Providers may find it easier to deliver value-based care with Stark Law/anti-kickback statute regulatory changes

Ingrid Stiver Senior Manager, Health Research Institute, PwC US December 03, 2020

CMS issued a final rule related to the Physician Self-Referral Law, also known as the Stark Law, last month that should make some activities easier for providers involved in value-based arrangements. The HHS Office of Inspector General (OIG) also issued a final rule revising the federal anti-kickback statute regulations. Both regulations could loosen some of the bindings holding back value-based care. For the most part, the new rules take effect Jan. 19.

CMS’ Modernizing and Clarifying the Physician Self-Referral Regulations final rule offers clarity on whether compensation meets fair market value requirements and other technical requirements under the Stark Law. Enacted in 1989 with the goal of reducing fraud and preventing self-interested moves by doctors, the Stark Law prohibits physicians from referring patients for some health services paid by Medicare to an entity with which he or she has a financial relationship. The law is rooted in a volume-based system, but it has not melded well to the demands of a healthcare system shifting toward value-based care.

Collectively, the changes in CMS’ and OIG’s final rules would make it easier, for example, for a local hospital to donate cybersecurity software to physicians who refer patients to the hospital to better share information in a protected way. HHS said the new rules would enable a hospital to reward post-acute providers for hitting certain outcome targets “that effectively and efficiently coordinate care across care settings and reduce hospital readmissions.”

The new anti-kickback statute regulations tackle concerns that the rules may be limiting care coordination. Under HHS’ final rule, medical device manufacturers can enter into value-based arrangements to provide care coordination, allowing in-kind payment of digital health technology to providers and allowing digital health tools to be given to patients. HHS Secretary Alex Azar, in an interview with Modern Healthcare, gave an example of a hospital that, under the new policy, could now work with a diabetes care management company to give free diabetes management devices and services to their patients after discharge. The goal, Azar said, would be to help the patients do better and to prevent admissions. Under the old rules, this sort of partnership was verboten.

In the commenting period for both rules, healthcare providers underscored that the previous regulations discouraged some entities from entering into legitimate value-based care arrangements and that they spent significant resources trying to remain within the boundaries of the policies.

The American Hospital Association (AHA) praised the changes to the Stark Law regulations but said the revisions to the anti-kickback statute regulations do “not keep pace with the robust protection provided under the Stark regulations.” The HHS final rule modifying the anti-kickback statute regulations creates three new safe harbors for value-based arrangements: “care coordination arrangements to improve quality, health outcomes, and efficiency”; “value-based arrangements with substantial downside financial risk”; and “value-based arrangements with full financial risk.” The CMS final rule modifying the Stark Law regulations, on the other hand, allows an exception for value-based arrangements regardless of the level of risk assumed.

In its comments on the OIG’s proposed rule made in December 2019, the AHA urged HHS to create a broader safe harbor for non-risk value-based arrangements under the anti-kickback statute, beyond care coordination arrangements, that would align with the proposed (and now final) value-based arrangement exception to the Stark Law. In those comments, the AHA said that if the changes to Stark Law regulations were finalized as proposed (which they mostly were), the Stark Law would no longer be an impediment to a value-based care system; the anti-kickback statute would be.

The Medical Group Management Association (MGMA) said in a press release that it appreciates HHS’ efforts to simplify regulations under the Stark Law and the anti-kickback statute and to remove barriers to value-based payment, but that the regulations remain too complex for the average physician or practice administrator to navigate. The American Medical Association (AMA) had yet to make a statement about the final rules as of Dec. 1 but did praise the efforts by CMS and HHS and expressed concerns similar to the MGMA’s in its December 2019 comment letter on the anti-kickback statute, saying it was concerned with the level of administrative burden required to comply with it, especially for small, underserved or rural physician practices. Major payer trade associations had not commented on the final rules as of Dec. 3.

HRI impact analysis

The shift in reimbursement from volume to value has been underway for years, led by CMS through a variety of value-based programs under Medicare. The incoming Biden administration is expected to continue the federal government’s move toward value-based care. The recent changes to Stark Law and anti-kickback statute regulations could help accelerate that shift by lessening one of the regulatory barriers to participating in such arrangements.

Providers may be more willing to engage in value-based arrangements after fee-for-service revenues plummeted early in the pandemic. The CARES Act Provider Relief Fund has helped stem some of the revenue losses, but this may not be enough. COVID-19 cases are surging and may require some hospitals to again delay non-urgent procedures, leading to further revenue losses. Starting in the spring, providers will also have to start repaying accelerated payments made by CMS early in the pandemic.

While value-based care will not resolve the pandemic-related financial issues that providers are facing, it could provide a more stable path forward for providers that still rely predominantly on fee-for-service revenue. Value-based care remains an important part of providers’ strategies, even in the midst of the pandemic. Eighty-six percent of 153 provider executives surveyed by HRI in August and September said that a continued push toward value-based care in the next year was important to their organization.

The changes to the anti-kickback statute did not include any safe harbor provisions for value-based arrangements involving pharmaceutical manufacturers, distributors, wholesalers or pharmacy benefit managers.

With increased focus on drug pricing, given the actions taken by the Trump administration and the drug pricing reforms included on President-elect Joe Biden’s healthcare agenda, some pharmaceutical companies are turning to alternative payment arrangements, including value-based or outcomes-based payments, as part of their pricing strategy. Pharmaceutical Research and Manufacturers of America, a trade organization representing the US pharmaceutical industry, did not specifically comment on the final rule updating the anti-kickback statute regulations, but it continues to support a safe harbor for value-based arrangements with pharmaceutical companies

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Ingrid Stiver

Senior Manager, Health Research Institute, PwC US

Erin McCallister

Senior Manager, Health Research Institute, PwC US

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