Welcome to today's educational event, titled Stark Law and Value-Based Arrangements, sponsored by the American Academy of Sleep Medicine. Today we have Tony Maida of McDermott, Will and Emery, a consulting firm specializing in healthcare policy. Joining us to discuss this timely topic. Before I introduce our speaker, I'd like to remind you that your audio is muted and your video is off. We encourage you to include any questions on the topic or for the speaker in the Q&A of the Zoom platform. Please refrain from using your cell phone or pager during this webinar. Now, allow me to introduce our speaker today. Tony Maida counsels healthcare and life science clients on government investigations, regulatory compliance and compliance program developed. Having served as a government official, Tony has extensive experience in healthcare fraud and abuse and compliance issues, including the federal and state anti-kickback and stark laws and Medicare and Medicaid coverage and payment rules. Thank you for joining us, Tony. Thank you. Thank you, Eric, for having me. I've put together a little slide deck to talk about the regulatory sprint value-based rules. I am happy to be talking to you about that today. It's a very timely topic. What I'm going to do is focus on the stark pieces of the rule as requested, but there's also an anti-kickback component to that rule as well, which I'll also run through. Just a little bit of background and level setting for all of you who have not been or are not regulatory lawyers like myself who follow these developments on a day-to-day basis. The Department of Health and Human Services in 2018 began what they called a regulatory sprint to coordinated care. The goal of that regulatory sprint was to look at different federal fraud and abuse laws like the stark law, the anti-kickback statute, HIPAA, and actually some of the substance abuse regulations around reducing regulatory burdens that are hindering or perceived as hindering the change from fee-for-service payments to value-based payments in our healthcare delivery system. Actually, the government, the HHS, and so OIG, Office of Inspector General, was primarily drove the bus on the anti-kickback rule, CMS handled the stark rule. Because they're so intertwined, those two agencies worked together. They both issued a request for information back in 2018, the proposed rule followed in 2019, and then the final rule came out at the end of 2020 and became effective in January. And so from a government rulemaking perspective, that is actually a sprint. Even though it took two years, these are very complex rules and there was significant changes made to them, both related to value-based payment, but also related to a whole host of other stark topics that I'm not going to talk about today, given time, but happy to in the future. So the top line sort of summary of the final rules is that we do have new safe harbors, anti-kickback safe harbors, and stark exceptions that address value-based care. And in some ways, they create more clarity and provide more options for providers to engage in value-based arrangements. But they don't actually eliminate the differences between stark and anti-kickback compliance. There is some substantial overlap on how the rules are structured, but because of the differences between the statutes, the fundamental differences between the statutes, complete alignment was not feasible in the views of the agencies. And so the safe harbors and exceptions take different approaches. And this is in part just a sort of level set because the stark law is a mandatory statute. It's a strict liability statute. So they have what we would call mandatory exceptions. You have to meet an exception in order to comply with the stark law. And so those exceptions are generally structured, not that they are easy to comply with, but they are easier to comply with, and you can fit arrangements within a stark exception. In contrast to the anti-kickback safe harbors, which is an intent-based criminal statute around paying remuneration for inducing or rewarding referrals, and here OIG has created voluntary safe harbors that protect narrowly drawn arrangements. And these safe harbors, you don't have to meet a safe harbor in order to have a compliant arrangement. If you don't meet a safe harbor, all of the elements of a safe harbor, you have to do effects and circumstances analysis to determine your risk level. And oftentimes you try to fit, hit as many of the safe harbor elements as you can as part of doing that facts and circumstances analysis to sort of measure your risk. And so as you, as the result of that underlying statutory framework, we have stark exceptions that are broader because you have to fit within one and anti-kickback safe harbors, which are more narrow because you don't have to fit within one. And those differences in some of the terms of the arrangement of the regulation certainly create new questions and other compliance issues. So the value-based framework starts with a whole bunch of new definitions that are used in the safe harbors and the regulations to define what a value-based, what falls within these safe harbors and exceptions. And I'll walk through each of these terms in a minute, but the general concept is that there's a value-based enterprise composed of two or more value-based participants who get together, so a round of identifiable value-based purpose, enter into arrangements and conduct activities that are directed at achieving that purpose towards a target patient population. And there's more flexibility depending on if the VBE, the value-based enterprise, and the participants have assumed some downside financial risk from payers. So the value-based enterprise to start at the top, as I said, is two or more participants that are collaborating to achieve a value-based purpose. This doesn't have to be a new corporate entity. You can form a VBE through a contract between independent organizations and practices. You do have to do two things, however. You have to designate a particular accountable body or person who is responsible for the financial and operational oversight of the VBE, and you have to have a governing document that describes the VBE and how the participants intend to achieve their purposes. Again, this can be done through a contract. It doesn't have to be sort of creating a new sort of corporate entity, but you do have to have some level of documentation and someone be accountable for the VBE achieving the purposes that it has identified. Anyone can be a VBE participant under the Stark or the NNCPEC rule. However, OIG did narrow the number of entities who could have their remuneration protected by the value-based safe harbors, and this may or may not be applicable to this audience, but it is helpful, or it could be, if you're forming a VBE and there's a manufacturer who wants to participate, or a laboratory, or a compounding pharmacy, a DME supplier. They can participate in the VBE, but the remuneration provided by those entities would not be protected by a value-based safe harbor, except for limited technology participants who provide digital health technology, and I'll talk about that more once we get through the safe harbor and exception framework, but this is something to keep in mind if you're forming a VBE. So as I said, you have your enterprise, your participants around a value-based purpose. The main purpose, I would say, this is sort of an unofficial view, but this coordinating and managing the care of the target patient population, OIG has a broad definition for that. It sort of says what you would expect it to say around what coordinating and managing care of a target patient population is. The second most probably common or prominent purpose is reducing costs or gross expenditures to payers, so they're important to note that reduction in costs to providers alone is not a value-based purpose under the regulations. We have to also be trying to achieve reducing costs or expenditures from payers, and again, the value-based arrangement is a pretty broad concept, sort of any kind of arrangement between the enterprise or the participants in the enterprise. The target patient population is a pretty broad definition. It can be, you just have to set out in writing in advance how you're defining the target patient population, but it could be by payer, geography, demographics, people over 65, clinical condition, people with a particular condition. So broader is generally better because the concern is that the population is not selected based on a profit, no motive, or only financial concerns, so sort of that cherry-picking and lemon-dropping concept of trying to keep high-cost patients out or only sort of let low-cost patients in or healthy patients in so that you'll be able to achieve whatever goals you're trying to achieve without necessarily managing a broad range of people. And activity can be anything except for making a referral under the anti-kickback rule. Now, the Stark rule doesn't have that carve-out, so making a referral could be a value-based activity for Stark purposes, but not for anti-kickback purposes. This is the first of several examples of the distinction between Stark and anti-kickback that I was talking about, where Stark is broader and protects more activity, whereas the anti-kickback safe harbor is more narrow and has more restrictions. So there's a series of charts here that are, I apologize for how many words they are, but I didn't write the regulation, I'm just reporting what they did, but it's meant to sort of, and I'm not going to walk through all of these in depth, but they're constructed to show a contrast between the anti-kickback safe harbor and the CMS Stark rule. And there's really four different constructs of value-based arrangements in the rule. We have three value-based safe harbors and exceptions specifically, and then OIG also made changes to the personal services safe harbor to allow for outcomes-based payments, which I'm calling the fourth value-based construct, because you could use that safe harbor in combination with one of the VBE, the Stark VBE exceptions, and use that to construct an arrangement. So the first construct is full financial risk, where the VBE has accepted full prospective financial risk for all of the costs of care to a target patient population for a certain period of time. And it protects, because you're at full financial risk, the government views this as the least risky situation, and so then protects all of the remuneration between the VBE and the VBE participant. OIG does require a quality assurance program, whereas CMS does not necessarily, although it's probably still a good idea, because you're going to need to sort of show that the arrangement is meeting a value-based purpose, and one way to do that is to have some sort of monitoring program in place. I think as a best practice, that would be advisable, and otherwise the remuneration exchange between the parties is supposed to be connected to the value-based purposes or used for the value-based activities undertaken by the participants. And Kickback Safe Harbor has a number of other, you know, sort of requirements or safeguards that you might expect to see around concerns about using remuneration for marketing, not inducing medically necessary services. CMS and OIG both are concerned with taking into account volume or value of non-target patient population business, and so there are some requirements around that. The second construct is called the substantial and meaningful downside risk. Here there's less flexibility, and this is the construct that is the most complicated, and frankly I think probably won't be used terribly often because it is so complicated and because there's such a difference between the Safe Harbor and the exception. The Safe Harbor requires that the VBE itself be at substantial financial risk, which it defines as in three different ways, either at least 30% of the cost for all the items and services, 20% for a defined clinical episode of care or certain partial cavitation payments, and then requires that each of the VBE participants meaningfully share in the financial risk of at least 5%. The starter exception is broader and easier to comply with and may actually be something that people will use because it limits the downside financial risk threshold to that the physician involved in the arrangement has to repay or forego no less than 10% of the total value of the remuneration the physician receives. So it has nothing to do with the payer arrangement or the cost of care being provided, but it's looking at the remuneration to the physician and saying that you'll be at some sort of meaningful downside financial risk if the physician agrees to repay or forego at least 10% of the remuneration they receive under the arrangement. That kind of in some ways sounds like a gain-sharing arrangement, but also having a risk component to it, whereas if you don't meet certain criteria, you might have to repay 10% of compensation that was paid, but you also might get 10% more if certain thresholds are achieved. We have similar safeguards and other requirements and some new ones. Now we have CMS saying that the methodology has to be set in advance. We have more restrictions on the anti-kickback side about what the remuneration can be. It has to not only be directly connected to one of the more of the value-based purposes, but also used predominantly to engage in those activities. CMS's conception is a bit broader. Again, sort of similar safeguards, regulatory safeguards around concerns about stinting and arrangements involving different types of patients. The third is the other value-based arrangements exception, for lack of a better way of saying it. A lot of people are referring to this as the no-risk safe harbor and exception, because risk is optional. I mean, you could assume risk under it. It's not that you can't, it's just that no risk is required in order to use either the care coordination safe harbor or the value-based safe harbor or its value-based exception. Key distinctions are, however, several, because the safe harbor, the anti-kickback safe harbor only covers in-kind remuneration, does not protect monetary payments, whereas the stark exception protects both. And the anti-kickback safe harbor has a requirement that the recipient pay at least 15% of the costs of the in-kind remuneration. So the in-kind remuneration could be a variety of things, though. It could be a care coordinator put in a practice to help manage a target patient population in order to get them to get their eye exams if they're diabetics or get certain screening procedures done, follow up on their medication, make sure they're taking it. Could be data analytics, could be technology. But similar to the electronic health records safe harbor and exception, there's a 15% contribution requirement on the anti-kickback side. CMS did not include any kind of contribution requirement in the value-based exception, which is helpful because from a start, it makes that voluntary. You don't have to do it. It will help if there is some contribution that will be relevant from an anti-kickback analysis perspective, but it's not a requirement to comply with the Stark law. And third is if there is no risk being assumed, then OIG and to some extent CMS or maybe to more extent CMS or the same extent is that they're concerned about the VBE actually acting in a legitimate way to achieve a value-based purpose. So OIG has mandated that certain outcomes or process measures are instituted and measured and that those outcomes measurements are based on clinical evidence or credible medical or health support. They include benchmarks that are going to be monitored, that it's not just based on patient satisfaction and convenience, but those two things can be monitored, but there also has to be some objective science-based clinical benchmarks and outcome benchmarks measured in order to take advantage of the safe harbor. The Stark has those outcome measures are optional, but again, probably not a bad idea if you're going to be in the position of trying to prove that your arrangements are focused on meeting a value-based purpose, are they really working? Because under this conception, under this third construct where there is no risk assumed by the VBE, if both the safe harbor and the exception require some level of diligence to determine that the activity is actually furthering a value-based purpose. And at a high level, this is the third row of this chart, is that if the arrangement is not working or not achieving or is ineffective, or God forbid, is actually creating quality problems, the VBE has to take some action to either change the activities and fix them or terminate the arrangement within a certain period of time, which does make sense, since the whole purpose of this construct is to be engaged in activities achieving a value-based purpose, trying to achieve the triple aim. So if your arrangements are not working or are ineffective, all you're really doing that is sort of exchanging remuneration between potentially original aim referral sources and recipients, and that's going to raise fraud and abuse issues. And finally, there's a commercial reasonableness requirement now in both of these, in both the safe harbor and the exception, which is a new addition that always adds a bit more gray and complexity to an analysis, because what does commercially reasonable mean? CMS actually defined commercially reasonable in the Stark rule, OIG did not, but CMS defined it in a helpful way and sort of saying, in terms of saying, well, commercial reasonableness should be measured by does the arrangement make business sense given the characteristic of the parties involved and that a profit does not necessarily have to be achieved in order for something to be commercially reasonable, which is particularly relevant in a nonprofit context and even in others where you may be trying to achieve a particular purpose or meet a community need, and that in and of itself does not generate profit on its own. And then we have the, again, the list of safeguards. This is the digital health technology, the technology pathway that I was referring to where certain categories of companies like non-physician owned device and supply manufacturers and DME suppliers can contribute digital health technology to other VBE participants or the VBE. Pretty broad definition of digital health technology, which I think is helpful because it includes not only hardware and software, but also internet connection and connectivity and other things to make the tools work. And so that can be if certain medical device and supply manufacturers and DME post suppliers can contribute digital health technology to a VBE. And the patient engagement safe harbor only protects the non-physician owned medical device and supply manufacturers to contribute digital health technology to patients. And this may be particularly relevant for activities involving a VBE and is getting both OIG and CMS recognize that getting technology in the hands of patients or providing patients with tools and support is going to help improve quality and outcomes and efficiency but they had to figure out a way, OIG had to figure out a way to do that in a way that sort of counterbalance their general concerns about providing remuneration to patients which could induce them to seek care from a particular provider. So this new safe harbor has a number of requirements. It is only limited to support remuneration provided through a VBE participant. So you need a VBE in order to take advantage of the safe harbor and single provider alone is not technically eligible to use the safe harbor. It is limited to in-kind goods or services. There's a $500 annual cap for each VBE participant and the tool or support has to have a direct connection to the coordination and management of care to the target patient population but importantly also has to be recommended by a licensed healthcare professional and advanced certain goals primarily around adherence to a treatment regimen follow-up care plan but it's certainly broader than, this safe harbor is broader than all of the other beneficiary inducement exceptions that you may be familiar with around that are all as a general matter limited to helping the patient get more medical care, removing obstacles to obtaining access to care or financial needs assessment. This doesn't have any of that and it has been referred to as one that could, and OIG talked about how this could be referred to as one that addresses those social determinants of health that there has been an increased amount of attention to particularly over the last year with COVID and recognizing that certain populations with certain characteristics or lack of access or lack of resources can have much worse outcomes than others. There are a few other safeguards on this safe harbor sort of related to who can get that sort of tool and support that shouldn't be used for marketing purposes. It shouldn't matter what type of insurance the patient has. And as I said, these sort of tools are much broader than what traditionally would be thought of as fitting into the beneficiary inducement exceptions like home modifications, wheelchair ramps, shower grab bars, grocery delivery services. Things that you can't do are, you know, the cash for cash equivalents, things that are just sort of a reward potentially for that would not be the sort of thing that would be recommended by a, you know, you could provide something that would be a reward for achieving a certain milestone, but it would have to be something that was recommended by a licensed healthcare professional that somehow was coordinated to managing care and tickets to a sporting event would not be. The smart pillbox is a bit of a trick question because it would be protected by the safe harbor, but for the fact that it's funded by a pharmaceutical manufacturer and a pharmaceutical manufacturer is one of those types of entities that is not allowed to where their remuneration is not protected by the VBE safe harbors, including the patient engagement and sports safe harbor. So here the fourth, as I was calling it, the fourth construct is the change made to the personal services safe harbor. OIG did a couple of things here. One is remove the requirement that the aggregate compensation be set forth in advance. So now you just have to have the methodology set forth in advance and it removes the pesky part-time schedule requirement. These two things that made the safe harbor virtually impossible to meet unless you were paid some sort of flat annual salary for a full-time position. But the value-based aspect that was added was protection for outcomes-based payments. So the safe harbor applies to monetary payments that are used to, that are paid if the agent satisfied certain outcomes measures that again are based on improvements to quality, reduction in costs or expenditures to payers and selected on solid clinical evidence or credible medical support. And there are requirements here that, you know, are requirements that we've had to deal with before in terms of being set in advance in fair market value and commercially reasonable and not directly taking into account volume or value, but an outcome-based measure certainly could indirectly take into account volume or value of referrals and that's acceptable. You know, gain sharing, you know, one of the things that this covers is the gain sharing concept. You know, gain sharing has existed for a long time without a safe harbor. We tend to use sort of effects and circumstances analysis there and either, you know, different exceptions on the stark side, all of which, you know, usually had some level of analysis around fair market value and that still remains here. But this is why where you could take this safe harbor and the no risk dark VBE exception does not have a fair market value requirement and you could use those as sort of the fourth construct around value-based arrangements. So applying these final rules to arrangements, what do we do with these things? Is the question that everybody is asking. And I, you know, they're clearly about to cover things like bundled payments, shared saving payments, quality bonuses. Again, the VBE, the stark exceptions can cover monetary payments based on their constructs or you could use the, or you could use others to start exceptions like personal services or fair market value or employment, depending on where, you know, what sort of arrangement we're talking about. And I kick back safe harbors only cover monetary payments if there is a shared risk, but the personal services exception or a safe harbor could cover outcomes-based payments that have some sort of shared savings or quality bonus component to them. And then there's all of the different types of in-kind remuneration that I mentioned earlier, where, again, the stark exceptions can cover those. Other exceptions, it may be harder to, this is a place where the VBE stark exceptions may be more useful because the other existing stark exceptions, you know, there's probably more doubt on whether, you know, how in-kind can fit within, you know, personal services exception, for example, it might fit better within this exception. And, you know, again, the safe, the care, and I kick back care coronation safe harbor specifically, you know, covers and is tailored to in-kind remuneration without having to bear risk. So they do, these safe harbors and exceptions create some flexibility and relief, you know, prior to the final rule, people have been doing value-based arrangements. I think there has been a pathway under the fraud and abuse laws to do many types of value-based arrangements, largely would have been around effects and circumstances analysis on the anti-kickback side, but because the healthcare industry, you know, said rather forcefully that the anti-kickback statute and the stark law were creating obstacles to value-based care that OIG and CMS, you know, decided to create additional regulations to address that concern and provide the industry with more flexibility. However, as you can see, they're still complicated. There's a lot of requirements, whether they will achieve the stated goal is frankly to be determined because I think that there's the way in which the safe harbors are drawn. It's going to be difficult for, you know, for a lot of, it's going to be difficult for arrangements to comply with it. Either you're going to have to take on more financial risk for the items and services for the target patient population, or you'll be using those safe harbors as a guideline for structuring a compliant and arrangement and assessing risk under effects and circumstances analysis, which frankly is how we have used safe harbors for many years. So there's a bit of a learning curve, I think, in the industry. I've been doing a lot of these presentations and, you know, there's a lot of interest in the area and amongst health systems and plans and other types of providers. And so I think we're just sort of at the beginning of the industry thinking about, well, what is it that we would want to do that would be considered a value-based activity? And who would we want to partner with? And how can we make that work from an economic perspective? And then how does that fit into the regulatory framework that the government has created? And so I will pause there and see if Eric has any questions or if there are any questions in the chat room that I can't see. Sure, well, thank you, Tony, for all of that. I'll start with a few questions that were posted in the chat earlier. So do you have any, again, it's very early, you know, in the process of people, you know, understanding these rules, but do you have any kind of simple clinical examples or scenarios that you think, you know, perhaps like, you know, private practice could use in implementing, you know, and where it fits on like the scale of risk? Right. Well, I think it starts with the most of my conversations have been sort of initially around the getting everyone, understanding that there was sort of individual practice in and of itself is probably not a value-based enterprise. Like you need a partner, you need somebody else to collaborate with in order to have a value-based enterprise. It's not clear from the rule whether, you know, all of the physicians in a physician practice can be a value-based enterprise. Is that the value-based enterprise? It's not obvious to me that that can be. That's one of the areas where I think it would be helpful for the government to clarify what the rules are because you're all part of the same organization. I think it's sort of meant, I think the intent was to go broader than that, but it's not, you know, that is an area that's not very clear. And so if you're going to partner with another practice in a different specialty or, you know, a health system, for example, and a telehealth provider, you know, there are things that you could conceive of as we're going to work together to manage, you know, the care of a particular target patient population, you know, and in sleep physicians, it would be, you know, if there's the, you know, physician, the sleep physician, there's the cardiologist sometimes because a lot of people have underlying heart conditions. There may be the DME manufacturer for the sleep apnea machine. There's the health system that could have a role. And I think there are, you know, partnerships that could happen in terms of exchanging of data and, you know, maybe even, you know, and presenting sort of a care model to then go to payers and say, here's our care model. We would like you to then pay us a value-based payment, right, to manage the care for this target patient population. And we'll have some upside if we do really well. You know, and then there's risks that, well, there will be downside. So, you know, one, I think a lot of people are sort of taking baby steps at the moment. And what I'm seeing mostly is that, you know, health systems wanting to, or interest in that care coordination, care coordinator person, right, who could go to physician practices like once a week and check in with the patients and make sure that, you know, if they were, if they're in the high-risk category of being readmitted to a hospital because of COPD or something like that, and the hospital could have a penalty if there's a readmission within a certain period of time, they'd send a care coordinator and they'd check in on those patients once a week and see how they're doing and make sure, and it's not something that the physician's office would necessarily do themselves, but they're willing to facilitate it, and it also will benefit the physician practice as well. So that could be a value-based enterprise between the hospital and the physician practice. The hospital is going to contribute this person one day a week at no cost to the physician, and that you could look at it under the value-based safe harbor, you know, in-kind remuneration exception. Maybe the physician pays 15% of the time. Maybe they don't, and then you're not in the safe harbor exactly, but you're looking at it from a facts and circumstances standpoint, and, you know, to the extent there are financial, other financial relationships that may also be relevant, but I think that most actors in the industry are sort of taking baby steps. Maybe not a nice way to say it, but sort of looking at, you know, what are these things that we've really wanted to do that are sort of not difficult to implement, and then, you know, working with our trade associations and others to really understand these rules and see did they really get to where we wanted to go, or is there still too much uncertainty to really take things to the next level outside of a demonstration project or an ACO waiver or something like that? Yeah. Thanks for that. You know, I think that was pretty wide ranging. So as far as, you know, a lot of our members obviously have to deal with DME companies all the time. So could you see an example where a facility-based clinic partners with a DME company that operates under the same facility? Could that somehow fit under the value-based arrangement? Where it's a DME company that operates under the same, or is part of the same enterprise, or? You know, I think in that it would be, you know, there would be different value-based enterprises, but, you know, again, they would share some kind of ownership, which would be the kind of conflicting thing under Stark. So they might be under the same facility share, you know, there might be some financial intake or financial entanglement, but could they be each value-based enterprises and participate in value-based arrangement? Right. Well, and that's a really, and that is a helpful point because, or clarification, is that the Stark, the value-based Stark exceptions are compensation exceptions only. None of the ownership rules changed. So physicians still cannot own in DHS entities unless they meet an ownership exception, or it's something that's part of their practice, right? If you're in a group practice in office ancillary, then you have a physician lab, you know, a lab as part of your practice, but otherwise the value-based exceptions are compensation only exceptions. They don't change the general Stark ownership interest, you know, rules that have existed. Great. Again, you know, thank you for all of that. And thank you, Tony, and thanks to everyone who participated today. I would encourage you to stay tuned for other upcoming webinars offered by the ASM on current sleep medicine topics. There will be an email sent out within the next couple of weeks with instructions on accessing these recordings. And thank you once again, and thank you, Tony. Thank you.

Stark Law

Value-Based Arrangements

Regulatory Changes

Safe Harbors

Exceptions

Financial Risk

Downside Risk

Digital Health Technology