AMARILLO, TX – Historically, health care in the United States has been based on fee-for-service (FFS). That is, third party payors (TPPs) pay a physician, hospital or other provider for the service rendered…regardless of the outcome. A by-product of FFS has been very little coordination among providers regarding a particular patient. The FFS approach has proven to be inefficient and expensive.

With 78 million Baby Boomers retiring at the rate of 10,000 per day, and with many Boomers living well into their 80s, the financial strain on the nation’s health care delivery system is markedly increasing. TPPs have concluded that the FFS system is no longer financially viable and that a new approach is necessary.

This new approach is “value-based care,” also known as “coordination of care” and “patient outcome management.” Value-based care (“VBC”) is premised on providers collaborating to provide health care for a patient and for remuneration to the providers to be based, at least in part, on whether certain metrics are achieved. VBC may result in providers referring patients to each other, providing services to each other, and sharing in the remuneration paid for the care of the patient.

The challenge is that VBC has run up against the prohibitions and restrictions of the federal physician self-referral law (“Stark”) and the federal anti-kickback statute (“AKS”). Stark and the AKS came into existence when health care was almost entirely based on FFS. And while there have been modifications/updates over the years to Stark and the AKS, such updates have not addressed how these two statutes fit within the VBC framework.

• Starkis a civil statute. It states that if a physician (or an immediate family member) has a financial interest (ownership or compensation) in a health care provider, then the physician cannot refer a Medicare/Medicaid patient to the provider for “designated health services” (“DHS”) …unless a Stark exception is met. DHS includes durable medical equipment (“DME”). The Stark definition of “physician” is a “doctor of medicine or osteopathy, a doctor of dental surgery or dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor.”
• The AKSis a criminal statute. It states that a person/entity cannot pay or receive (or offer to pay or agree to receive) anything of value in exchange for (i) referring or arranging for the referral of a patient covered by a federal health care program (“FHCP”) or (ii) recommending the purchase of a service/product covered by an FHCP. The Office of Inspector General (“OIG”) has published a number of “safe harbors.” If an arrangement complies with a safe harbor then the remuneration exchanged between the parties does not constitute illegal remuneration under the AKS. If an arrangement does not meet the terms of a safe harbor, it does not mean that the arrangement violates the AKS; rather, it means that the parties will need to conduct an in-depth analysis in light of the language of the AKS, court decisions and other published guidance.

Recognizing the challenge imposed by Stark and the AKS on providers moving into the VBC space, (i) CMS updated Stark and (ii) the OIG updated the AKS.

Background
In the summer of 2018, CMS and the OIG sought input from interested parties by issuing Requests for Information. AAHomecare submitted a letter containing the association’s comments. One comment was that it would be ill-advised for physicians to be allowed to self-refer for DME. The recently released Final Rules do not change the Stark prohibition against physicians self-referring for DME.

In early October 2019, CMS and the OIG simultaneously issued proposed rules modifying Stark and the AKS. Providers and other interested parties submitted many comments. And then finally on November 20, 2020, CMS and the OIG issued the Final Rules that are the subject of this white paper.

The goal of the Final Rules is to encourage health care providers to collaborate in the provision of health care…without being unduly restricted by Stark and the AKS. Nevertheless, the AKS will remain as a “back stop” designed to prevent arrangements that while being technically correct on their face, are in reality designed to funnel remuneration to referral sources.

Three-Part Series
Part One of this three-part series of articles discusses modifications to Stark. Part Two discusses modifications to (i) the AKS, and (ii) Stark and the AKS. Part Three discusses the applicability of the modifications to DME suppliers.

Applicability to DME Suppliers
Certain components of the final rules do not directly apply to DME suppliers. There are two reasons for this. First, at present most DME suppliers are not integrated into the VBC arena; most suppliers are paid on an FFS basis. Secondly, several of the changes specifically exclude DME suppliers. These include: (i) the Value-Based Arrangements with Full Financial Risk safe harbor; (ii) the Value-Based Arrangements with Substantial Downside Risk safe harbor; (iii) with limited exceptions, the Care Coordination Arrangements safe harbor; (iv) the Patient Engagement and Support safe harbor; and (v) the addition to the Personal Services and Management Contracts safe harbor that pertains to protection of certain outcome-based payment arrangements.

On the other hand, other components of the final rules do directly apply to DME suppliers. These include:

• Modification to the Personal Services and Management Contracts safe harbor to the AKS by removing the requirement that the aggregatepayment for a management or services arrangement be set out in advance (i.e., only the methodology needs to be set out in advance). For example, instead of being required to pay a Medical Director (e.g., exactly $18,000 per year), the DME supplier can feel comfortable in paying the Medical Director on an hourly basis.
• Modification to the Personal Services and Management Contracts safe harbor to the AKS by removing the requirement that a part-time arrangement have a schedule of services specifically set out in the written agreement. From a practical standpoint, this element of the safe harbor has always been difficult to meet.
• Modification to the Stark definition of “commercial reasonableness” … clarifying that (i) the key question is whether the arrangement makes sense as a means to accomplish the parties’ goals and (ii) commercial reasonableness is not one of valuation – it is expressly not based on whether the arrangement is profitable or not.
• Clarification to the Stark “volume or value standard and other business generated standard” by stating that the amount of compensation will be considered to take into account the volume or value of referrals or other business generated only when the formula used to calculate compensation to or from a physician includes the volume or value of referrals or other business generated.
• Clarification that the Stark definition of “fair market value” means the value in an arm’s length transaction consistent with the general market value of the subject transaction (i.e., the intended use of the equipment or facility space is not taken into consideration…and the proximity to a referral source lessor is not taken into consideration).
• The ability of the parties to a transaction (that implicates Stark) to sign documents (memorializing the arrangement) within 90 days of the beginning of the arrangement.
• The modification to the Stark definition of “set in advance” to allow the modification of compensation during the term of an agreement where the modified compensation is not based on the volume or value of referrals.
• Under Stark, allowing remuneration (not to exceed $5,000 per calendar year) to be paid to a physician, for substantive services rendered, without a written agreement or compensation set in advance. For example, assume that a DME supplier’s medical director unexpectedly resigns and the supplier quickly arranges for a new medical director to start performing services before a Medical Director Agreement is signed. This modification to Stark would permit this.
• Modifications to the Stark EHR exception and AKS EHR safe harbor by (i) removing the sunset provision; (ii) allowing the recipient to pay its portion of the EHR at reasonable intervals; (iii) deleting the prohibition against donating replacement technology; and (iv) deleting the prohibition against the donor taking any action to limit or restrict the use, compatibility, or interoperability of the items or services with other e-prescribing or electronic health record systems.
• Enactment of the new Stark Cybersecurity Technology exception and new AKS Cybersecurity Technology safe harbor, the goal of which is to facilitate the donation of cybersecurity technology to recipients that may not be able to afford the protection against cyberattacks. Donating providers have a great deal of discretion in deciding the types of technology and services that qualify for protection.

These modifications and clarifications bring Stark and the AKS into line with each other. For example, before the modifications and clarifications (i) the Stark Personal Services exception allowed compensation on a per hour or per unit of service basis, while (ii) the Personal Services and Management Contracts safe harbor to the AKS only allowed fixed annual compensation. And so an arrangement could comply with the Stark exception but violate the AKS safe harbor. This modification solves this dilemma.

Stark comes into play when a party includes a physician (as defined by Stark) and/or his family member. There is no “intent” element in Stark. An arrangement either meets the Stark exception … or it does not. There is no “gray” … just “black and white.” On the other hand, the AKS is intent-based, which can often lead the parties into a gray area.

If a DME supplier wishes to enter into an arrangement with a physician (as defined by Stark), then the supplier must comply with both Stark and the AKS. On the other hand, if the DME supplier enters into an arrangement with a provider who does not fall under Stark, then the supplier only must comply with the AKS (and any other relevant laws). As stated earlier in this White Paper, if an arrangement does not comply with all of the elements of an AKS safe harbor, it does not mean that the arrangement violates the AKS. Rather, it means that the parties need to analyze the arrangement thoroughly under the language of the AKS, court decisions, and OIG guidance.

The modifications to Stark and the AKS show that CMS and the OIG recognize that Stark and the AKS were too limited in today’s health care climate. The modifications provide additional freedom to DME suppliers to enter into collaborative arrangements with physicians, hospitals and other providers … when the arrangements are designed to improve patient outcomes.

What is of paramount importance is for DME suppliers not to attempt to use these modifications to “game the system” by entering into arrangements that are not designed to improve patient outcomes – but rather – are designed to funnel remuneration to a referral source.

AAHOMECARE’S EDUCATIONAL WEBINAR

Managed Care Contracts: Key Provisions and Pitfalls to Avoid

Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Monique A. Pena, Esq., Brown & Fortunato

Tuesday, March 16, 2021

1:30-2:30 p.m. CENTRAL TIME
Historically, DME suppliers have billed Medicare and state Medicaid programs directly. This is known as the fee-for-service (“FFS”) model or the traditional Medicare/Medicaid model. This is changing. Today, about 35% of Medicare patients are covered by Medicare Advantage Plans (“MAPs”) and about 70% of Medicaid patients are covered by Medicaid Managed Care Plans (“MMCPs”). A MAP (i) is owned by an insurance company, (ii) contracts with (and receives payments from) Medicare, and (iii) contracts with health care providers to take care of the MAP’s covered lives. The same concept holds true with MMCPs…except that the MMCPs contract with state Medicaid programs. This program will discuss the most important challenges that DME suppliers face when they enter the managed care space, including (i) key provisions in managed care contracts; (ii) pitfalls to avoid when signing contracts; (iii) how to respond when a Plan will not allow a supplier onto its panel; (iv) how to respond when a Plan unrealistically lowers reimbursement; and (v) how to respond when a Plan enters into a sole source contract.

Register for Managed Care Contracts: Key Provisions and Pitfalls to Avoid on Tuesday, March 16, 2021, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq. and Monique A. Pena, Esq. of Brown & Fortunato.

Members: $99
Non-Members: $129

Complimentary Webinar

Hosted by AAHomecare, Brown & Fortunato, and Medtrade 

Medicare Coding, Coverage and Payment – Manufacturer’s Guide to Launching Home Care Products

Presented by: Cara C. Bachenheimer, Esq., Brown & Fortunato & Jeffrey S. Baird, Esq., Brown & Fortunato

Thursday, March 25, 2021

1:00-2:00 p.m. CENTRAL TIME
Manufacturers are increasingly bringing to market innovative products designed to be used by patients in their homes. In order to successfully launch a new product, manufacturers must understand the impact and role of HCPCS codes, Medicare coverage, and payment rules, as these will heavily influence how manufacturers market the new product. In this program, you will learn how to:

• Navigate Medicare’s coding, coverage and payment processes, and how these relate to non-Medicare payers such as commercial plans and state Medicaid programs.
• Understand the key role that the Centers for Medicare and Medicaid Services (CMS) has in issuing new HCPCS codes, and the responsibilities of the Pricing Data Analysis Contractor (“PDAC”) in assigning products to existing HCPCS codes.
• Learn when and how to engage in these processes, including how to work with CMS and the PDAC, and you will receive tips for maximizing success.

We will also cover the Medicare program’s new rule on coverage for Innovative Technology, and how this rule provides immediate coverage for “breakthrough devices” upon FDA approval.

Speaker Cara Bachenheimer has 30 years of experience helping manufacturers with HCPCS coding, coverage and payment issues and processes. Speaker Jeff Baird has over 30 years of experience representing manufacturers and DME suppliers on multiple issues, including billing and reimbursement.

Register for Medicare Coding, Coverage and Payment – Manufacturer’s Guide to Launching Home Care Products on Thursday, March 25, 2021, 1:00-2:00 p.m. CT, with Cara C. Bachenheimer, Esq. and Jeffrey S. Baird, Esq. of Brown & Fortunato. 

Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or [email protected].