Dec 29, 2020

OIG and CMS Pave the Way for Value-Based Arrangements

By Meghan V. Hoppe, Esq.

Last December, Schenck Price issued a Special Edition of the Health Law Dispatch dedicated to proposed regulations aimed at reforming the federal Anti-Kickback statute (the “AKS”) and the federal Physician Self-Referral Law (the “Stark Law”). The long-awaited final rules, which largely adopt the proposed regulations, were published concurrently by the Office of Inspector General of the Department of Health and Human Services (“OIG”) and the Centers for Medicare & Medicaid Services (“CMS”) on December 2, 2020. The final rules pave the way for value-based health care by, among other things, creating new safe harbors under the AKS and exceptions under the Stark Law for certain value-based compensation arrangements. 

The new exceptions and safe harbors rely on a set of shared terminology. They protect “value based arrangements” involving at least one “value based activity” for a target population. The value based arrangement must involve a “value based enterprise” or “VBE,” which is two or more participants that: (1) are collaborating to achieve at least one value-based purpose; (2) are each a party to a value-based arrangement with the other (or at least one other participant in the same VBE); (3) have an accountable body or person responsible for financial and operational oversight of the VBE; and (4) have a governing document describing the VBE and how its participants intend to achieve the VBE’s value-based purpose(s).

The new Stark Law and AKS rules both include protections for arrangements with full financial risk. An AKS safe harbor also covers substantial downside financial risk, and a Stark Law exception protects arrangements with meaningful downside financial risk. The value-based exceptions and safe harbors provide flexibility in structuring relationships among providers proportional to their assumption of financial risk. Therefore, arrangements involving greater risk are subject to fewer regulatory requirements.

Notably, the value-based exceptions and safe harbors do include a requirement that the arrangements reflect fair market value (FMV), which is a traditional fraud and abuse safeguard found in many of the existing Stark Law exceptions and AKS safe harbors that has created significant barriers to value-based compensation arrangements in the past. While the new AKS safe harbors and Stark Law exceptions include many similarities intended to protect value-based arrangements, the requirements for compliance are not identical. For example, pharmaceutical manufacturers, pharmacy benefit managers (PBMs), medical device companies, lab companies, compounding pharmacies and durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) are excluded from the value-based AKS safe harbors. The new Stark Law exceptions do not exclude any specific entities from eligibility

The new rules take effect on January 19, 2021, other than certain revisions to the Stark Law relating to group practices that will be effective January 1, 2022, and apply only prospectively. Thus, arrangements entered into prior to January 20, 2021 are still subject to current regulations. 

For more information, contact Meghan V. Hoppe, Esq. at or (973) 540-7351.




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