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One Patient, Multiple Doctors: Provider Referral Laws Explained

Jan. 19, 2021, 10:30 AM

Health-care providers that work together to treat patients holistically is the optimum way to make people healthier. But two laws and the severe penalties they carry for violators have long been cited as the reason providers can’t coordinate their care.

The Physician Self-Referral Law and Anti-Kickback Statute prohibit physician referrals and financial arrangements that favor one clinic over another. The laws aim to ensure there’s fair competition in the marketplace among health-care facilities.

Two Department of Health and Human Services (HHS) rules slated to take effect Jan. 19, however, have created new exceptions to and safe harbors from those laws. The changes aim to make it easier for doctors to work across the health fields.

1. What are the Anti-Kickback Statute and the Stark Law?

The Anti-Kickback Statute, enacted in 1972, makes it a felony for anyone who knowingly and willfully offers, pays, solicits, or receives kickbacks, bribes, or rebates to encourage or reward referrals for health services paid for by federal health programs like Medicare. Violators can be fined up to $100,000 and/or put in prison for up to 10 years.

The Physician Self-Referral Law, also known as the Stark Law, bans doctors from referring Medicare or Medicaid patients for medical services if that doctor or an immediate member of their family would financially benefit. When it was enacted in 1989, the goal was to protect patients from being referred for a service they didn’t need or steered to lesser quality or more expensive procedures by doctors who make referrals to pad their own pockets.

2. What changes did the new rules make?

The HHS Office of Inspector General’s final rule provides three new safe-harbor shields under the criminal Anti-Kickback Statute for “value-based arrangements” that involve multiple doctors coordinating to treat a patient. The safe harbors come into play when the parties assume full financial risk, or substantial downside financial risk if the patient’s health deteriorates or requires expensive treatment. They also apply to lower risk arrangements between doctors that exchange in-kind payments.

The new safe harbors, however, don’t extend to the pharma or medical device industries. That includes drugmakers and distributors, pharmacy benefit managers, laboratory companies, medical supply and device manufacturers and distributors, and entities or individuals that sell or rent durable medical equipment, prosthetics, orthotics, and supplies.

The Centers for Medicare & Medicaid Services rule provides new, permanent exceptions to the Stark Law for certain value-based arrangements between or among physicians, providers, and suppliers. To qualify for the exception, the payments in the financial arrangement have to be consistent with fair market value, not directly or indirectly based on the volume or value of referrals, and they must be considered commercially reasonable.

3. What was the goal of the revamp?

The rules are meant to help the country’s health-care system shift at a faster clip from a model that pays providers a fee for every service they provide to one that pays providers based on patients’ health outcomes. Industry participants claimed the Stark Law and Anti-Kickback Statute were standing in the way of providers working together and stymieing innovative arrangements that could lead to better and less costly patient care.

4. What kinds of new financial arrangements might emerge?

The new safe harbors and exceptions will allow physician practices and hospitals to bring care coordinators on staff that work with patients to ensure they are seeing the right specialists and getting the right medications. Care coordinators are often registered nurses or social workers.

Direct contracting relationships between employer health plans and provider groups will also be possible under the changes. For example, insurers will now be able to more easily dole out bonuses to a group of doctors for providing better care, preventing future medical issues, and lowering health-care costs of plan participants.

Health providers will also be able to purchase medical devices from suppliers for patient use—e.g., glucose monitors for patients with diabetes—without violating the physician-referral law. The new rules also allow hospitals to donate cybersecurity software and services to physician practices to better ensure their patients’ data is kept confidential.

5. What must physicians do to ensure they still comply with the laws?

The rules are broad and complicated and the penalties for violators are severe. The Stark Law is a strict-liability statute that can nab providers even if they unintentionally violate the law, potentially putting them on the hook to pay back millions in Medicare and Medicaid claims. Violators of the Anti-Kickback Statute, meanwhile, can face jail time or big fines.

When entering into new financial arrangements, providers should still get a lawyer involved who understands the intricacies of both anti-fraud laws, attorneys say.

To Lean More:

— From Bloomberg Law

Changes to Anti-Fraud Laws Spur ‘Paradigm Shift’ in Health Care

Doctor Referral, Kickback Rules Aim to Boost Coordinated Care (1)

Relaxed Doctor Referral Rules Could Clash With Anti-Kickback Law

Health Fraud Rules Stir Debate Over How Much Monitoring Is Enough

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Jo-el J. Meyer at jmeyer@bloombergindustry.com

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