February 2, 2021 

HHS Makes Long-Awaited Reforms to the Anti-Kickback Statute and Stark Law Bringing Value-Based Arrangements to the Forefront
By Nicolette Taber and Ann Ford

New Changes to Federal Regulatory Laws Invite Medical Device and Durable Medical Equipment Companies to Enter into Digital Technology Agreements.

On November 20, 2020, the Department of Health and Human Services (HHS) published two new final rules aimed towards supporting care coordination and value-based care. As part of the Trump Administration’s “Sprint to Coordinated Care” plan, the HHS Office of Inspector General (OIG) revised the safe harbors under the Anti-Kickback Statute (AKS) and the Centers for Medicare and Medicaid Services (CMS) revitalized the physician self-referral regulations (“Stark Law”). These reforms are designed to primarily reduce the regulatory burden on the healthcare industry while incentivizing coordinated care.

The AKS is a federal statute that provides for criminal penalties for whoever knowingly and willfully offers, pays, solicits, or receives remuneration to induce or reward the referral of business reimbursed by a federal health care program. The Stark Law prohibits physicians from making self-referrals. Since the AKS pertains to medical device manufacturers and durable medical equipment (DME) companies, and Stark rarely applies, this blog will focus on the OIG’s changes to the AKS as it pertains to value-based arrangements.

Of note, many companies, including medical device, DME, and pharmaceutical entities, are ineligible to utilize the value-based safe harbors under the Final Rule. However, the care coordination arrangements safe harbor permits medical device and DME entities to enter into digital technology arrangements, albeit with restrictions. HHS defined digital health technology as “hardware, software, or services that electronically capture, transmit, aggregate, or analyze data and that are used for the purpose of coordinating and managing care.”

OIG recognizes the vital role of digital health technology in advancing coordinated care. Therefore, OIG permits medical device and DME companies to furnish patient engagement tools or other forms of digital health technology under the value-based safe harbor. In the Final Rule, OIG admits that many digital health technologies are inextricably linked to a medical device company, so OIG will afford safe harbor protection to the exchange of digital health technologies by manufacturers of medical devices under the care coordination arrangements safer harbor.

OIG also appreciates pharmaceutical manufacturers’ key role in delivering efficient, high-quality care to patients, but advises further analysis is required in these arrangements to ensure compliance with the AKS.

In this age of digital health technology, we are seeing a lot more collaboration between digital health and life science companies. The value-based safe harbors are highly fact-dependent. Therefore, although at first glance life sciences companies may not fall under the safe harbors, this can be further explored if collaborating with a digital health company.

Here are the three new AKS safe harbors for certain remuneration exchanged in value-based arrangements that promote better coordinated and managed care:
  1. Care coordination arrangements to improve quality, health outcomes, and efficiency. This safe harbor protects in-kind remuneration exchanged between value-based entities (VBE) that enter into arrangements that are directly connected to the coordination and management of care for the target patient population. Of note, this safe harbor does not require the parties to assume risk. However, recipients are required to pay at least 15 percent of either the offeror’s costs or the fair market value of the remuneration. These arrangements carry the most significant regulatory burden.
  2. Value-based arrangements with substantial downside financial risk. This safe harbor covers both monetary and in-kind remuneration exchanged between a VBE and a VBE participant. Here, the VBE assumes a substantial downside financial risk from a payor under one of three methodologies, and the VBE participant assumes a portion of the share of the VBE’s total risk. These arrangements have some additional regulatory requirements.
  3. Value-based arrangements with full financial risk. This safe harbor protects monetary or in-kind remuneration from a VBE to a VBE participant provided the VBA assumes full financial responsibility for the cost of all health care items, devices, supplies, and services covered by the applicable payor for each patient in the target patient population for a term of at least one year. These arrangements have the fewest regulatory requirements.
The new rules took effect on January 19, 2021, on the eve of then-President-elect Joe Biden’s inauguration. Time will tell as to whether the Biden Administration will make any major changes to the “Sprint to Coordinated Care” plan.

Do you have questions about the Anti-Kickback Statute reforms? Please contact Ann Ford (aford@hpslaw.com) and Nicolette Taber (ntaber@hpslaw.com).