, then the arrangement either needs to be modified or end, they proposed.
HHS is seeking comment on whether providers involved in a value-based arrangement would be required to report to the government or if they simply need to document their agreement.
"That may mean that eventually the inspector general or somebody else comes in to ... see what they're doing to make sure that they're legitimately using the safe harbor in this case," HHS Deputy Secretary Eric Hargan told Modern Healthcare.
Hargan said that the idea is to create "additional flexibility in the system" to allow providers in value-based enterprises to create their own targets and decide how to measure progress. The role of the inspector general or the CMS would mostly serve to make sure that providers in value-based arrangements are making progress towards their stated goals.
The agencies also indicated that they will offer more protections to providers who take on at least 25% in downside risk.
"I think that is a reasonable approach to move the system toward greater utilization of value-based strategies," Horton said.
The CMS and OIG are concerned about payments between doctors and laboratories or medical device manufacturers that are used to induce referrals, which is why it is considering excluding labs, devicemakers, pharmaceutical companies, pharmacy benefit managers, distributors and wholesalers from the definition of a value-based participant. The agencies may at minimum require that the arrangement is not between a physician and a device manufacturer.
Both proposed rules pointed out that while the agencies have made some effort to coordinate their Stark and anti-kickback oversight, it isn't creating a uniform system. A safe harbor under the Stark law may not be one in the anti-kickback framework. This has been a point of frustration for providers, who have to carefully navigate both laws.
But their approach to separate these two jurisdictions seems to be the correct approach, said Dr. Thomas Feeley, a senior fellow at the Harvard Business School, adding that he appreciates the Trump administration's efforts to use value-based healthcare as a solution to the current delivery system.
Providers have been calling for an overhaul for years as they look to grow physician alignment opportunities. Physicians at times avoid referring patients to an entity they or their employer have a financial stake in, even when it is in their best interest, because of the potential risk, experts said.
For instance, referrals to cardiac rehabilitation are often underutilized, Aguilar said. With research showing that outcomes improve with physical therapy services after a heart attack, doctors can be incentivized through greater alignment opportunities with cardiac rehabilitation centers, which are typically owned by the hospital, he said.
"If care was bundled together, there could be a care coordinator that improves continuity," Aguilar said, adding that the Stark law is one element contributing to the fragmented system.
Valuation experts may define fair market value and reasonable compensation differently, creating more confusion, Horton said.
"Then you have to shoulder the costs for an exemption, and you could come up empty," he said. "The argument is that you become unnecessarily risk averse. Providers are reluctant to move forward because if they are wrong, they are not just paying a fine, it is a situation where you may have millions in Medicare billing that you have to pay back."
Waivers and exceptions only apply to certain alternative payment models, may be relatively short and may not be issued until the model is underway. Simple, unintentional documentation errors like incorrect dates may trigger a violation.
Hargan said that HHS understands that providers have concerns about how the Stark and anti-kickback rules are implemented, saying that "we'll work with people that need technical assistance or information on how these laws work."
The American Hospital Association said in a statement that removing outdated barriers to teamwork will allow hospital and doctors to more quickly implement new and better ways to treat patients with chronic conditions, discharge patients to their homes sooner, provide them with more in-depth counseling to avoid complications and even provide services to speed their recovery, such as home visits, remote monitoring and delivered meals.
"Despite widespread agreement by Congress, and even previous administrations, that these regulations needed to be modernized, today's proposal is the first major step toward achieving that goal," the association said.
Hargan said that HHS will review the healthcare industry's feedback on the proposals and monitor how the rules perform once they're implemented to see if they need more changes. He was hesitant to say whether changes to the existing rules were enough or if Congress needs to pass new laws to give HHS more power to align self-referral and anti-kickback rules with the needs of value-based healthcare.
"We have been able to expand a lot of existing flexibilities within the laws that we have," Hargan said. "I think one of the first steps is to see how these regulatory proposals affect the landscape. And see where people want to go from there."
Michael Brady contributed to this report.