The Regulatory Sprint to Value-Based Care

On December 2, 2020, the CMS and the OIG published the rules modifying the safe harbors under the Anti-Kickback Statute[1] and exceptions under the Stark Law[2]. This article presents an overview of the value-based rules, which became effective on January 19, 2021.

CMS and OIG coordinated many aspects of the value-based rules, and this section will align them as much as possible. It is important to remember that these rules do not protect remuneration based on ownership interests, only for compensation.

A value-based arrangement must be designed to achieve: (i) coordination and management of care; (ii) improve the quality of care; (iii) reduce the costs to, or growth in expenditures of, payors without reducing the quality of care; or (iv) transition from fee for service to the quality of care and control of costs of care. Cost savings that are not passed onto payors are not covered by the new rules. The arrangement must be reasonably designed to achieve one of these purposes, but failure to achieve them does not necessarily violate the safe harbor or exception.

The arrangement must be designed to serve a target patient population. A “target patient population” is an identifiable patient population, developed through “legitimate and verifiable criteria,”[3]  set out in advance in writing, and selected to further the Purpose(s) of the Enterprise. A target patient population does not need to be limited only to the federal health care program beneficiaries, but can include private payors and self-pay patients.  Target patient population criteria cannot be targeted to only particularly lucrative patients (“cherry-picking”) or avoid high cost or unprofitable patients (“lemon-dropping”).  In certain circumstances, a target patient population may include the entirety of a provider’s patient population.

The rules provide protection for enterprises that take on full financial risk on a prospective basis for the items and services provided under the arrangement. To be financially responsible on a perspective basis means the enterprise assumes full financial responsibility before the provision of any items and services to the patients.[4]

There are also protections for arrangements without full financial risk. OIG requires the recipient to assume substantial downside financial risk for the arrangement and established three methodologies to achieve this: (1) the Shared Savings and Losses method, wherein the enterprise assumes at least 30% of any loss for all items and services furnished to the target patient population; (2) the Episodic Payment method, wherein the enterprises assumes at least  20% of any loss for all items and services furnished to the target patient population for a clinical episode of care and the clinical episode of care is in more than one care setting; or (3) the Capitation method, wherein the enterprise receives from the payor a prospective, per patient payment that is designed to produce material savings and is paid on a monthly, quarterly, or annual basis. CMS requires physicians to assume meaningful downside financial risk, wherein they will repay or forgo at least 10% of the remuneration if the purpose of the arrangement is not met.

OIG created the care coordination safe harbor, which is limited to in-kind, not monetary, remuneration. The remuneration must be connected to the coordination and management of care and there must be one or more legitimate outcome measurements reasonably anticipated to advance the purpose, based on clinical evidence or credible medical or health sciences support.

CMS created the value-based arrangement exception designed to achieve the outcome measures based on objective, measurable, and clinical evidence or credible medical support to (1) improve or maintain the quality of care; or (2) reduce in the costs to or reduction in growth in expenditures of payors without reducing the quality of care. The outcome measurements must be based on objective, measurable, and clinical evidence or credible medical support. Changes can be made to the outcome measurements, but only on a prospective basis.

The new value-based rules are designed to be broad and encourage innovation in patient care. As parties begin to utilize these value-based rules, it will be important that they have a clear understanding of the legal requirements of the safe harbor or exception. Parties should ensure to work with experience health care attorneys to ensure such compliance.

Originally published in Healthcare Michigan, February 2021.

ABOUT THE AUTHOR

Jeremy Belanger is an Associate in Dickinson Wright’s Troy office. He can be reached at 248-433-7542 or JBelanger@dickinsonwright.com.

[1] 85 Fed. Reg. 77684 (Dec. 2, 2020).

[2] 85 Fed. Reg. 77492 (Dec. 2, 2020).

[3] 85 Fed. Reg. at 77702.

[4] Id. at 77773.