Weiss Zarett Brofman | Sonnenklar & Levy, P.C. | Attorneys At Law

High Quality Services And Personal Attention

CLIENT ALERT: CMS and OIG Move to Expand Exceptions and Safe Harbors to Stark Law and Anti-Kickback Statute

On Behalf of | Dec 10, 2020 | Articles, Healthcare Law, Publications

By Mathew J. Levy, Esq. Email Mathew

On November 20, 2020, the Centers for Medicare and Medicaid Services (“CMS”) and the Office of Inspector General (“OIG”) adopted significant changes to regulations regarding the Anti-Kickback Statute (“AKS”) and the Physician Self-Referral Law (“Stark Law”).  Among the changes are those that expand, and create new, AKS safe harbors and Stark Law exceptions.


As a general matter, AKS and the Stark Law and AKS prohibit medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid, and from entering into certain kinds of financial relationships.  There are various exceptions to the Stark Law, together with certain safe harbors to AKS, that permit certain referrals under limited circumstances.  The recent changes adopted by CMS and OIG aim to expand those exceptions and safe harbors in order to modernize and clarify regulations that were enacted back in 1989.  Summarized below is a general overview of the key AKS and Stark Law changes.

AKS Changes:

The main AKS revisions are as follows:

  • Value-Base Arrangements:  Three new AKS safe harbors will be added to protect certain arrangements entered into with, or by, a value-based enterprise (VBE) and its eligible participants for a number of value-based network arrangements, as follows:
  • Care coordination arrangements to improve quality, health outcomes, and efficiency, involving “no risk”, where in-kind renumeration such as technology or services are exchanged between VBE participants used to engage in value-based activities directly connected to care coordination for the target patient population.
  • Value-based arrangements involving both monetary and in-kind renumeration between a VBE and VBE participants where the VBE assumes “substantial downside financial risk” for providing or arranging for the provision of items and services for the target patient population, and the VBE participants assume a “meaningful share” of that risk.
  • Value-based arrangements involving both monetary and in-kind renumeration between a VBE and VBE participants where the VBE assumes “full financial risk” for all items and services covered by a payor for each patient in the target population for a term of at least one year.

These “value-based” safe harbors vary by the type of remuneration protected, the type of entities eligible to rely on the safe harbors, and the types of safeguards included as safe harbor conditions. The value-based safe harbors exclude pharmaceutical manufacturers, distributors, and wholesalers; PBMs; pharmacies that primarily compound or dispense compounded drugs; laboratories; medical device and supply manufacturers; medical device distributors and wholesalers; DMEPOS suppliers; and physician-owned medical device companies. The care coordination safe harbor can be accessed by medical device and DMEPOS manufacturers to protect digital technology arrangements under certain conditions.

  • Patient Engagement:  A new safe harbor will be added for patient engagement tools and supports to improve care quality, outcomes and efficiency, furnished by a VBE participant or “eligible agent” to a patient in a “target patient population,” subject to a $500 annual cap, with an inflation adjuster. This safe harbor includes the same general exclusions as outlined above but allows medical device and supply manufacturers to provide some digital health technology.
  • CMS-Sponsored Models:  A new safe harbor will be added for CMS-sponsored model arrangements and CMS-sponsored model patient incentives that is expected to reduce the need for separate fraud and abuse waivers for new CMS-sponsored models.
  • Cybersecurity:  A new safe harbor will be added to protect non-monetary donations of certain cybersecurity technology, including both software and hardware, and related services. This safe harbor permits the donation of cybersecurity technology to physician groups or other providers so long as the technology is “necessary and used predominantly to implement, maintain, or reestablish cybersecurity.” The safe harbor limits donors from making donation decisions considering volume or value of referrals or other business generated between the parties.
  • Electronic Health Records:  The existing electronic health records (EHR) safe harbor will be modified to update provisions regarding interoperability, remove the prohibition on donation of equivalent technology, and provide clarification to protections for cybersecurity technology and services included in an electronic health records arrangement.
  • Personal Services and Management Contracts:  The existing personal services and management contracts safe harbor will be modified to increase flexibility for part-time or unpredictable compensation arrangements, and to provide new protection for outcome-based payment arrangements, with the same entity-exclusions that are applied to the new value-based safe harbors.
  • Warranties:  The existing safe harbor for warranties will be modified to revise to definition of “warranty” and provide protection for warranties for one or more items and related services.
  • Local Transportation:  The existing safe harbor for local transportation will be modified to increase mileage limits from 50 to 75 miles for rural areas, and to eliminate distance limitations for transporting patients discharged home from an inpatient or observation setting.

The AKS changes will become effective January 19, 2021.

Stark Law Changes:

Many of the Stark Law changes track similar revisions made to AKS, with some distinctions.  The main revisions are as follows:

  • Exceptions for Value-based Arrangements. As with the AKS changes, new, permanent exceptions for value-based arrangements were adopted to permit value-based arrangements that satisfy certain requirements based on the level of financial risk undertaken (full financial risk, meaningful downside financial risk, or no risk).  These exceptions will allow health care providers to design and enter into more flexible value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate Stark Law.
  • New Guidance and Clarifications. SMS provided additional guidance on key requirements of the exceptions to the Stark Law to make it easier for health care providers to comply with the law. For instance, compensation provided to a physician by another health care provider must generally be at “fair market value.” The new rules clarify how to determine whether compensation meets this requirement.  An additional clarification was effected by adding new definition of “commercially reasonable”, which requires that an arrangement “furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty” and clarifies that an arrangement may be commercially reasonable even if it does not result in a profit for one or more of the parties.
  • Other New Exceptions. The final rule establishes new exceptions to protect non-abusive, beneficial arrangements between physicians and other health care providers that apply regardless of whether the parties operate in a fee-for-service or value-based payment system—such as donations of cybersecurity technology that safeguard the integrity of the health care system. In addition, CMS finalized a new exception to protect compensation not exceeding an aggregate of $5,000 per calendar year, adjusted for inflation, to a physician for the provision of items and services without the need for a signed writing and compensation that is set in advance if certain conditions are met, including that the compensation does not exceed fair market value and is not determined in any manner that takes into account the volume or value of referrals or other business generated.

The new Stark Law regulations will become effective January 19, 2021. Certain provisions relating to value-based care arrangements will not be effective until January 1, 2022.

Should you have any questions regarding the foregoing rule changes, please contact Mathew Levy at 516-627-7000 or [email protected].

About the Authors:

Mathew J. Levy is a Partner of the firm and co-chairs the Firm’s corporate transaction and healthcare regulatory practice. Mr. Levy has extensive experience in, defending healthcare professionals in actions brought by State licensing authorities and the Federal agencies (OIG, Medicare, OMIG, Medicaid, DEA, OSHA, OCR OSHA, Hospital Review Boards, Office of Professional Medical Conduct and Office of Professional Discipline.) Mr. Levy has successfully defended numerous healthcare providers in actions involving the US Attorney’s Office investigations, Medicare Fraud Waste and Abuse investigations, Medicaid Fraud Control Unit investigations, OPMC, OPD, Medicare, Medicaid as well as commercial insurance audits including Prepayment Review, Post Payment Review, Medicare Hearings and Hospital Discipline Investigations.

Mr. Levy has successfully structured and negotiated joint venture agreements, private equity transactions, venture capital transactions, stock purchase agreements, asset sale agreements, shareholders agreements, partnership agreements, employment contracts, managed care agreements and commercial leases. Among the areas in which he focuses are coordinating mergers and acquisitions, compliance programs, ambulatory surgery centers, the establishment of diagnostic and treatment centers, HIPAA privacy regulations, fee-splitting issues, Stark law issues, fraud and abuse rules and regulations and Medicare/ Medicaid, Oxford, Americhoice, Fidelis, Healthfirst and other third-party payor settlements.

Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors’ rights, and commercial real estate transactions.