The FCA Insider

The FCA Insider

Insights and updates on False Claims Act Litigation

Uncategorized

OIG Redesigned Hotline Webpage

The Office of Inspector General (“OIG”) recently launched a new, redesigned hotline webpage to better guide the public through the tip and complaint reporting process. The OIG hotline operations accepts tips and complaints from all sources regarding potential fraud, waste, abuse, and mismanagement in the U.S. Department of Health and Human Services’ (“HHS”) programs. The OIG receives nearly 115,000 complaints each year. Much of this information, as reported in the OIG’s promotional video, has led to thousands of referrals for further action. Therefore, the OIG stated it is imperative that users understand the complaint and submission process, which it hopes the updated webpage will help facilitate. The OIG’s updated hotline webpage creates a more user friendly environment and a better experience for the complainants.

On the new website, users can find guided questions, mobile compatibility, and more information regarding the types of complaints that the OIG investigates. The updated hotline page includes a section titled “What You Need to Know.” This section contains a link to information for the complainant to review before they submit a complaint. The information on found at this link includes a list of the types of claims the OIG investigates and a list of complaints not addressed through the OIG hotline. The new hotline website lists the following as the types of complaints it investigates: (1) Complaints for HHS employees, grantees or contractors about fraud, waste, abuse or mismanagement in HHS programs (whistleblower complaints); (2) crime, gross misconduct, or conflicts of interest involving HHS employees, grantees or contractors; (3) fraud, waste, or abuse relating to HHS grants or contracts; (4) false or fraudulent claims submitted to Medicare or Medicaid; (5) kickbacks or inducements for referrals by Medicare or Medicaid providers; (6) medical identity theft involving Medicare and/or Medicaid beneficiaries; (7) failure of a hospital to evaluate and stabilize an emergency patient; (8) abuse or neglect in nursing homes and other long-term-care facilities; and (9) human trafficking by HHS employees, contractors or grantees to include procuring a commercial sex act. There is also information regarding what is needed for the complaint, privacy safe guards, what to expect after a complaint is submitted, and how to appeal an OIG hotline operations complaint decision.

In addition to submitting a complaint online, complainants may also forward their tip via phone or mail, as indicated on the updated website. However, the OIG notes in its promotional video, that online complaint submission is preferred because of the efficiency. It also allows individuals the opportunity to submit supporting documents, along with their complaints. Supporting documents cannot be submitted via the other types of complaint submissions.

The OIG emphasized the importance of the updated Hotline website, by stating that the new site will provide complainants with much more information than they previously had available to them. The updated site will guide complainants in filing complaints that the OIG can act on. The OIG stressed that, while they are not able to provide complainants with a status on their tip or complaint, the complainants’ role is very important, and the OIG would be unable to stamp out fraud, waste, and abuse without their assistance.

Given the OIG’s focus on increasing the simplicity in allowing the public to notify it about potential fraud and abuse issues, we will not be surprised if there is a quick and significant increase in the number of complaints filed.  This, in turn, could lead to increased investigatory activity by the OIG. We will continue to provide updates as the OIG publishes information about its updated hotline.

DOJ, FCA Litigation, Regulatory

Increased False Claims Act Scrutiny for Private Equity Firms Investing in Healthcare Providers

Private equity firms investing in healthcare should take note of increasing False Claims Act (FCA) scrutiny by the government and whistleblowers. In two recent cases, the government has demonstrated a willingness to pursue private equity (PE) firms that invest in healthcare providers and take an active role in operations.

A recent example is the government’s case against Riordan, Lewis & Haden, Inc. (RLH), its portfolio pharmacy, doing business as Patient Care America (PCA), and PCA executives. DOJ extended the reach of the FCA to RLH in reliance on the fact that a RLH investment fund held a controlling
interest in PCA, two RLH partners were PCA board members and officers/directors and the two RLH partners were actively involved in PCA’s operational decisions. The government also highlighted the PE firm’s alleged push to generate a strong return on investment. And, importantly, DOJ further alleged that “[a]s an investor in health care companies, RLH knew or should have known when it acquired PCA … that health care providers that bill federal health care programs are subject to laws and regulations designed to prevent fraud[.]” The parties recently settled for $21.36 million.

In another case, Massachusetts alleged that a mental health center operator, its former CEO and a PE firm submitted false claims to Medicaid. A federal court agreed that “a defendant may be liable where the submission of false claims by another entity was the foreseeable result of a business practice.” When denying the PE firm’s motion to dismiss, the court noted that the boards, with a majority of the membership held by the firm’s members and principals, was allegedly involved in the provider’s operations in the form of “approving contracts, strategic planning, budgeting, and earnings issues.” With the defendants denying the allegations, the case remains in litigation as of the date of this publication.

Takeaways for PE Firms:

  1. As a major economic driver, healthcare is an attractive investment opportunity particularly with expected expansion as our nation’s population ages. New entrants to the market, however, should understand the complex and dynamic laws that regulate the industry. Business activities that may be common in other business sectors may trigger civil or criminal liability under healthcare laws.
  2. Carefully diligence a target’s compliance with fraud and abuse laws. Civil fraud enforcement typically arises under a “knew or should have known” standard. While the law is evolving as to where that standard is for PE firms, the statute of limitations for FCA cases is six years (and in some cases ten years). Knowing the risks at the beginning allows a PE firm to adjust deal terms when the scope of liable actors may not be known for years.
  3. If a provider is a portfolio client, monitor legal compliance but refrain from participating in provider operations. Moreover, carefully consider whether PE firm partners should sit on the provider’s board.
  4. Evaluate executive incentive compensation programs to ensure rapid business growth does not come at the expense of legal compliance. For example, in some cases, the government has required monitored entities in the wake of a fraud case to have “claw back” provisions in executive compensation plans that are triggered if non-compliance is identified.
  5. If a potential problem is identified, discontinue funding the practices, hold executives accountable and evaluate the firm’s potential exposure.
Uncategorized

Updated Civil Monetary Penalties

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 requires agencies to adjust civil monetary penalties for inflation annually. Effective November 5, 2019, the Department of Health and Human Services released updated civil monetary penalties for the regulations its agencies are responsible for enforcing.

Below are key changes applicable to healthcare providers.

  1. The physician self-referral law, commonly known as the Stark Law, imposes civil monetary penalties for referring certain designated health services to an entity in which a physician has a financial relationship and for billing for those services. In 2018, the penalty per claim was a maximum of $24,748. The annual adjustment for 2019 increases this to $25,372 per claim.
  2. The federal anti-kickback statute imposes civil monetary penalties for knowing and willful solicitation, receipt, offer, or payment of remuneration for referring an individual for a service or for purchasing, leasing, or ordering an item to be paid for by a Federal health care program. In 2018, the penalty per violation was a maximum of $100,000. The annual adjustment for 2019 increases this to $102,522.
  3. The Civil Monetary Penalty Law also prohibits offering remuneration to induce beneficiaries of Federal health care programs to use particular providers, practitioners, or suppliers. In 2018, the penalty per violation was a maximum of $20,000. The annual adjustment for 2019 increases this to $20,504.
  4. The False Claims Act prohibits knowingly presenting or causing to be presented a false or fraudulent claim under to the federal government. In 2016 (when the dollar amounts were last updated), the penalty for violating this prohibition was $10,000 per claim. The 2019 adjustment increases this to $10,461. The False Claims Act also prohibits making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim. In 2016, the penalty for violating this prohibition was $50,000 per violation. The 2019 adjustment increases this to $52,308.

As always, healthcare providers should be mindful of the landscape of regulatory requirements that govern their business. The penalties for violations are large, and, as demonstrated by this 2019 update, the federal government is consistent in increasing the potential liability.

Uncategorized

Changes to CMS’ Conditions of Participation Regulations for Providers Take Effect Nov. 29

Healthcare providers should begin finalizing plans to implement the Centers for Medicare and Medicaid Services’ Omnibus Burden Reductions (conditions of participation) final rule, which becomes effective Nov. 29, 2019. The final rule, issued Sept. 26, 2019, is intended to remove Medicare regulations, contained primarily in providers’ conditions of participation that CMS has identified as unnecessary, obsolete or excessively burdensome on healthcare providers and patients. The rule finalizes the provisions of three distinct proposed rules:

  • Regulatory Provisions to Promote Program Efficiency, Transparency, and Burden Reduction (Omnibus Burden Reduction), published Sept. 20, 2018
  • Hospital and Critical Access Hospital Changes to Promote Innovation, Flexibility, and Improvement in Patient Care, published June 16, 2016
  • Fire Safety Requirements for Certain Dialysis Facilities, published Nov. 4, 2016

The final rule represents a continuation of CMS’ Patients Over Paperwork initiative to reduce regulatory burdens on the healthcare industry, as discussed in a July 9, 2019, McGuireWoods client alert.

CMS estimates that, within the first year of implementation, the changes made by the final rule will save providers and suppliers an estimated 4.4 million hours previously spent on paperwork and roughly $8 billion per year over the next 10 years. The final rule contains many revisions that impact a wide array of providers.

Below are key changes applicable to four specific provider types.

1) Hospitals

Upon implementation of the final rule, CMS will permit a hospital system (defined as a system consisting of two or more separately certified hospitals subject to a system governing body legally responsible for the conduct of each hospital), to elect to have a unified and integrated Quality Assurance and Performance Improvement (QAPI) program for all of its member hospitals subject to compliance with state and local laws. This change is intended to help hospitals increase efficiencies and eliminate some duplication of efforts

In the final rule, CMS also gave hospitals increased flexibility to establish a medical staff policy describing the circumstances under which such hospital can utilize a pre-surgery/pre-procedure assessment for an outpatient, instead of a comprehensive medical history and physical examination. If a hospital elects to establish such a policy, its pre-surgery/pre-procedure assessment must consider patient age, diagnoses, the type and number of surgeries and procedures scheduled to be performed, comorbidities, and the level of anesthesia required for the surgery or procedure, among other requirements. CMS believes these changes will benefit providers and patients by providing administrative and financial relief from current comprehensive pre-operative testing requirements, which are often unnecessarily performed on patients, particularly those patients undergoing only minor outpatient procedures.

2) Ambulatory Surgical Centers (ASCs)

In the final rule, CMS removed from the conditions for coverage (CfCs) requirement that ASCs either (i) have written hospital transfer agreements in place or (ii) require their medical staff physicians to have admitting privileges with a local hospital. While CMS will no longer mandate these requirements, the CfCs will still require ASCs to have an effective procedure for the immediate transfer of patients requiring emergency medical care beyond the capabilities of the ASC, to a local hospital that meets Medicare requirements for payment for emergency services.

As support for removal of the written hospital transfer agreement requirement, CMS noted the current requirement is unnecessary, obsolete and burdensome in light of the small number of patient transfers, existing requirements under the Emergency Medical Treatment and Labor Act, and the exhaustive administrative paperwork and negotiation burden that is required when a local hospital system refuses to sign the written hospital transfer agreement. Despite the removal of this requirement, CMS emphasized that it still believes it is important for ASCs and hospitals to communicate and encourages ASCs and hospitals with “functional working relationships” to maintain written transfer agreements. Further, CMS expects each ASC to periodically provide the local hospital with written notice of its operation and patient population served, including details such as hours of operation and the procedures that are performed in the ASC.

3) Transplant Centers

In response to concerns that present reporting requirements for transplant centers have resulted in fewer eligible patients receiving transplants, CMS’ final rule removed the requirement for transplant centers to submit data, clinical experience and outcome requirements for Medicare re-approval. CMS believes the removal of these requirements will lead to improved patient outcomes, increased transplantation opportunities for patients on the wait list, improved organ procurement for transplantation, greater organ utilization and reduced burden on transplant programs. CMS also noted that the removal of these requirements directly aligns with the U.S. Department of Health and Human Services’ Advancing American Kidney Health initiative, which seeks to increase access to kidney transplants, as discussed in a July 12, 2019, McGuireWoods client alert.

The rule does not make any changes to the QAPI program for transplant centers and CMS expects transplant programs to continue use their QAPI programs to monitor qualify of care, evaluate transplant activities and conduct performance improvement activities, as necessary.

4) Emergency Preparedness Requirements

Medicare and Medicaid providers and suppliers are now required to review and provide training on their emergency programs biennially, instead of annually, with the exception of long-term care facilities, which will still be required to review their emergency programs and provide training annually. Despite this change, CMS still expects facilities to update their emergency preparedness program more frequently than biennially if circumstances trigger the need for such an update — for example, if staff changes occur or lessons are learned from a real-life event or exercise. CMS believes these changes will give providers more flexibility to review and revise their plans based on their actual operational needs.

Bottom Line

The final rule offers regulatory relief to a wide array of healthcare providers. In addition to the categories discussed above, the rule includes a significant number of changes for home health agencies, hospices, comprehensive outpatient rehabilitation facilities, portable X-ray services, critical access hospitals, dialysis facilities and religious nonmedical healthcare institutions. Providers should review their existing policies and procedures to ensure they have revised them to implement the changes required under the final rule.

For more information regarding the new rule, please consult one of the authors.

Defense Arguments, FCA Litigation

Tenth Circuit Affirms an Award of Attorneys’ Fees for a Successful FCA Defendant

On June 11, 2019, the Tenth Circuit affirmed an award of $92,592.75 in attorneys’ fees to the defendants in Pack v. Hickey, 776 F. App’x 549 (10th Cir. 2019). Pack had appealed the district court’s entry of summary judgment and related orders in favor of Defendants Maureen Hickey (“Hickey”) and Cloud Peak Initiatives, Inc. (“Cloud Peak”) on Pack’s claims under the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733.  The Wyoming District Court also granted the defendants’­­ motion for attorneys’ fees on April 6, 2018, Case No. 15-CV-185.

Summary:

Under the whistleblower provisions of the FCA, Pack served as a qui tam relator in a suit against Defendants Cloud Peak and Hickey.  Cloud Peak is a private mental health facility.  Hickey was Cloud Peak’s President, owner, and sole shareholder.  The individual parties in the lawsuit were allegedly in a prior relationship and it was alleged that Hickey had terminated Pack as CEO of Cloud Peak and had also terminated their romantic relationship.  This background is relevant because the Tenth Circuit’s opinion noted these details in finding that the defendants deserved attorneys’ fees because Pack’s suit was frivolous and motivated by personal animus.

Pack alleged that Hickey was the sole person responsible for reviewing and submitting bills to Medicaid and that she committed Medicaid fraud based upon three types of purportedly false billing: improperly billing skills groups as therapy groups, improperly billing group therapy sessions as individual therapy sessions, and billing of unauthorized direct targeted case management without necessary medical documentation, all in violation of the FCA.

Pack had submitted an affidavit in connection with the District Court proceeding, but the District Court struck portions of the affidavit on multiple grounds, including issues of personal knowledge, hearsay, and impermissible beliefs, opinions, and conclusions.

On appeal, Pack failed to address the district court’s specific findings and failed to identify by number any of the paragraphs from his affidavit that were at issue. Instead, Pack relied on what Judge Briscoe called “generalized propositions, lengthy string cites, and conclusory statements.” Id.

In addition to Pack’s lack of personal knowledge, the court found the absence of evidence supporting the scienter element required for an FCA claim to be striking.

Award of attorneys’ fees to Defendants:

The False Claims Act permits an award of attorneys’ fees in favor of the Defendants where the Defendants prevailed in the litigation and the relator had asserted a claim that was “clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.”  31 U.S.C. § 3730(d)(4).

In this case, the district court awarded the Defendants $92,592.75 in attorneys’ fees and the appellate court affirmed the award, finding “no reversible error.”  Pack, 776 F. App’x at 558. The court based its ruling on, among other things, Pack’s failure to adduce evidence of false billing claims, the failure to satisfy the scienter requirement of an FCA claim by not deposing Hickey and others, the lack of documentary evidence and reliance on hearsay and speculation, and the proposal of a settlement offer which “tended to show [Pack] brought the action for an improper purpose.” Pack, 776 F. App’x at 559.

Conclusion:

In light of the high standard, it is rare that defendants in FCA suits are able to recover attorneys’ fees.  Further, relators in qui tam suits do not typically have deep pockets, and courts are sympathetic to a private citizen bringing an action on the government’s behalf.  However, the Pack case provides an outline of some of the considerations that a Court will view as appropriate to justify an award of attorneys’ fees for the Defendant.  We expect that Defendants will continue to evaluate the possibility of recovering attorneys’ fees in the future, particularly in situations where a relator brings claims that are motivated entirely by personal animus or where the claims were knowingly brought despite a lack of merit.

Uncategorized

HHS to Ease Fraud and Abuse Rules Part 4: Proposed Revisions to the Stark Law

As discussed in a previous McGuireWoods alert, on Oct. 9, the Department of Health and Human Services announced two proposed rules to significantly amend the Physician Self-Referral Law (Stark Law), the federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalties (CMP) Law. This client alert, the fourth in McGuireWoods’ summary series on these proposed rules, focuses on the Centers for Medicare & Medicaid Services’ (CMS’) proposed revisions to ease certain requirements under the Stark Law by adding: (1) a new exception for limited monetary compensation; (2) changes to the group practice definition, particularly on physician profit-sharing; (3) definitional clarification for interpreting the regulations; and (4) other clarifications to ease compliance.

The proposed rules stem from HHS’ Regulatory Sprint to Coordinated Care (discussed in a Sept. 26, 2018, client alert), intended to incentivize value-based arrangements and patient care coordination by expressly permitting certain activities that could be deemed problematic under current law. The proposed rules, respectively released by CMS and the HHS Office of Inspector General (OIG), would add new value-based exceptions to the Stark Law and additional safe harbors under the AKS.

Although the proposed changes are likely to provide greater flexibility under the Stark Law, CMS does not intend to increase program risk. Accordingly, CMS provided additional clarification and bright-line rules in the proposed rule, based in part on knowledge gained from overseeing more than a thousand Self-Referral Disclosure Protocol filings. The industry will likely welcome changes to a strict liability statute that otherwise prohibits a physician referring designated health services (DHS) when a financial relationship does not meet an exception. This alert outlines CMS’ proposed changes to modernize its Stark Law regulations and provides seven key takeaways to assist healthcare providers in navigating these potential revisions.

1. CMS proposed a new exception for limited monetary physician compensation, under $3,500 per year. CMS seeks to add a new non-monetary compensation exception, which would allow physicians to be paid $3,500 or under per calendar year (adjusted for inflation), in the aggregate, without a signed writing or compensation set in advance. CMS, however, would still require that the compensation (a) not take into account the volume or value of referrals or other business generated, (b) not exceed fair market value, and (c) be commercially reasonable.

CMS noted that, through the Self-Referral Disclosure Protocol, it regularly encountered arrangements it deemed non-abusive but which failed to meet the requirements for a Stark Law exception (e.g., where a hospital paid a physician fair market value and had a legitimate need for physician services, yet failed to satisfy an exception because the arrangement was not in writing). CMS requested comment on whether a $3,500 limit would be workable and appropriate.

Note, importantly, the $3,500 limit, as proposed, would not apply to compensation for items or services outside of these arrangements if that compensation is itself protected under a different exception. CMS also suggested this exception might allow compliance at the outset of an arrangement before being replaced by another exception.

2. Changes to the group practice definition may necessitate certain revisions to a group’s compensation plan. The nuanced, technical definition of “group practice” is a critical concept under the Stark Law, as Congress created certain exceptions for referrals within group practices, including the in-office ancillary services exception, understanding that internal DHS referrals are commonplace and foster continuity of care and patient convenience. Therefore, even minor changes to the group practice definition can have significant impacts necessitating changes to physician compensation. Here, most significantly, CMS proposed to change limits placed on acceptable profit-sharing and productivity bonuses that do not directly vary based on the volume or value of DHS referrals and still meet the group practice definition.

First, CMS proposed a new, deemed-compliant profit-sharing methodology for group practices participating in a value-based enterprise (discussed below). Current law provides three deemed-compliant methodologies that the agency considers to be not directly based on the volume or value of DHS referrals. This new proposal would add another deemed-approved methodology for remuneration paid to a physician based on his or her DHS referrals in the context of value-based arrangements.

Second, CMS proposed several clarifying revisions to the profit-sharing rules. Perhaps the most important clarification is CMS’ continuing intention that “overall profits” means the profits derived from all the DHS in aggregate and not categories of DHS (i.e., the group cannot assign physicians into separate or overlapping imaging, physical therapy and outpatient prescription drug pods). CMS also appeared to prohibit a common approach — to split different DHS categories within a single pod in different compliant manners (i.e., within the same pod, using pro rata for imaging, and basing physical therapy on personal production). Commenters are likely to provide what they consider non-abusive examples of such approaches. We will be watching to see if CMS states explicitly that this clarification will be prospective only for enforcement purposes, despite its statement that the move is consistent with its intention all along.

3. CMS clarified key terms to simplify compliance. CMS, recognizing that common elements of numerous Stark Law exceptions are not always understood, sought to clarify a number of terms.

  • “Commercially Reasonable” Element. CMS proposed to finally define this term utilizing the key determining question of “whether the arrangement makes sense as a means to accomplish the parties’ goals.” From this basic question, CMS proposed two alternative definitions, where the particular arrangement: (i) “furthers a legitimate business purpose of the parties and is on similar terms and conditions as like arrangements” or (ii) “makes commercial sense and is entered into by a reasonable entity of similar type and size and a reasonable physician of similar scope and specialty.” CMS requested comments on these alternatives and specifically asked whether parties could make these proposed comparisons. Commenters may request additional clarification, but we expect many will welcome clarification that this definition is not a valuation question and an arrangement does not need to be profitable.
  • “Volume or Value” and “Other Business Generated” Bright-Line Standards. CMS proposed special rules for each of the “volume or value” and the “other business generated” standards to create more bright-line, objective tests.
    • Compensation from an entity to a physician would be considered to take into account the volume or value of referrals or business generated only if the physician “receives additional compensation as the number or value” of the physician’s referrals or business generated to the entity increases.
    • Compensation from a physician to an entity would be considered to take into account the volume or value of referrals or business generated only if the physician “pays less compensation as the number or value of the physician’s” referrals or business generated to the entity increases.
    • Fixed-rate compensation would also be considered to take into account the volume or value of referrals or business generated if “there is a predetermined, direct correlation between the physician’s prior” referrals or business generated (e.g., a hospital bases its fixed amount for medical director services on exceeding a past patient admissions threshold).

We expect commentators will appreciate the proposed objective, bright-line tests. To provide these tests, CMS believes it needs to revise certain exceptions by expressly referencing that any referral requirements will not contradict patient choice or a patient’s best interest. CMS specifically asked if the academic medical center exception needs this change too.

  • “Fair Market Value” and “General Market Value” Definitions. CMS proposed to provide three separate definitions for “fair market value” that will apply separately to equipment rentals, to office space rentals, and to all other arrangements generally. The definitions do not appear to substantively alter the statutory definition; however, the proposed definitions specifically include that “fair market value” means the “value in an arm’s-length transaction, with like parties and under like circumstances, of like assets.” CMS further proposed to amend the definition of “general market value” to be more in line with the valuation industry’s usage relating “to the value of an asset or service to the actual parties to a transaction that is set to occur within a specified timeframe.” This latter change would allow a particular, in-demand orthopedic surgeon sought by professional athletes to, for example, be paid more than a salary survey would suggest, although it may mean less pay for locations with a lower cost of living.

4. Additional Clarifications to Ease Compliance. CMS also made numerous other changes and proposals to ease certain Stark Law burdens.

  • Definitional Changes. CMS proposed to revise the following definitions, among others.
    • Designated Health Services. For inpatient hospital services, CMS proposed to carve out from “DHS” any furnished service that does not affect Medicare’s payment to the hospital under the inpatient prospective payment system (IPPS), such as an X-ray that is ordered after the IPPS rate has been established by the relevant payment rules. CMS requested comment on similar changes for hospitals not paid under the IPPS.
    • Remuneration. The current definition of “remuneration” carves out certain items, devices or supplies used solely to collect, transport, process or store specimens for the entity providing it. Under current law, CMS does not protect surgical items in this carve-out; however, CMS proposed to allow surgical items if used solely for one of the six statutory purposes. Notwithstanding this change, CMS continues to believe things like sterile gloves, essential to the specimen collection process, are fungible and therefore cannot qualify for this remuneration carve-out.
    • Transaction. The term “transaction” is used in the isolated financial transaction exception for one-time sales of property or a practice. CMS noted that some have used this exception beyond its intended scope to cure noncompliance retroactively. Therefore, CMS proposed to establish an independent definition of “isolated financial transaction” and clarify that it “does not include payment for multiple services provided over an extended period, even if there is only one payment for such services.”
  • Writing and Signature Requirements. CMS proposed to codify electronic signature approval for exceptions requiring a signed writing and to allow the 90-day grace period for unsigned writings to be used to satisfy the writing requirement.
  • Non-exclusive Rental Arrangements. Under current law, CMS requires a lessee to have exclusive use of an office or equipment being rented. CMS proposed to clarify that the exclusive use is only against the lessor, such that healthcare providers will have greater freedom to enter into non-exclusive leases, including multiple lessees at the same time.
  • Expanding Relevance of Three Existing Exceptions. CMS proposed to liberalize three exceptions that past rulemaking significantly limited. First, at §411.357(g), CMS proposed a significant rewrite for remuneration unrelated to DHS from hospitals to protect more arrangements. Second, at §411.357(i), CMS proposed to expand the reach of the payments by a physician exception by allowing its use even if another regulatory exception could apply (statutory exceptions still cannot). Finally, CMS proposed to allow the fair market value exception at §411.357(l) for short-term equipment and office space rentals under one year in length.
  • Physician Recruitment. CMS proposed to modify the signature requirement for physician recruitment arrangements so a physician practice has to sign the writing only if it is receiving a financial benefit from the arrangement, but not if the practice merely serves as a pass-through to the recruited physician.
  • Remuneration for Non-physician Practitioner (NPP) Patient Care Services. CMS proposed to revise an exception allowing a hospital, federally qualified health center or a rural health clinic to assist a physician in hiring an NPP, previously discussed in a Sept. 1, 2015, client alert. CMS clarified numerous service area questions, including that the NPP could remain in his or her community and receive this support after first becoming a nurse practitioner. CMS also proposed to require that the NPP and physician arrangement begin on or after the commencement of the assistance arrangement.
  • Ownership or Investment Interests. CMS raised two topics with respect to its definition of ownership or investment interests. First, CMS proposed that a titular ownership or investment would not be considered ownership. This may be beneficial for some corporate practice of medicine arrangements, although in many cases, the in-office ancillary services exception already protects the relationship. In addition, CMS asked for comments on whether it should also remove employee stock ownership plans, or ESOPs, from its meaning of ownership.
  • Decoupling the AKS from the Stark Law. CMS proposed to remove certain requirements for exceptions that entail AKS or other related law compliance. Although the practical effect may be small, providers will appreciate that this would remove ambiguity from complying with a strict liability statute by meeting an intent-based criminal statute with more limited safe harbors. CMS noted the AKS separately remains a “backstop” for problematic arrangements that would no longer be restricted under the Stark Law.

5. CMS proposed to replace its “period of disallowance” rule with a general standard. For purposes of the DHS referral prohibition, CMS has called the period when a referral cannot be made a “period of disallowance.” CMS has now proposed to replace its current complex rule to determine a period of disallowance, with a general principle that the period of disallowance “should begin on the date when a financial relationship fails to satisfy all requirements of any applicable exception and end on the date that the financial relationship ends or satisfies all requirements of an applicable exception.” Providers would determine the ending date on a case-by-case basis. While commenters will likely appreciate the deletion of the overly prescriptive period of disallowance rules, and certain guidance that may allow providers to cure noncompliance without triggering this period, the general guidance provided in the proposed rule will likely lead to further legal development and consideration in the industry, particularly since the guidance may provide additional opportunities to cure past conduct.

6. CMS proposed a new exception and modifications to the EHR exception to extend protections for cybersecurity technology. CMS has amended the EHR exception several times, avoiding sunsetting the exception as initially codified. In the proposed rule, CMS introduced various potential changes to the Stark Law exception, consistent with OIG’s AKS proposals. Specifically, CMS’ proposed revisions would: (i) allow cybersecurity technology donations, (ii) update interoperability provisions and (iii) remove the existing sunset date. CMS separately proposed a new cybersecurity technology exception. More information regarding CMS’ proposed modifications were presented in a recent McGuireWoods alert.

7. CMS proposed a new, value-based exception. As will be discussed in greater depth in a forthcoming McGuireWoods alert, CMS, in an effort to foster a greater emphasis on value-based care, also proposed creating a new Stark Law exception, in conjunction with OIG’s proposed safe harbors to the AKS. Specifically, CMS proposed an exception focused on remuneration exchanged between or among participants in certain value-based arrangements (e.g., care coordination arrangements designed to improve quality, health outcomes and efficiency). CMS would structure the requirements for this exception around whether the value-based arrangement (a) has full financial risk, (b) has meaningful downside financial risk or (c) has other criteria, which would come with the most significant regulatory burden. In adding this exception, CMS also proposed a new value-based enterprise definition that would allow multiple entities to come together to collaborate to achieve value-based purposes.

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Through these proposed changes, CMS sought to be balance a need for innovation with the potential for improper inducements prohibited by the Stark Law, by removing certain burdens while clarifying others and adding new exceptions. Consistent with its changes to the Stark Law advisory opinion process (discussed in an Aug. 26, 2019, client alert), CMS seems to be loosening its rules. Overall, many providers will support these proposed changes, notwithstanding that existing arrangements may need to be adjusted, reformed or terminated to comply with the proposed rule.

The proposed changes are subject to a public comment period, open until Dec. 31, 2019. Please do not hesitate to contact a McGuireWoods attorney or one of the authors of this alert for more information regarding these proposed rules or for assistance in preparing a comment to these rules. After the open comment period, the government will review and may finalize the rule with any desired changes to reduce Stark Law burdens on providers as soon as early 2020.

Given the significance of these proposed changes, McGuireWoods plans to provide additional analysis and summaries on these proposals in the coming weeks. To review additional guidance on the proposed rules, click on the links at the bottom of McGuireWoods’ Oct. 10, 2019, alert.

Uncategorized

HHS to Ease Fraud and Abuse Rules Part 3: Flexibility for EHR Items and Services, Donated Cybersecurity Tech

As discussed in a previous McGuireWoods alert, on Oct. 9, the Department of Health and Human Services announced two proposed rules to significantly amend the Physician Self-Referral Law (Stark Law), the federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalties Law. This client alert, the third in McGuireWoods’ summary series on these proposed rules, focuses on (i) proposed changes to the electronic health records (EHR) items and services exception to the Stark Law and EHR safe harbor to the AKS, and (ii) a proposed new exception to the Stark Law and safe harbor to the AKS related to the donation of cybersecurity software and services.

The proposed rules stem from HHS’ Regulatory Sprint to Coordinated Care (discussed in a Sept. 26, 2018, client alert), intended to incentivize value-based arrangements and patient care coordination by expressly permitting certain activities that could be deemed problematic under current law. The proposed rules, respectively released by HHS’ Centers for Medicare & Medicaid Services (CMS) and the HHS Office of Inspector General (OIG), would add new value-based exceptions to the Stark Law and additional safe harbors under the AKS.

In addition to those value-based arrangement changes, other proposed changes to CMS’/OIG’s regulations are likely to ease certain burdens for healthcare providers and provide greater flexibility under these federal fraud and abuse rules, particularly regarding the donation of EHR and cybersecurity items and services.

1. CMS and OIG proposed adding cybersecurity technology and services to the EHR exception and safe harbor and adding a stand-alone cybersecurity technology and related services exception and safe harbor . CMS and OIG noted that the digitization of healthcare delivery and rules designed to increase interoperability and data sharing in the delivery of healthcare create numerous targets for cyberattacks. They further acknowledged that the cost of cybersecurity technology and related services has increased dramatically, to the point where some providers and suppliers are unable to invest in, and therefore have not invested in, adequate cybersecurity measures. Accordingly, CMS and OIG proposed providing for the donation of cybersecurity items and services both within the EHR exception and safe harbor and through a stand-alone exception and safe harbor.

CMS and OIG explained that, as proposed, the new cybersecurity exception and safe harbor are broader than their EHR counterparts are, as they require fewer conditions. For example, the cybersecurity exception and safe harbor do not share the condition of a 15 percent required contribution from recipients that exists under the EHR exception and safe harbor. CMS and OIG clarified that a party seeking to protect an arrangement involving the donation of cybersecurity software and services must comply with only one exception.

As proposed, the cybersecurity exception and safe harbor allow for the donation of cybersecurity technology and related services provided that certain conditions are met, including the following:

a. The technology and services are necessary and used predominantly to implement and maintain effective cybersecurity.

b. The donor does not (i) directly take into account the volume or value of referrals or other business generated between the parties when determining the eligibility of a potential recipient for the technology or services or the amount or nature of the technology or services to be donated; nor (ii) condition the donation of technology or services, or the amount or nature of the technology or services to be donated, on future referrals.

c. Neither the recipient nor the recipient’s practice (nor any affiliated individual or entity) makes the receipt of technology or services, nor the amount or nature of the technology or services, a condition of doing business with the donor.

CMS and OIG are also considering an alternative proposal that allows for the donation of certain cybersecurity hardware when the donor has determined that the hardware is reasonably necessary based on a risk assessment of its own organization and that of the potential recipient.

2. CMS and OIG proposed modernization updates to EHR interoperability provisions . The existing rules — discussed in an April 12, 2013, client alert and a Dec. 24, 2013, client alert — prohibit a donor from taking any action to limit or restrict the use, compatibility or interoperability of EHR items or services. CMS and OIG proposed modifications in recognition of significant intervening legal updates in this area. Specifically, they proposed adopting the term “information blocking” from the 21st Century Cures Act, which generally means interfering with, preventing or materially discouraging access, exchange or use of electronic health information. CMS and OIG clarified that both engaging in information blocking related to donated items or services and using those items or services to engage in information blocking are prohibited. Further, under the existing rules, software that was once ONC-certified but is not certified at the time of donation is protected. The proposed rule would revise this provision to require that the software be certified at the time of donation to be protected. CMS and OIG noted that any changes to the deeming provision would be prospective.

3. CMS and OIG proposed changes to the EHR cost-sharing requirements . CMS and OIG requested comments on whether to eliminate or reduce the 15 percent cost-sharing requirement within the EHR exception and safe harbor for small or rural physician organizations, or, alternatively, to reduce or eliminate this requirement for all physician recipients. CMS and OIG are additionally considering eliminating or reducing the percentage for updates to previously donated software or technology (i.e., requiring a contribution for the initial investment only). These considerations are based on comments that CMS and OIG received describing the 15 percent contribution requirement as burdensome and preventative to some recipients in adopting EHR technology.

4. CMS and OIG proposed to allow donation of replacement technology . The current EHR exception and safe harbor do not protect the donation of replacement technology when the replacement is for “equivalent items or services.” In the 2013 EHR final rule comments, one commenter asserted that the current exceptions lock physicians into vendor agreements by forcing a choice between paying full price for a new system or continuing to pay 15 percent of the cost for substandard technology. The 2019 proposal by CMS and OIG, if adopted, would allow donations of replacement EHR technology.

5. CMS and OIG proposed to either eliminate or extend the EHR exception and safe harbor sunset provisions . The EHR exception and Anti-Kickback Statute safe harbor concerning EHR items and services were originally scheduled to sunset on Dec. 31, 2013. In 2013, both CMS and OIG extended the sunset date to Dec. 31, 2021, but retained the idea that this exception would be obsolete once EHR technology was universal and would then be eliminated. If adopted, these proposed rules would eliminate the sunset date, expressing CMS’ and OIG’s continued interest in promoting EHR technology adoption. OIG explained that a need for this protection persists as new parties enter medical practice and EHR technology ages. Alternatively, CMS and OIG could simply extend the sunset date, and they are seeking comments on this matter.

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Through these proposals, CMS and OIG seek to remove burdens on providers, without creating substantial risk of increased fraud and abuse. While CMS and OIG acknowledged that any donation of valuable technology poses risks of fraud and abuse, the need to protect the “weak links” in a healthcare system outweigh these concerns due to the threat of cyberattacks. Overall, many providers will likely support these proposed changes, notwithstanding that existing provider arrangements may need to be adjusted, reformed or terminated to comply with the proposed amendments.

The proposed changes are subject to a public comment period, open until Dec. 31, 2019. Please do not hesitate to contact a McGuireWoods attorney or one of the authors of this alert for more information regarding these proposed rules or for assistance in preparing a comment to these rules. After the open comment period, the government will review and may finalize the rule with any desired changes, to reduce Stark Law and AKS burdens on providers as soon as early 2020.

Given the significance of these proposed changes, McGuireWoods plans to provide additional analysis and summaries on these proposals in the coming weeks. To review additional guidance on the proposed rules, please click on the links at the bottom of McGuireWoods’ Oct. 10, 2019, alert.

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HHS to Ease Fraud and Abuse Rules Part 2: Civil Monetary Penalty Law Changes, In-Home Dialysis Telehealth

As discussed in a previous McGuireWoods alert, on Oct. 9, the Department of Health and Human Services (HHS) announced two proposed rules to significantly amend the Physician Self-Referral Law (Stark Law), the federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalties (CMP) Law. This client alert, the second in McGuireWoods’ summary series on these proposed rules, focuses on proposed revisions to the statutory exception for furnishing telehealth technologies to certain in-home dialysis patients, as well as CMP Law beneficiary inducement changes.

The proposed rules stem from HHS’ Regulatory Sprint to Coordinated Care (discussed in a Sept. 26, 2018, client alert), intended to incentivize value-based arrangements and patient care coordination by expressly permitting certain activities that could be deemed problematic under current law. The proposed rules, respectively released by HHS’ Centers for Medicare & Medicaid Services and the HHS Office of Inspector General (OIG), would add new value-based exceptions to the Stark Law and additional safe harbors under the AKS.

In addition to those value-based arrangement changes, other proposed changes to OIG’s regulations are likely to ease certain burdens for healthcare providers and provide greater flexibility under these federal fraud and abuse rules, particularly regarding the furnishing of telehealth technologies to certain in-home dialysis patients. The following outlines these changes, intended to reduce the burdens of the CMP Law, which imposes penalties against any person offering or transferring remuneration to a federal healthcare program beneficiary that is likely to influence the beneficiary’s selection of a particular provider.

The HHS proposed rule includes several amendments related to the beneficiary inducements CMPs, including (1) changes to the definition of “remuneration” to add an exception for “telehealth technologies” furnished to certain in-home dialysis patients; and (2) a new safe harbor for patient engagement and support arrangements and modifications to the existing local transportation safe harbor, which would, by operation of law, serve as exceptions to the beneficiary inducements CMP prohibition’s definition of “remuneration.” These proposals are discussed below.

Statutory Exception for Telehealth Technologies for In-home Dialysis

The proposed rule aims to amend 42 CFR §1003.110 to formally implement the Budget Act of 2018 amendments to the beneficiary inducements CMP definition of “remuneration.” Pursuant to the terms of the proposed rule, there would be “an exception for the provision of certain telehealth technologies related to in-home dialysis services to the definition of ‘remuneration.’” The intent of the proposed rule is to allow end-stage renal disease (ESRD) patients who receive home dialysis to obtain monthly ESRD-related clinical evaluations via telehealth technologies, so long as certain other conditions are met.

According to the proposed rule, “telehealth technologies” would be defined as “multimedia communications equipment that includes, at a minimum, audio and video equipment permitting two-way, real-time interactive communication between the patient and distant site physician or practitioner used in the diagnosis, intervention or ongoing care management, paid for by Medicare Part B, between a patient and the remote healthcare provider. Telephones, facsimile machines, and electronic mail systems do not meet the definition of ‘telehealth technologies.’” Although, note, OIG said it would not consider smartphones to be “telephones” if they have two-way video conferencing applications.

To take advantage of this new exception to the definition of “remuneration” in the beneficiary inducements CMP, the ESRD patient must receive the telehealth technology after Jan. 1, 2019; the ESRD patient must be receiving home dialysis that is paid for under Medicare Part B; and the technologies must be furnished by the patient’s provider or dialysis facility. As clarification of the statute stating that the technologies must be furnished by the patient’s provider or dialysis facility, OIG plans to require that any such technologies come from the provider or facility that is then-providing services like home dialysis, telehealth visits, or other ESRD care to the patient. The intent is to prevent someone from attempting to steer a patient to a particular provider or supplier to form a clinical relationship through such telehealth technology.

In addition, the proposed rule mirrors the statute to require that “(i) the telehealth technologies are not offered as part of any advertisement or solicitation; [and] (ii) the telehealth technologies are provided for the purpose of furnishing telehealth services related to the individual’s end stage renal disease.” Providers should be aware that OIG proposes to also require that any provided telehealth technology (a) significantly add to the provision of the beneficiary’s telehealth services in connection with his or her ESRD; (b) not be of excessive value (e.g., cannot provide a $600 smartphone when a $300 smartphone would adequately run the technology); and (c) not be “duplicative of technology that the beneficiary already owns if that technology is adequate for the telehealth purposes.”

Other safeguards OIG is considering in connection with this proposed rule, and for which it solicited comments, include the following:

  • Whether to require providers and dialysis facilities to provide telehealth technology consistently, either to all Medicare Part B ESRD patients or to all who meet certain criteria
  • Whether to limit the provision of telehealth technology to only those patients who do not currently have the kind of technology necessary for telehealth services
  • Whether to require an explanation to patients, in writing, about why they are receiving the technology and any “hidden” fees related to the technology
  • Whether to require providers and dialysis facilities that provide telehealth technology to “advise patients when they receive such technology that they retain the freedom to choose any provider or supplier of dialysis services and to receive dialysis in any appropriate setting”

New Safe Harbor and Modification to an Existing Safe Harbor

OIG also proposed a new safe harbor for patient engagement and support arrangements (42 CFR § 1001.952(hh)) and proposed modifications to the local transportation safe harbor (42 CFR § 1001.952(bb)), which function as exceptions to the definition of “remuneration” in the beneficiary inducements CMP prohibition, as well as safe harbors to the AKS.

  • New Safe Harbor ─ Arrangements for Patient Engagement and Support to Improve Quality, Health Outcomes and Efficiency

OIG proposed to establish a new safe harbor at 42 CFR § 1001.952(hh) to “protect certain arrangements for patient engagement tools and supports to improve quality, health outcomes, and efficiency furnished by VBE [value-based enterprise] participants … to specified patients.” This new “patient engagement and support safe harbor” is intended to help providers keep patients involved in their care and help patients take steps to make informed healthcare decisions and to maintain or improve their health, without AKS and beneficiary inducements CMP barriers.

Specifically, under the proposed safe harbor, “remuneration” under AKS “would not include in-kind patient engagement tools or supports … furnished directly by a VBE participant … to a patient in a target patient population … that are directly connected to the coordination and management of care …, provided that all of the conditions of proposed [42 CFR §] 1001.952(hh) are satisfied.” However, there may be limitations on those who could offer such patient engagement tools or supports, those who could receive such tools or supports, and on what could be offered.

  • Modifications to Safe Harbor ─ Local Transportation

OIG acknowledged in the proposed rule that transportation plays a significant role in patients’ “access to care, quality of care, healthcare outcomes, and effective coordination of care for patients, particularly for patients who lack their own transportation or who live in ‘transportation deserts.’” Therefore, as discussed in an Oct. 28, 2019, McGuireWoods alert, OIG is taking this opportunity to reconsider certain provisions of the existing local transportation safe harbor (currently codified at 42 CFR § 1001.952(bb)) and, in conjunction with this, proposing the new patient engagement tools and support safe harbor, which could also include certain transportation services.

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Through these proposals, OIG seeks to remove key CMP Law burdens on providers, without creating substantial risk of increased fraud and abuse. Overall, many providers will likely support these proposed changes, notwithstanding that existing provider arrangements may need to be adjusted, reformed or terminated to comply with the proposed amendments.

The proposed changes are subject to a public comment period, open until Dec. 31, 2019. Please do not hesitate to contact a McGuireWoods attorney or one of the authors of this alert for more information regarding these proposed rules or for assistance in preparing a comment to these rules. After the open comment period, the government will review and may finalize the rule with any desired changes to reduce CMP Law burdens on providers as soon as early 2020.

Given the significance of these proposed changes, McGuireWoods plans to provide additional analysis and summaries on these proposals in the coming weeks. To review additional guidance on the proposed rules, click on the links at the bottom of McGuireWoods’ Oct. 10, 2019, alert.

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HHS to Ease Fraud and Abuse Rules Part 1: Proposed Revisions to Existing Anti-Kickback Statute Safe Harbors

As discussed in a previous McGuireWoods alert, on Oct. 9, 2019, the Department of Health and Human Services announced two proposed rules to significantly amend the Physician Self-Referral Law (Stark Law), the federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalties Law. This client alert, the first in McGuireWoods’ summary series on these proposed rules, focuses on the HHS Office of Inspector General’s (OIG’s) proposed revisions to ease certain requirements under existing AKS safe harbors related to: (i) electronic health records (EHR) arrangements, (ii) warranties, (iii) local transportation and (iv) personal services and management contracts.

The proposed rules stem from HHS’ Regulatory Sprint to Coordinated Care (discussed in a Sept. 26, 2018 client alert), intended to incentivize value-based arrangements and patient care coordination by expressly permitting certain activities that could be deemed problematic under current law. Collectively, the proposed rules, respectively released by HHS’ Centers for Medicare & Medicaid Services (CMS) and the OIG, would add new value-based exceptions to the Stark Law and additional safe harbors under the AKS, as well as revise existing safe harbors under the AKS (as described in more detail throughout this alert).

The proposed changes are likely to reduce burdens for healthcare providers and other stakeholders within the healthcare industry and provide greater flexibility under these federal fraud and abuse rules while, at the same time, ensuring that the revisions are not misused to perpetrate fraud and abuse. The following alert outlines the OIG’s proposed changes to existing AKS safe harbors and provides five key takeaways to assist healthcare providers in navigating these potential revisions.

  1. Among other changes, the proposed modifications to the EHR safe harbor would extend protections for cybersecurity technology. Since the EHR safe harbor’s creation in 2006, the OIG has amended it several times. In the proposed rule, the OIG introduced various potential changes to the AKS safe harbor. Specifically, the OIG’s primary proposed revisions would: (i) add protections for certain cybersecurity technology, (ii) update provisions regarding interoperability and (iii) remove the existing sunset date. More information regarding OIG’s proposed modifications will be presented in a forthcoming McGuireWoods alert.
  2. Proposed revisions to the warranty safe harbor would expand the scope of protected warranties. The OIG proposed several key revisions to the warranties safe harbor, including but not limited to: (i) extending coverage for bundled warranties (as described in more detail below); (ii) capping the amount of warranties and prohibiting terms that condition warranties on exclusive use or minimum purchase requirements, which the OIG considers improper inducements; (iii) addressing clinical outcome-based warranties on conditions that will be forthcoming (i.e., comments were solicited to develop this provision); and (iv) developing a definition of “warranties” that incorporates items or services critical to the healthcare industry but which are not currently encompassed by other statutes or case law.

    In the proposed revisions, the parameters around bundled warranties received considerable attention. Prior guidance from the OIG had effectively limited the safe harbor to warranties for single items, thereby excluding warranty arrangements that pertain to bundled items and services. To promote beneficial and innovative arrangements, the OIG proposed expanding the safe harbor to protect bundled items and services. The proposed rule demonstrates OIG’s caution with respect to this proposal and includes various safeguards that could practically limit the use of this safe harbor on a broader level. For example, the OIG proposed that all federally reimbursable items and services in a bundled warranty arrangement be reimbursed by the same federal healthcare program and in the same payment. The OIG also proposed that (i) the bundled arrangement include at least one item in the bundle (i.e., cannot bundle only services); (ii) the remuneration a manufacturer or supplier may pay to any party (other than a beneficiary) must be limited to the cost of the warrantied items or services; (iii) manufacturers and suppliers must not be allowed to condition bundled warranties on the exclusive use of such items or services; and (iv) manufacturers and suppliers not be allowed to impose minimum-purchase requirements.

    The OIG further clarified that the proposed modifications would not protect free or reduced-priced items or services that sellers provide either as part of a bundled warranty agreement or ancillary to a warranty agreement. The OIG specifically requested responses from commentators on the conditions and safeguards that should be included in a final rule with respect to the warranty safe harbor to ensure flexibility and use of this safe harbor while simultaneously mitigating fraud and abuse risks.

  3. The OIG proposed to ease rural mileage and other restrictions under the local transportation safe harbor. In recognizing the importance that transportation often plays in patient access to care, quality of care and care coordination, the OIG proposed to modify certain conditions that currently limit use of the local transportation safe harbor. Specifically, the OIG proposed to: (i) increase the distance patients residing in rural areas may be transported, from 50 miles to 75 miles; and (ii) remove all mileage limits on transporting a patient from a healthcare facility from which the patient has been discharged to the patient’s place of residence. In connection with these proposals, the OIG requested from commenters information regarding patients within the commenters’ communities who cannot obtain care within the existing mileage restrictions and whether eliminating the distance limitation on transporting discharged patients should be extended to cover any destination of such patient’s choice.

    In addition to these proposed revisions, the OIG explicitly clarified that this safe harbor historically has applied to ride-sharing services. Lastly, in recognizing that transportation for non-medical purposes may help improve patients’ health, the OIG expressed a willingness to potentially expand the safe harbor to permit transportation for certain non-medical purposes (e.g., transportation to apply for food stamps or housing assistance) as a means to foster innovative arrangements that could improve health outcomes. In weighing this consideration, the OIG requested that commenters provide insight as to whether such expansion should be limited to certain beneficiary populations.

  4. The proposed rule would add flexibility to the personal services and management contracts safe harbor by eliminating and modifying existing restrictions and potentially extending protections to outcomes-based payments. The OIG proposed several modifications to the personal services and management contracts safe harbor in an effort to remove barriers to care coordination and value-based arrangements. Specifically, the OIG proposed to: (i) remove the requirement that contracts for part-time arrangements specify the schedule, length and exact charge for the intervals of time worked under the arrangement; (ii) substitute the requirement that aggregate compensation paid under an arrangement be set in advance, with a new requirement that only the methodology for determining compensation be set in advance; and (iii) permit outcomes-based payments under an arrangement if certain conditions are met.

    Notably, the proposed removal of the part-time arrangement restrictions would permit providers to receive safe harbor protection for services provided on an as-needed basis and more closely align the safe harbor with the personal arrangements exception to the Stark Law. Similarly, the proposed modification of the “set-in-advance” compensation requirement would more closely align with the Stark Law in that the parties would no longer be required to specify the total compensation to be paid over the duration of an arrangement. If finalized, these changes would provide regulatory protection (assuming all other elements are met) to providers that need periodic management and personal services arrangements but are unable to predict the exact frequency (e.g., call coverage).

    The proposal to permit outcomes-based payments would align the personal services and management contracts safe harbor with the current evolution of payment models for healthcare. While the outcomes-based payments proposal opens the door for rewarding agents for improving patient or population health, or reducing payor costs while improving quality of care, the proposed safe harbor would exclude arrangements that relate solely to achievement of internal cost savings for the principal. The OIG, however, proposed to limit the scope of this protection, specifically excluding pharmaceutical manufacturers; manufacturers, distributors and suppliers of durable medical equipment, prosthetics, orthotics and supplies; and laboratories. The OIG is also considering, but requested comment regarding, whether to also exclude pharmacies (including compounding pharmacies), wholesalers and distributors of pharmaceutical products, and pharmacy benefit managers from this safe harbor.

  5. In addition to modifications of existing safe harbors, the OIG proposed creating new, value-based safe harbors. As will be discussed in greater depth in a forthcoming McGuireWoods alert, the OIG, in an effort to foster a greater emphasis on value-based care, also proposed creating several new AKS safe harbors. Specifically, the OIG proposed: (i) three new safe harbors for remuneration exchanged between or among participants in certain value-based arrangements (e.g., care coordination arrangements designed to improve quality, health outcomes and efficiency); (ii) a new safe harbor for certain patient engagement and support arrangements; (iii) a new safe harbor for remuneration provided in connection with a CMS-sponsored mode; and (iv) a new safe harbor for donations of cybersecurity technology and services. In proposing these new safe harbors, the OIG hoped to strike an effective balance in achieving its goals of clarity, objectivity, flexibility, necessary safeguards and ease of implementation.

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In an era of increased government enforcement and whistleblower activity, situations where new care-delivery models conflict with precise adherence to safe harbor conditions create uncertainty. Through these proposed changes, the OIG attempted to balance a need for innovation with the potential for improper inducements, by removing some elements while adding safeguards for others. Providers and industry stakeholders examining new models of care delivery, outcomes-based metrics and enhancement of access to care will find value in these changes, if finalized.

The proposed changes are subject to a public comment period, which is open until Dec. 31, 2019. Please do not hesitate to contact a McGuireWoods attorney, including any of the authors of this alert, for more information regarding these proposed changes to existing AKS safe harbors or for assistance in preparing a comment to these rules. After the open comment period, the government will review and may finalize the rule with any desired changes to reduce AKS burdens on providers as soon as early 2020.

Given the significance of these proposed changes, McGuireWoods plans to provide additional analysis and summaries on the various key proposals in the coming weeks. To review additional guidance on these proposed rules, click on the links at the bottom of McGuireWoods’ Oct. 10, 2019, alert.

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HHS Proposed Rules Seek to Remove Stark Law, Anti-Kickback Burdens on Providers

On Oct. 9, the Department of Health and Human Services announced two proposed rules to significantly amend the Physician Self-Referral Law (Stark Law), the federal Anti-Kickback Statute (AKS) and the Civil Monetary Penalties (CMP) Law. The proposed rules intend to further incentivize value-based arrangements and patient care coordination by expressly permitting certain activities that could be deemed problematic under current law. The proposed rules, respectively released by HHS’ Centers for Medicare & Medicaid Services (CMS) and the HHS Office of Inspector General (OIG), would add new value-based exceptions to the Stark Law and additional safe harbors under the AKS.

These proposals stem from HHS’ Regulatory Sprint to Coordinated Care. As discussed in a Sept. 26, 2018, McGuireWoods client alert, the Regulatory Sprint has the goal of reducing regulatory burdens on the healthcare industry and incentivizing coordinated care. As part of this effort, HHS committed to examining federal regulations that impede coordinated care efforts. This effort has generated widespread interest. In response to a June 2018 request for public comments on the need for revisions to the Stark Law, CMS received 375 responses, and in response to an August 2018 request for comments on the need for revisions to the AKS, OIG received 359 responses.

HHS stated yesterday that these proposed rules “provide greater certainty for healthcare providers participating in value-based arrangements and providing coordinated care for patients” and would “ease the compliance burden for healthcare providers across the industry, while maintaining strong safeguards to protect patients and programs from fraud and abuse.” Indeed, for value-based arrangements, CMS and OIG respectively propose three largely consistent exceptions to the Stark Law and safe harbors to the AKS to protect remuneration between participants in value-based arrangements. These three proposals vary by the types of remuneration protected, level of financial risk assumed by the parties and types of safeguards. For example, value-based arrangements where participants take full financial risk will have fewer regulatory requirements, while more regulatory requirements will be imposed on arrangements where only substantial financial risk downside (i.e., not just upside rewards) is accepted. The most significant regulatory burden will be imposed on other care coordination models where participants do not take any financial risk.

OIG’s proposed AKS and CMP rule provides for two other value-based arrangement safe harbors. OIG proposes a new safe harbor for a provider’s furnishing of certain tools and supports to patients to improve quality, health outcomes and efficiency, such as in-kind items and services to support patient compliance with discharge and care plans and services and supports to address unmet social needs affecting health. OIG also proposes a new safe harbor for financial arrangements between providers in connection with CMS-sponsored payment models. OIG proposes additional changes to the AKS, including the following:

  • Cybersecurity Technology and Services. Providing a new safe harbor for donations of cybersecurity technology and services.
  • Personal Services and Outcomes-Based Payments and Part-Time Arrangements. Modifying the existing personal services and management contracts safe harbor to add flexibility with respect to outcomes-based payments and part-time arrangements. In addition, OIG proposes to revise the meaning of set-in-advance to no longer necessitate that total payments be determined when entering into the arrangement, which makes this more consistent with the Stark Law.
  • Warranties. Modifying the existing safe harbor for warranties to revise the definition of “warranty” and provide protection for bundled warranties for one or more items and related services.
  • Local Transportation. Modifying the existing safe harbor for local transportation, discussed in a Jan. 11, 2017, client alert, to expand and modify mileage limits for rural areas to 75 miles and to allow more transportation for patients discharged from inpatient facilities.

OIG proposes the following with respect to the CMP Law:

  • Accountable Care Organization Beneficiary Incentive Programs. Codifying a statutory exception related to Accountable Care Organization Beneficiary Incentive Programs for the Medicare Shared Savings Program.
  • Telehealth for In-Home Dialysis. Interpreting and incorporating a new statutory exception to the prohibition on beneficiary inducements for “telehealth technologies” furnished to certain in-home dialysis patients.

CMS noted that, in addition to the Regulatory Sprint, its proposed Stark Law rule stems from its Patients Over Paperwork initiative discussed in a July 8, 2019, client alert. From these initiatives, CMS proposes the value-based arrangements discussed above, as well as modifying its existing exception for electronic health records items and services. CMS proposes to add protections for financial arrangements related to cybersecurity technology, to update interoperability requirements and to remove the electronic health records exception’s sunset date. OIG also proposes to update its similar safe harbor provisions in an almost identical manner.

CMS includes new Stark Law exceptions for the following:

  • Limited Remuneration to a Physician. Arrangements where a physician receives remuneration limited to no more than $3,500 per calendar year in exchange for items or services actually provided by the physician.
  • Cybertechnology. The donation of cybersecurity technology and related services to a referring provider, similar to the AKS safe harbor proposed by OIG.

The proposed Stark Law rule promises to provide “critically necessary” guidance for industry stakeholders whose financial relationships are governed by the Stark Law. Some of the most helpful guidance appears to be revising or adopting new definitions for key terms used throughout various Stark Law exceptions — including “commercially reasonable,” “volume or value” standards, “other business generated” standards and the “fair market value” definition — to include discussion of “general market value.”

In addition, changes are proposed with respect to periods of disallowance for billing when there is a noncompliant arrangement, grace periods for signatures and writing during the first 90 days of an arrangement, and clarifications of exclusive use under the rental exceptions. Finally, CMS proposes to clarify that group practices have to pool all DHS profit in profit share pools (either the entire group or subsets of five or more physicians), and not create separate pools for different DHS categories. Note that these proposals come on the heels of proposed revisions to the Stark Law advisory opinion process, as discussed in an Aug. 26, 2019, alert.

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Through these two proposed rules, HHS seeks to remove Stark Law and AKS key burdens on providers, without creating substantial risk of increased fraud and abuse. Both CMS and OIG noted the “close nexus” of the two laws, and synchronized requirements between the two laws where they could, but also noted that the AKS often acts as a “backstop” to the Stark Law such that some of OIG’s proposals are stricter. Overall, many providers will likely support these proposed changes, notwithstanding that existing provider arrangements may need to be adjusted, reformed or terminated to comply with the amendments.

Given the significance of these proposed changes, McGuireWoods plans to provide additional in-depth analysis on these proposals in the coming weeks. The proposed changes are subject to a public comment period, open until Dec. 31, 2019. Please do not hesitate to contact a McGuireWoods attorney or one of the authors of this alert for more information regarding these proposed rules or for assistance in preparing a comment to these rules.

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