In the last two weeks, the U.S. Department of Health and Human Services (HHS) published two notices in the Federal Register delaying the publication of certain final fraud and abuse rule reforms for up to a full year. First, in the Aug. 27 Federal Register, the Centers for Medicare & Medicaid Services (CMS) delayed the issuance of a final rule on eagerly anticipated reforms to the federal physician self‑referral law (the Stark Law) regulations. This rule has been expected to provide key clarifications to the strict liability Stark Law statue that prohibits physicians from referring certain healthcare services to an entity with which the physician has a financial relationship unless that financial relationship meets technical exceptions to the law. That delay was followed by a second notification in the Sept. 8 Federal Register continuing and extending a current interim rule for the Civil Monetary Penalties (CMP) inflation adjustment. Here are four key things for healthcare providers to know from these two HHS deadline extensions:

1. Providers will want CMS to finalize the Stark Law rule as soon as possible. CMS extended the date for publication of its Stark Law final rule until August 31, 2021, due to “the complexity of the issues raised by comments received on the proposed rule.” Healthcare providers supported many of these proposed changes as the CMS proposed changes, on balance, eased the regulatory burden on providers by revising or adopting new definitions for key terms used throughout various Stark Law exceptions, and proposing new exceptions to the law including for EHR donations, value-based arrangements and certain short-term financial relationships, as discussed in McGuireWoods Alerts dated Nov 1, 2019, Nov. 7, 2019 and Nov. 22, 2019. It is, however, important for providers to note that certain other proposed reforms, such as finalizing changes to the group practice definition profit sharing rules, could require some providers to restructure their financial relationships upon the implementation of the new rules. As such, it is hoped that CMS can finalize the rule sooner than its new deadline. While CMS found it necessary to announce a delay from their previously announced Aug. 2020 release timeframe, the notice did not state that the agency would actually take the full additional year to finalize the reforms. The federal Office of Management and Budget (OMB) has been reviewing a draft of the final rule since July (according to its regulatory dashboard), which may mean the rule is close to release notwithstanding this announcement.

It is hoped that CMS can finalize the rule sooner than its new deadline.

2. CMS’ delay likely also applies to the Anti-Kickback Statue (AKS) final rule. As discussed in an Oct. 10 client alert, HHS’s Office of Inspector General (OIG) announced its significant reforms to the AKS and CMP regulations on the same day CMS announced its amendments to the Stark Law regulations. HHS intended the proposed rules to both AKS and Stark Law to work together to incentivize value based arrangements and patient care coordination by expressly permitting certain activities that could be deemed problematic under the current laws. OIG’s proposed changes to the AKS and CMP regulations generally tracked those in the CMS proposed rule, particularly with respect to value-based arrangements, deviating only to reflect differences in the scope of the three laws. OIG and CMS have joined to discuss the proposed rules collectively with stakeholders, such as during an Oct. 24, 2019, AHLA webinar. OMB received final rules from both CMS and OIG on July 21, 2020. Therefore, while OIG has not announced an extension on its final rulemaking as discussed in 1 above, CMS’s announcement will likely mean a similar delay for the OIG final rule addressing the AKS and CMP regulations. We anticipate both final rules stemming from HHS’s Regulatory Sprint to Coordinated Care to be issued on the same day, and OMB is unlikely to approve the AKS changes to value-based arrangements without also signing off on the Stark Law changes.

3. CMP inflation extension likely will not have a substantive effect for providers. HHS and CMS also announced a one-year continuation through Sept. 6, 2021, of its interim final rule with respect to annual CMP inflation adjustments, after a similar 6-month extension earlier this year. The interim final rule was first published Sept. 6, 2016, to adjust CMP civil penalties annually for inflation as required in the Federal Civil Penalties Inflation Adjustment Act and Improvement Acts of 2015. We most recently discussed these annual inflation adjustments to the CMP civil penalties in a Nov. 18, 2019 FCA Insider post, particularly how the fines apply to various fraud and abuse conduct, such as violations of the Stark Law and AKS, beneficiary inducement violations, submission of false claims, and other prohibited conduct. HHS explained that this second continuation was necessary due to the extenuating circumstances of the 2019 novel corona virus (COVID-19) pandemic. This further extension also comes after CMS discovered that it had “inadvertently missed setting a target date for the final rule to make permanent the changes to the Medicare regulations” for CMP inflation adjustments after its 2016 interim final rule necessitating the earlier extension. Until the interim final rule is finalized, we expect CMS to announce its annual inflation adjustment in Nov. 2020 under the interim final rule. In addition, providers should remember that while such CMP civil penalties exist for government enforcement, whistleblowers continue to begin most enforcement actions under these regulations through the federal False Claims Act.

4. These extensions likely suggest continued workload burdens. Earlier this summer, we discussed how the announced Stark Law 2019 settlements continued a downward trend. In that FCA Insider post, we speculated that federal fraud and abuse regulatory staff workload may lead to a decline in Stark Law self-disclosure settlements despite a potential increase in filings, and noted, how if that was the case, COVID-19 would likely further reduce settlements in 2020. In our discussion, we noted that the reduction in announced settlements is likely due to staff shifting their focus and efforts on the Stark Law proposed reforms discussed above, a new Stark Law advisory opinion process (as detailed by McGuireWoods), as well as certain COVID-19 Stark Law waivers discussed on FCA Insider on May 2, 2020 and April 4, 2020. It is possible that the need to extend the time period for finalizing these rules suggest similar workload burdens as staff focus on necessary emergency needs with respect to COVID-19 rather than finalizing these reforms. On the other hand, as noted above, CMS and OIG have sent their reform suggestions to OMB and OMB is currently reviewing, which may suggest the rules are ready. We will continue to monitor these rulemaking processes to see if this could be part of a wider trend based on the current federal workload as regulators look to adjust fraud and abuse rules.

McGuireWoods will continue to monitor HHS and CMS rulemaking to assist clients in navigating these critical fraud and abuse rules, and will provide additional guidance as they are finalized.