New Stark Law and AKS Final Rules: Part 2 — referrals and fair market value

In addition to focusing on value-based care, the Stark Law and Anti-kickback Statute (AKS) Final Rules alter several decades of safeguards, as long as certain parameters are met. This is Part II of a three-part series.

First and foremost, it is imperative to appreciate that in order for the new Stark Law and AKS Final Rules to apply, a value-based enterprise or value-based arrangement, which meets all of the criteria, must be formed. This was addressed in Part I of this series.

For decades, physicians, providers, consultants, and lawyers have focused on fair market value (FMV) and referrals based on volume and/or value when advising their clients in order to avert a violation of either the Stark Law and/or the AKS, which could in turn lay the basis for a False Claims Act case. First and foremost, because of the requirements of the new Final Rules, there is nothing expressly stating that past conduct for not meeting the previous safe harbors, some of which had been in effect for decades, is not actionable. This makes sense because in order for the New Rules’ value-based safe harbors to apply, the relevant criteria must be met, which was not previously known or published.

Overall, the “value-based safe harbors, as finalized, do not include the traditional fraud and abuse safeguards of fair market value or a broad prohibition on taking into account the volume or value of any referrals.” Having said that, new safeguards in each respective safe harbor have been implemented to curtail fraud and abuse. For example:

• A prohibition on taking into account the volume or value of referrals outside the target patient population;
• Limits on directed referrals;
• Ineligible entities;
• Risk sharing, which is required by both the substantial downside financial risk and the full financial risk safe harbors; and
• Contribution requirements for recipients.

The AKS Final Rule expressly states that, “[n]othing in the risk-based safe harbors prevents parties from negotiating fair market value arrangements for services or from using the personal services and management contracts and outcomes-based payments safe harbor at paragraph 1001.952(d), which include fair market value requirements.” Notably, the care coordination arrangements safe harbor “does not protect monetary payments, including payments for services such as radiology or imaging.” An additional factor with the AKS statute is the list of ineligible entities. If those entities are involved in paying kickbacks, the safe harbors are not being met. Therefore, liability can still attach to the conduct under the AKS and the False Claims Act.

The Stark Law Final Rule has its own nuances. For example, the previous language indicated that, “[t]he exception for bona fide employment relationships includes requirements that the arrangement is commercially reasonable, the compensation paid to the physician is fair market value, and the compensation is not determined in any manner that takes into account the volume or value of the physician’s referrals.” These requirements are notably absent from the final exceptions at §411.357(aa). Moreover, the Centers for Medicare and Medicaid Services (CMS) stated that, “depending on the terms and conditions of the value-based arrangement, the arrangement may be unable to satisfy all the requirements of the exception for bona fide employment relationships.” The ultimate determination is, as it always has been, based on the totality of the facts and circumstances.

There are still many areas, such as the broad waiver of copays and deductibles, which are not addressed in either the Stark Law Final Rule or the AKS Final Rule. Hence, since they have neither been withdrawn nor modified, they are still in effect. While a value-based enterprise does not need to be a separate legal entity with independent contracting power (84 Fed. Reg. 55779); however, depending on its size and complexity, it may be prudent to do so. A key caveat is that a VBE “may assume legal obligations in different ways. For examples, all VBE participants in a VBE could each sign the contract for the VBE to assume full financial risk from a payor.” Alternatively, contractual arrangements between the various VBE participants that assign risk jointly and severally is another option.

Hopefully, this article gives providers, consultants, and lawyers alike some insight into another aspect of these Final Rules. There is a lot to digest and it is imperative that the laws be read and contrasted with each other because just as in the past, an exception under the Stark Law does not necessarily mean a safe harbor under the AKS – or vice versa.

_{About the Author}

_{Rachel V. Rose, JD, MBA, advises clients on compliance and transactions in healthcare, cybersecurity, corporate and securities law, while representing plaintiffs in False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.}