Health Law Monitor

By: Alaina N. Crislip and

The Federal Anti-Kickback Statute (“AKS”) is a criminal statute that prohibits transactions intended to induce or reward referrals for items and services reimbursed by federal health care programs (such as, Tricare, Medicare, and Medicaid). On November 20, 2020, the United States Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) issued a final rule that amends the Federal Anti-Kickback Statute (“AKS Final Rule”).¹  The AKS Final Rule implements seven new safe harbors, modifies four existing safe harbors, and codifies one new exception under the Beneficiary Inducements Civil Monetary Penalties (“CMP”). The AKS Final Rule will take effect on January 19, 2021.  

This article is the first of a mini-series on the AKS Final Rule. It focuses on the three new safe harbors for AKS that protect value-based arrangements that foster better coordinated and managed patient care.  The other parts of the series will provide a deeper dive into the value-based arrangements safe harbors and the newly promulgated definitions, along with a summary of the other modifications to the safe harbors. 

Issued in conjunction with HHS’s Regulatory Sprint to Coordinated Care, the AKS Final Rule takes further steps to reduce regulatory barriers on care coordination and transition the health care system to one that pays for value instead of one predicated on fee-for-service reimbursements. The AKS Final Rule is aimed to “encourage and improve patients’ experience of care, providers’ coordination of care, and information sharing to facilitate efficient care and preserve and protect patients’ access to data.”²  In the traditional sense, arrangements that allowed for this type of collaboration and coordinated care among providers and others could implicate the AKS.  Thus, the AKS effectively held back the health care system from fully embracing the coordinated, value-based care system.  

In the AKS Final Rule, the OIG acknowledged that protecting certain value-based arrangements would improve quality, outcomes, and efficiency. Therefore, the AKS Final Rule provides significant new flexibilities for value-based arrangements and modernizes the safe harbor regulations to protect certain payment practices and business arrangements from sanction under the AKS.  

Value-Based Arrangements Safe Harbors

The value-based arrangements safe harbors follow a tiered framework based on risk assumption of the parties.  Those safe harbors include: 

• Care coordination arrangements to improve quality, health outcomes, and efficiency (42 CFR §1001.952(ee)); 
• Value-based arrangements with substantial downside financial risk (42 CFR §1001.952(ff)); and,
• Value-based arrangements with full financial risk (42 CFR §1001.952(gg)).

These safe harbors address a broad range of potential value-based arrangements for care coordination by varying in: (1) types of remuneration protected (in-kind or in-kind and monetary), (2) types of entities eligible to rely on the safe harbors, (3) level of financial risk assumed by the parties, and (4) types of safeguards included as safe harbor conditions.  The intent is that these safe harbors will protect both existing and emerging value-based arrangements. Although all three safe harbors offer protection for in-kind renumeration, only the safe harbors for value-based arrangements with substantial or full assumption of risk protect monetary renumeration. Thus, greater flexibility will be afforded to those arrangements where parties assume more financial risk. 

The new Stark³  and AKS Final Rules are aligned in many ways to transform the healthcare system into one that is value-based and promotes coordinated care. The key definitions are an example of those congruent changes as both final rules use the same terminology. Essential to the application of the AKS Final Rule value-based arrangements safe harbors, along with the exceptions under Stark, are the newly promulgated definitions for a “value-based arrangement,” “value-based activities,” a “value-based enterprise” or “VBE,” “value-based enterprise participants” or “VBE participant,” a “value-based purpose,” and a “target patient population.”   

Care Coordination Arrangements Safe Harbor⁴  

The care coordination arrangements safe harbor protects only in-kind remuneration exchanged to engage in value-based activities that are directly connected to the coordination and management of care for the target patient population. The safe harbor for care coordination arrangements is the least flexible of the new value-based arrangements safe harbors, although it does require participants to take on some risk. Recipients are required to contribute at least fifteen percent (15%) of either the offeror’s costs or the fair market value of the remuneration. However, there are safeguards in place to ensure transparency. The safe harbor requires the parties to establish at least one evidence-based outcome measure to advance the coordination and management of care for the target patient population. Unlike the Stark value-based arrangement exception, the AKS care coordination safe harbor requires that the arrangement must be commercially reasonable and does not permit arrangements involving marketing to patients for items, services, or patient recruitment activities

Value-Based Arrangements with Substantial Downside Risk⁵ 

The safe harbor for value-based arrangements with substantial downside risk protects both in-kind and monetary remuneration between a VBE and a VBE participant if the VBE undertakes the requisite amount of risk. The safe harbor requires a VBE, either directly or through its VBE participants, to assume substantial downside financial risk from a payor and a value-based participant to assume a “meaningful share” of the VBE’s total risk in order to protect both monetary and in-kind remuneration. Compared to the proposed rule, the AKS Final Rule reduced the proposed risk and meaningful share thresholds. The AKS Final Rule reduced the risk threshold that the parties must assume from forty percent (40%) to thirty percent (30%). Thus, the VBE need only take at least 30% of shared losses. The AKS Final Rule also modified the definition of “meaningful share” of a VBE’s substantial downside financial risk that the VBE participant needs to take to qualify under the safe harbor. The AKS Final Rule reduced the threshold for two-sided risk from eight percent (8%) to five percent (5%).

Value-Based Arrangements with Full Financial Risk⁶ 

The safe harbor for value-based arrangements with full financial risk protects both monetary and in-kind remuneration from a VBE to VBE participant. The safe harbor provides the greatest flexibility as it requires assumption of the most risk. It requires a VBE to be at risk on a prospective basis 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. This safe harbor has generally the same requirements as the Stark full financial risk exception.

Ineligible Entities and Individuals

Under the AKS Final Rule, the OIG listed certain entities and individuals that are ineligible to use each value-based arrangement safe harbor. Those entities and individuals include: 

1. Pharmaceutical manufacturers, distributors, and wholesalers; 
2. Pharmacy benefit managers; 
3. Laboratory companies; 
4. Pharmacies that primarily compound drugs or primarily dispense compounded drugs; 
5. Manufacturers of devices or medical supplies; 
6. Entities or individuals that sell or rent durable medical equipment, prosthetics, orthotics and supplies (other than a pharmacy or a physician, provider, or other entity that primarily furnishes services); and 
7. Medical device distributors and wholesalers.

The AKS Final Rule has a carve-out for certain medical device manufacturers and durable medical equipment companies that participate in protected care coordination arrangements involving digital health technology as long as certain requirements are met.  These entities and individuals are referred to as “limited technology participants.”

Unlike the proposed rule, where the OIG excluded these entities and individuals from the definition of VBE participants, the AKS Final Rule sets forth the above list of ineligible entities and individuals. As a result, these entities and individuals will not be excluded from participating in a value-based arrangement, but any remuneration exchanged between them and a VBE or other VBE participants will not be protected under the safe harbors, except in the case of limited technology participants.

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The AKS Final Rule, along with the changes to the Stark Law, are aimed to reduce the existing burdens on providers. With these changes, providers need to ensure that their current and future provider arrangements comply with AKS. Jackson Kelly’s attorneys and staff are dedicated to helping you do just that. In addition to the AKS Final Rule mini-series, we will be providing additional content detailing the other changes in the Stark Law in the coming weeks. Please do not hesitate to contact your JK Health Law Attorney with questions on these final rules.

¹  Medicare and State Health Care Programs: Fraud and Abuse; Revisions to Safe Harbors Under the Anti-Kickback Statute, and Civil Monetary Penalty Rules Regarding Beneficiary Inducements, 85 Fed. Reg. 77684.  AKS Final Rule is available at: https://www.govinfo.gov/content/pkg/FR-2020-12-02/pdf/2020-26072.pdf.
²  Id.
³  On November 20, 2020, the Centers for Medicare & Medicaid Services (“CMS”) also released its final rule to modernize and clarify the existing Physician Self-Referral Law (“Stark” or “Stark Law”).
⁴  42 CFR 1001.952(ee).
⁵  42 CFR 1001.952(ff).
⁶  42 CFR 1001.952(gg).