Physician groups see problems with Trump administration’s Stark law, anti-kickback changes



The Trump administration on Friday signed off on long-awaited changes to physician self-referral and anti-kickback rules that aim to boost value-based care by making it easier for providers, suppliers and others to work together.

During an exclusive interview with Modern Healthcare ahead of the announcement, HHS Secretary Alex Azar and HHS Deputy Secretary Eric Hargan discussed how the changes could affect the healthcare industry.

Hargan said the current rules need an update because they’re “constraining the next development of value-based care (because) providers risk getting strict liability fines under the Stark rules or criminal sanctions under the Anti-Kickback Statute.”

The final rules give providers more flexibility to take part in value-based arrangements and coordinate and manage patient care by reducing their potential liability and administrative work in exchange for taking on risk. Providers get to decide how much risk to accept, but they’ll have to deal with some trade-offs.

“The more risk you take, the more flexibility you get under these new regulatory exceptions,” Hargan said.

Providers, healthcare technology companies and others will be able to join forces to achieve a specific value-based goal for a target population through so-called “value-based enterprises.” For example, a hospital could team up with a diabetes care management company to supply free diabetes management devices and services for hospitalized diabetes patients after discharge to improve outcomes and prevent readmissions, Azar said. Or providers could share data analytics programs to “keep track of patients as they move from one site of care to another,” Hargan added.

Health systems could also give cybersecurity technology to physician practices to guard against cyberthreats since a lack of it “prevents small, solo practitioners or small physician groups from being able to share data with a hospital,” Hargan said. That often means patients have to coordinate their own care among several providers, even as they struggle to manage their chronic conditions and other health issues. The updated regulations allow providers to take a more active role in managing patients’ care, he said.

“We’re not dictating a particular set of benefits,” Hargan said. “It’s basically a platform that we built on the regulatory side that allows healthcare entities to try to innovate (and) produce value.”

But that doesn’t mean providers can do whatever they want. The rules only allow providers to do “sensible” things that don’t significantly increase the “risk for fraud or self-dealing but allow healthcare providers to work together,” according to Azar.

Hargan said regulators put guardrails in place to ensure providers don’t take advantage of the new freedoms. They need to document each value-based enterprise and have someone in charge of making sure it’s on track to achieve its goals. If an enterprise isn’t living up to its promise, the participating entities might need to shut it down.

“They have to make those papers available for us to look at to make sure that this isn’t a sham transaction,” Hargan said.

The American Hospital Association, Federation of American Hospitals and America’s Essential Hospitals were encouraged by the Trump administration’s efforts to reform physician self-referral and anti-kickback rules. But other provider groups offered lukewarm support, saying that federal policymakers made a good-faith effort to update the regulations but still need a lot of work.

The rules go into effect Jan. 19—just one day before President-elect Joe Biden takes office. But their impact could be instantaneous because they make clear what activities providers can take part in without running afoul of the law, Azar said. Biden’s administration could revisit the rules in the future, but the recent changes are largely bipartisan and have widespread industry support, so most experts don’t expect more changes soon. Congress probably won’t spend political capital to update the laws now. Avalere Health managing director Fred Bentley said Biden’s administration could issue subregulatory guidance to clarify how they’ll enforce the rules.

“Providers could effectively begin changing their conduct immediately. We’re not going to be pursuing enforcement (of the current rules),” Azar said.

Some experts argued healthcare organizations need more clarity than the new rules deliver because they need to make administrative, financial, operational and clinical changes for different arrangements and exceptions. Providers need one set of rules if they’re going to take on risk, AMGA Chief Policy Officer Chet Speed said.

“How much risk you’re taking shouldn’t determine whether or not you’re qualifying for the safe harbor,” said Darryl Drevna, senior director of regulatory affairs at AMGA.

Without uniform rules, it could be difficult to bring all the changes into line with “arrangements that exist in the real world,” said Mollie Gelburd, associate director of government affairs for the Medical Group Management Associate.

“I don’t know how many groups exist in today’s environment that could actually (use the full-risk exception),” she said.

But the point is to get providers to take on more risk, so, unsurprisingly, many of those arrangements don’t exist yet, said Colbey Reagan, partner at Waller Lansden Dortch and Davis. The administration’s approach clarifies that Trump officials were frustrated that providers weren’t moving to risk faster, so they designed the rules to encourage them to do it, Bentley said. Reagan thought the rules were mostly well-designed and would support new ventures.

“You will see lots of new arrangements with myriad parties … in arrangements they previously thought were too risky,” Reagan said. “I don’t see any reason (the new rules) can’t make an impact within the next 30 days.” Providers could take advantage of relaxed standards for beneficiary transportation, personal services and management arrangements right away, he said.

Though creating new value-based enterprises could take a while because there could be significant legal challenges to overcome. Gelburd said providers’ lawyers would need time to digest the new regulations and figure out how to apply them to specific situations.

“These rules are supposed to help with care coordination across the continuum of care,” she said. So providers “are going to have to work with outside hospitals and medical group practices.”

That would involve several attorneys and entities working together, which could take a long time.

“There’s going to be a lot of ambiguity,” Bentley said. “These terms the industry has thrown around (like value-based arrangement) now have legal implications.

Still, most experts agree that fundamental financial and business considerations make providers leery of risk, not physician self-referral and anti-kickback rules.

“This is not the big barrier to participation in value-based care,” Bentley said.

In addition to opening the door to new collaboration opportunities, Azar believes the new rules could help slow consolidation among providers.

“One of the ways to get around (the current rules) is to be the same entity. The Stark and anti-kickback statutes … inadvertently created an incentive to consolidation and enhanced provider market power in localized areas,” he said. “An ancillary benefit of these rules changes is to enable virtual collaboration … without essentially requiring consolidation and common ownership.”

Healthcare executives have warned regulators for years that providers are hesitant to sign up for value-based arrangements or coordinate care, in part, because they’re worried about breaking federal fraud and abuse rules. Under the Anti-kickback Statute, HHS’ Office of Inspector General can fine physicians up to $50,000 per kickback plus three times the amount of the kickback for civil cases. It can also fine physicians up to three times the government’s loss plus $11,000 for each false claim filed. Criminal violation carry more severe penalties, including up to $25,000 in fines per violation and five years in prison. The Stark law has similar penalties for non-criminal violations. Providers could have to refund overpayments, have False Claims Act liability, face civil monetary penalties for knowingly breaking the rules up to $15,000 for each service and have to pay up to three times the amount claimed.

“These well-meaning rules … froze in place a disaggregated care model,” Azar said.

Federal officials last fall proposed a wide range of changes to physician self-referral and safe harbor regulations to improve care coordination and encourage providers to take part in value-based arrangements.

Providers were generally supportive of the new exceptions and safe harbors put forward by CMS and HHS’ Office of Inspector General. But they opposed tying any form of price transparency to Stark law exemptions, which the Trump administration considered for each value-based care exemption. The requirements could have forced providers to give patients information about their out-of-pocket costs for referred items and services. But they didn’t make it into the final rules.

The COVID-19 pandemic produced more evidence that Stark Law and Anti-Kickback Statute regulations needed changes. But the outbreak delayed them for months. Federal agencies granted Stark law and Anti-kickback Statute relief to providers during the public health emergency, but the new rules give them long-term protection.

The Stark law was initially put in place to prevent physicians from profiting off referrals to Medicare providers that they or a family member had a financial stake in. While those rules made sense under traditional, fee-for-service Medicare, providers have been spooked that the government could come down on them for taking part in value-based arrangements even if they don’t get financial benefits from referrals.

Providers have argued that permanent exceptions for value-based arrangements could encourage more of them to join value-based arrangements because they won’t face potential financial penalties. Employers supported exceptions for providers that take on meaningful risk. But they worried providers would be less willing to take on more risk if doctors and hospitals could get an exception with low levels of risk. According to the Business Group on Health, that could undermine federal policymakers’ goal to boost value-based care.

Providers are on board with the Trump administration’s plan to allow most types of compensation because it allows for more flexibility in designing value-based arrangements, which could make them easier to create. They opposed changes that would only permit non-monetary compensation.

Hospitals and physician groups were incredibly supportive of permanently allowing donations of electronic health records and cybersecurity technology, including hardware and training.

Doctors and hospitals had asked CMS to reconcile it’s Stark law changes with OIG’s updates to the anti-kickback rules to avoid regulatory and legal uncertainty. According to Hargan, both agencies worked together to create “a single pathway” to ensure providers wouldn’t risk violating one set of regulations, even if they followed the other set.



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