Substantial, if not fundamental, changes to health-care fraud and abuse laws appear on thehorizon in light of the U.S. Department of Human Services“Regulatory Sprint to Coordinated Care.” If proposed changessubmitted by key stakeholders come to fruition, a sizable swath ofhealth law regulatory practice may be replaced, if not largelydisappear. That is, the need to fit a wide range of innovativeprovider arrangements into complex and confusing Stark exceptionsand Anti‑Kickback Safe Harbors may become largelyobsolete.

Earlier this year, two federal agencies, the Centers forMedicare and Medicaid Services (CMS) and the Office of InspectorGeneral (OIG) within the Department of Health and Human Services(HHS), issued formal requests for information to seek input tofurther the “Regulatory Spring to Coordinated Care” launched byHHS. Published responses from a wide range of affected constituents(e.g., numerous hospital associations, physician societies andassociations, and trade groups) reveal numerous common threads thatportend potentially fundamental change to fraud and abuse laws.

The problems

Silos confound value-based payment models and clinicalintegration

Primary goals of the Stark Law (42 U.S.C. 1395nn) and theAnti-Kickback Statute (42 U.S.C. §1320a‑7b(b))include eliminating over-utilization of health-care servicespayable by the federal government. This is accomplished by eithercriminalizing, imposing civil monetary penalties, or imposing otherlegal sanctions (such as exclusion from Medicare) againsthealth-care providers and other individuals who violate those laws.The resulting sets of statutes, regulations, formal waivers, otherformal governmental guidance, and case law can be exceedinglycomplex, requiring careful navigation by specialized legal counsel.Unintended missteps can lead to harsh results.

In large measure, existing federal health-care fraud and abuselaws create an “isolation bias” that requires mapping andseparating financial interests of health-care providers in order toensure that patient referrals cannot be tainted by self-interest.Under Stark, a strict liability law, physicians cannot make areferral for the provision of “designated health services” to anentity in which they have a financial relationship (unless one ofapproximately 30 exceptions applies).

The general construct is that the referring physician must beseparated from the provider to which he or she refers. Under theAnti-Kickback Statute, common financial relationships involvingproviders of, for example, office space leases, equipment leasesand professional services can be deemed legally suspect unless theyfit within a “safe harbor,” which are typically structured toensure arms-length negotiation that cannot be based on the volumeor value of referrals.

The problem is, today, isolation of providers is the enemy. WhenCongress replaced Medicare's dreaded “sustainable growth rate” withthe Medicare Access and CHIP Reauthorization Act of 2015 (MACRA),it laid the foundation for Alternative Payment Models (APMs) thatrequire provider integration and coordination. Today, we speak ofclinically integrated networks (CINs), alternative payment models(APMs), accountable care organizations (ACOs), and bundled paymentmodels (BPMs), all of which are based on clinical and financialintegration and coordination—not isolation.

Complexity

The complex requirements of various Stark exceptions andAnti-Kickback Safe Harbors often confound the development ofinnovative care management models. Correctly structuring innovativefinancial incentives and disincentives—the ultimate drivers ofbehavior—requires careful and sophisticated analysis of this“mind-numbing” array of rules (See Aug. 24, 2018, submission to CMSfrom Medical Group Management Association).

Cost of compliance

Hiring the requisite expertise, i.e., specialized counsel andvaluation experts to sort through legal issues and performquantitative analyses, was cited by many commentators as bothnecessary and expensive—even for simple leasing, employment andadministrative services agreements.

Chilling effect

Often, providers abandon ideas for innovative health managementmodels due to concerns about having to defend them. Commentssubmitted to CMS and the OIG reveal a certain irony: innovativemodels designed to maintain quality and control utilization areabandoned because they can't comply with cumbersome and arcanegovernmental requirements designed to do the same thing—maintainquality and control utilization—but designed in a differentera.

Requests for information from CMS and OIG

On June 25, 2018, CMS published a “Request for InformationRegarding the Physician Self-Referral Law” (83 FR 29524). Twomonths later, on Aug. 27, 2018, the OIG published a “Request forInformation Regarding the Anti-Kickback Statute and BeneficiaryInducements CMP” (83 FR 43607). A review of published commentssubmitted in response to these two RFIs reveals similarrecommendations and analyses from a veritable chorus of hospitalassociations, physician associations, and other trade groups:

Create a broad exception/safe harbor for alternativepayment models

Commenters overwhelmingly implored CMS and OIG to permit—on acomprehensive basis—participation in value-based care andalternative payment models that incorporated verifiable componentspertaining to care management, quality and cost control. Inaddition, the form of permission should apply across the board toall types of plans and all types of patients; that is, rather thanbe restricted to Medicare APMs, MCOs, MSSPs and Bundled PaymentsModels, the blanket permission should encompass commercial plansand Medicaid and essentially be “plan agnostic.”

Create an exception/safe harbor forcybersecurity

Commenters overwhelmingly urged CMS and OIG to permit providers(e.g., physicians and physician groups) to receive donations ofcybersecurity technology (e.g., training, hardware, software) fromother providers (e.g., hospitals and hospital systems). It was alsourged that the recipients of the cyber technology should not berequired to meet a minimum contribution criterion, such as the 15percent of the donor's cost requirement under the existing Starkexception for electronic health records. 42 CFR 357.411(w)(4).

Expand safe harbors to promote patient access andrecognize social determinants of health

Another common refrain from numerous commenters was to eliminatebarriers to patient access by loosening existingsafe-harbor criteria for local transportation and waivers ofcopayments, coinsurance and deductibles. Additionally, ashealth-care systems have assumed more responsibility for patientoutcomes, their perspectives have broadened from individual healthto population health.

Improving access to stable housing, healthy foods and physicalsafety has been recognized as a valid goal of health-care deliverysystems. The agencies were thus asked by several commenters toexpressly permit expenditures for “health-related nonmedicalservices” that, under existing law, could be characterized asinappropriate inducements. (See Oct. 26, 2018, submission to theOIG from Bruce Siegel, MD, President and CEO America's EssentialHospitals and former New Jersey Commissioner of Health.)

Merge AKS and Stark exceptions/Safe Harbors

Complying with two similar, but not identical, sets of legalrequirements was cited as a problem by a numerous commenters, whooverwhelmingly suggested that compliance requirements for the AKSand Stark should be identical. Some commenters took this a stepfurther and urged CMS and the OIG to initiate discussions withstate governments to align similar state laws regardingself-referral prohibitions and anti-kickback laws with federallaw.

Formalize, extend and expand existingwaivers

The current federal fraud and abuse waivers, issued on aprogram-by-program basis for ACOs and bundled payments programs,have been issued by CMS and the OIG pursuant to their statutoryauthority under Section 1115A(d)(l) and Section 1899(f) of theSocial Security Act. Many commenters urged CMS and the OIG tosubject those waivers to formal rule-making procedures and codifythem permanently. Commenters also urged CMS and OIG to replace theexisting program-specific waivers with a broad, overarching waiverapplicable to all innovative patient care models that incorporatequality, efficiency, coordination and cost control.

Conclusion

Federal fraud and abuse laws, the bane of physicians' andhospital executives' existence, are poised for retooling. Thefederal government's objective to cut regulations, and thehealth-care industry's nearly uniform desire to achieve thatobjective, forms a formidable merger of private and publicinstitutions with the same goal. If fraud and abuse laws arerelaxed to accommodate all forms of value-based payment models,transactions governing provider relationships should be easier andless expensive to accomplish because the need for legal andvaluation expertise should be diminished. The volume of providerand payor transactions should also increase (and become moreinteresting) as more innovative value-based purchasing models arelaunched across the health-care sector.

Policy-wise, it remains unknown whether the retooled laws wouldachieve the goal of lowering the total cost of care, i.e., bend thecost curve downward. Or, would these changes prove to be nothingmore than the opening of a floodgate that simply enlarges thehealth-care sector, increases overall spending, and ultimatelybends the curve the wrong way. Whichever way the cost curveultimately bends, relaxation of existing fraud and abuse laws toaccommodate value-based purchasing and population health goalsshould lead to more innovation, more provider collaboration, andmore attention paid to quality assessment.

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Barry Liss is a Director and HealthcareTeam Leader at Gibbons P.C. in Newark. His practice has beenexclusively devoted to healthcare law for more than 20 years andfocuses on corporate and regulatory healthcare-relatedlaw.