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INSIGHT: Kickbacks or Common Sense Business? Hurdles for Value-Based Care

Dec. 10, 2018, 11:13 AM

University-based health systems—known as academic medical centers—are trying to innovate and form business arrangements that give patients the highest quality care for the best value. But they have to tread carefully. Under current law, there can be ambiguity (or worse) surrounding so-called “value-based care” arrangements that involve financial assistance or incentives among providers or to patients. Many have called for changes in the law to catch up with the evolution to value-based care.

In August, the Department of Health and Human Services Office of Inspector General (OIG) issued a request for information (RFI) to understand industry developments and to consider regulatory changes that those developments may require.

The OIG specifically (i) sought information regarding novel care coordination, delivery, and payment arrangements of interest to the health care industry that may be hindered by the federal anti-kickback statute (AKS) or the beneficiary inducement provisions of the civil monetary penalty law (CMPL) and (ii) solicited proposals for new or modified AKS safe harbors and CMPL exceptions that might facilitate such arrangements.

In response to the RFI, we met with some of the nation’s leading academic medical centers (AMCs) to identify ways in which the current federal regulatory framework impedes implementation of new care delivery and financing arrangements that hold great promise in promoting healthier populations and reducing total medical expenses.

Two themes emerged:

  • AMCs are interested in making the substantial upfront investment in infrastructure and human resources needed to succeed under value-based care models. They are also constantly evaluating opportunities to implement more modest, iterative projects that, over time, and taken collectively, drive better and more cost-effective health outcomes.


  • AMCs are innovators and have developed a variety of models to deliver value-based care. Protection, however, is not always clearly available under existing AKS safe harbors, CMPL exceptions, or fraud and abuse waivers. As a result, even with nonabusive intent fully consistent with value-based care objectives of reducing costs while improving quality, absent supportive administrative guidance, some models have not been implemented because of uncertainties regarding potential legal challenges.

Value-Based Care Arrangements Hindered by Fraud and Abuse Laws

Patients of AMCs often also are patients of community providers. AMCs and community providers increasingly seek to be aligned by risk arrangements that consider the total cost of care for, and health of, those shared patients. Providers should be coordinated in pursuing these goals.

At the same time, AMCs and community providers are, of necessity, regularly making and receiving referrals to and from each other. This combination of referral relationship and funds flow creates concerns for AMCs interested in making investments to further the provision of better coordinated, more cost-effective, and higher quality care for these shared patients.

AMC representatives shared many examples of projects that lacked adequate protection under existing safe harbors and exceptions. Capital projects of interest included provision of telehealth equipment, remote monitoring, advanced information and data analytic systems, and cybersecurity resources, as well as the technical personnel necessary to operating and maintain these systems.

Similarly, AMCs are interested in building human capital across the continuum of care through, for example, providing scholarships, grants, or educational debt forgiveness to clinically integrated providers or their support staff for attending intensive educational programs in quality reporting, data analytics, and similar topics.

AMCs are also interested in providing incentives to encourage patients to take effective steps to improve their health. Such incentives might include cash payments for attending wellness visits, participating in workshops on managing chronic health conditions, or completing health surveys. Due in some cases to uncertainty in its application and in others to firm limitations, the current regulatory framework constrains AMCs to offering only trivial incentive programs that are insufficient to meet the goals of engaging in their own health care patients who historically have been disengaged.

Proposing a New AKS Safe Harbor and CMPL Exception

A consensus emerged that a value-based care and care coordination safe harbor and CMPL exception could remove undue regulatory hurdles or uncertainties for these categories of beneficial arrangements, while incorporating appropriate safeguards against fraud and abuse.

In our RFI response, we proposed that OIG develop a new safe harbor to the AKS and a new exception to the CMPL expressly protecting certain value-based care and care coordination investments and transfers made within the context of alternative payment models (APMs)—namely, those models featuring payments other than fee-for-service reimbursement—with both public and commercial payors.

To facilitate the initiatives identified by AMCs as particularly important, we proposed that the safe harbor and exception should protect:

  • nonmonetary resources made available within the context of an APM, without limit, if related to electronic health records, telehealth, information security, or care coordination;


  • monetary grants, incentive payments or nonmonetary remuneration derived from proceeds of participating in APMs (e.g., such as funding under state-initiated delivery system transformation or reform incentive programs); and


  • any other remuneration with an aggregate value not exceeding the reasonably projected risk under the APMs in which the participant is involved.

Such a safe harbor and exception could incentivize providers to place more revenue at risk and to make investments to support long-term performance and patient care improvement, while simultaneously safeguarding against transfers disproportionate to the goals of the APM (and therefore potentially abusive under traditional measures). Within the amount at risk, participants in APMs would have substantial flexibility to implement programs that best further their goals.

Our proposal also suggested the incorporation of certain safeguards, consistent with those found under existing federal waivers. For example, to benefit from clear safe harbor protection, APM participants might be asked to make a reasonable, good-faith determination that each proposed arrangement is reasonably related to the purpose of the APM program, to enter into a written agreement with a health plan for a term of at least one year and utilizing an APM, and to maintain records of such determination and written agreement for a sufficient period.

If applicable, remuneration subject to protection could be capped, for example, based on the reasonably projected risk associated with such APM participant.

Looking Forward

The RFI’s comment period closed Oct. 26 and it remains unclear when additional guidance or rulemaking will be forthcoming, and whether it will serve to reduce the barriers AMCs face in implementing value-based care initiatives.

Until then, industry participants will continue to wrestle with the current regulatory framework, seeking comfort in part under existing federal fraud and abuse waivers, AKS safe harbors, and CMPL exceptions, and in part under measured analyses and reasoned assessments.

Author Information

Michael Lampert is a partner in the health care practice of Ropes & Gray in Boston. He provides strategic, regulatory, and transactional advice to health care clients, including hospitals, universities, schools of medicine, medical device and pharmaceutical companies, investors, physician practices, laboratories, and emerging providers.

Benjamin Wilson is an associate in the health care practice of Ropes & Gray in Boston. His practice focuses on providing transactional, health care regulatory, and general corporate counsel.

Michael DiMaio is an associate in the corporate practice of Ropes & Gray in Boston. He advises health care providers, pharmaceutical and medical device manufacturers, and other health care organizations regarding a broad range of transactional, regulatory, compliance, and financing issues.

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